Answer True or False

1. Recognition is the process of formally recording or incorporating an item into the financial statements.
2. When initially recording the cost of land purchased, most companies use the current value.
3. Under the accrual method expenses are recognized when revenue is earned.
4. Most companies use the cash basis of accounting.
5. Three months before year end Billings Company signed a $100,000 12%, 6- month note. Principal and interest will be paid at maturity. No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures.

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4. Would you advise the company to raise the price, lower the price, or to keep the price the same? What if the elasticity were 0.6? what if it were 1? Explain your answer.

You can use diagrams where appropriate to enhance and explain your response

Elburn Supply Co. has the following transactions related to notes receivable during the last 2 months of 2017. The company does not make entries to accrue interest except at December 31.

2. When parking a car in a downtown parking lot, drivers pay according to the number of hours or parts thereof. The probability distribution of the number of hours that cars are parked has been estimated as follows:

X                  1        2        3        4        5        6        7        8

P(X)             .24     .18     .13     .10     .07     .04     .04     .20

a. Find the mean and standard deviation of the number of hours that cars are parked in the lot.

b. If the cost of parking is $2.50 per hour, calculate the mean and standard deviation of the amount of revenue each car generates.

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as revenue. On December 31, 20X3, you discover that an adjusting entry was never made. If you fail to make the correcting entry, liabilities will be understated and net income will be understated liabilities will be overstated and net income will be overstated liabilities will be understated and net income will be overstated liabilities will be overstated and net income will be understated the financial statements will be accurate because an adjusting entry was not necessary

Iowa Development (ID) made the following land sales and had the following cash collections:

2012 sold Altoona land for 2,000,000 that cost ID $1,200,000. The land agreement required payments of $1,000,000 within one week of occupancy of the land, and the other $1,000,000 in 2013 ID received the $1,000,000 payment.

Assume ID cannot estimate uncollectible accounts accurately and recognizes revenue using the IFRS method for significant uncertainty in collectibility.

Required: Prepare journal entries to record the sale, cash collections, and recognition of gross profit (if appropriate) in 2012 and 2013.

Rita is the owner of Rita’s Osteria. She wants to study the growth of her business using simulation. She is interested in simulating the number of customers and the amount ordered by customers each month. She feels that the number of customers is normally distributed, with a mean of 800 and a standard deviation of 45. The bill for each customer is $65 and uniformly distributed, with a maximum increase of 8% and a minimum decrease of 5%. The changes of the bills are incremental, i.e. each change is based off the average bill of the previous month. Formulate a simulation, computing the mean total revenue and the standard deviation in one year.

Question 1
(1) An item of stock costing $60,000 was written down to its realizable value of $35,000.
(2) School fees paid to the proprietor's son was debited to the Drawings account.
(3) $2,500 paid for a printer was written off as expense(instead of being capitalized).
(4) Assets like inventory are valued in dollars, not units, for the financial statements.
(5) Company reports revenue when it is earned instead of when the cash is collected.
(6) Assets will normally be recorded at their historical cost in balance sheet.

Required:

Identify the name of the concept or principle for the above events.