A. Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact when revenue is recognized? Which option would you recommend for the client?

B. Based on the decision of accrual vs. cash basis, describe when revenue would be recognized on the sale of inventory, and how the accrual reporting differs from cash basis.

C. Determine the economic impact on the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind appropriate Internal Revenue Code and Treasury regulations.

D. Summarize the cash or accrual accounting method in relation to the selected business entity.

Please, I need a correct answer and clear explanation. Thank you,

Part I – Explanation

Q1

Below are pairs of changes that affect elements of the accounting equation. Give an example of a transaction or economic event that reflects each:

a. Asset increases, asset decreases

b. Asset increases, liability increases

c. Asset increases, shareholders’ equity increases

d. Asset increases, revenue increases

e. Liability decreases, asset decreases

f. Asset decreases, expense increases

g. Liability decreases, revenue increases

h. Asset decreases, shareholders’ equity decreases

i. Liability increases, expense increases

j. Asset decreases, revenue decreases

Seminoles Corporation’s fiscal year-end is December 31, 2018. The following is a partial adjusted trial balance as of December 31.     
  

     
Required:

1. Prepare the necessary closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the entry to close the revenue accounts.

Record the entry to close the expense accounts.

Record the entry to close the dividends account.

2.38 Baggage fees: An airline charges the following baggage fees: $25 for the first bag and an extra $35 for the second. Suppose 54% of passengers have no checked luggage, 34% have only one piece of checked luggage and 12% have two pieces. We suppose a negligible portion of people check more than two bags.


a) The average baggage-related revenue per passenger is: $  (please round to the nearest cent)
b) The standard deviation of baggage-related revenue is: $  (please round to the nearest cent)
c) About how much revenue should the airline expect for a flight of 120 passengers? $  (please round to the nearest dollar)

The following graph shows the daily demand curve for bippitybops in Detroit.

Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.

Note: You will not be graded on any changes made to this graph.

On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bippitybop.

According to the midpoint method, the price elasticity of demand between points A and B is approximately (0,0.54,1.86,14) .

Suppose the price of bippitybops is currently $45 per bippitybop, shown as point B on the initial graph. Because the price elasticity of demand between points A and B is ( elastic, inelastic, unit elastic) , a $15-per-bippitybop increase in price will lead to (a decrease, an increase, no change) in total revenue per day.

In general, in order for a price decrease to cause a decrease in total revenue, demand must be (elastic,inelastic,unit elastic) .

1. Go to the Profit & Loss worksheet. Elena has entered most of the income and expense data on the worksheet. She estimates revenue will be $825,000 in Year 1 and $1,400,000 in Year 5 of the shuttle service. She needs to calculate revenue for Years 2–4. Revenue should increase at a constant amount from year to year. Project the revenue for Years 2–4 (cells C7:E7) using a Linear Trend interpolation.
2. Elena also needs to calculate expenses for payroll and rent for Years 2–5. She knows the starting amount for each expense, and estimates the rent in Year 5 will be $64,000. She expects the payroll expenses to increase by at least 6 percent per year and the rent to increase by a constant rate. Project the expenses for Payroll in Years 2–5 (cells C13:F13) using a Growth Trend extrapolation. Use 1.06 (a 6 percent increase) as the step value. Project the expenses for Rent in Years 2–4 (cells C14:E14) using a Growth Trend interpolation.

The Bradford Company issued 10% bonds, dated January 1, with a face amount of $50 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Required: 1. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2018 (at the effective rate). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the purchase of the bonds by Saxton-Bose.

Record the interest revenue on June 30, 2018.

Record the interest revenue on December 31, 2018.

The Bradford Company issued 8% bonds, dated January 1, with a face amount of $100 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

Required:
1. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2018 (at the effective rate). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the purchase of the bonds by Saxton-Bose.

Record the interest revenue on June 30, 2018

Record the interest revenue on December 31,2018