Accounting Answers

Which one of the following alternatives is correct?

 A. The selling price of the partnership business is determined by the value of its assets.

 B. When recording the valuation adjustments, if the value of a liability is decreased, the valuation account credited with the amount of a decrease.

 C. The fair value of the assets of a partnership is equal to the total equity of a partnership.

 D. An existing goodwill account balance is transferred to the partners’ capital accounts on admission of a new partner.

 E. To ensure that compliance is followed, the financial statements of partnerships must be prepared according to IFRS.

(iii) M.K. Industries purchased an expensive special-purpose machine with an estimated useful life of 10 years. Proper installation of the machine required that it be set in the concrete floor of the factory. Once the machine was installed the assistant factory manager argued that the machine had no resale value and thus directed that the entire cost of the machine should be written off in the current year.

(iv) Land was reported at its estimated selling price, which is substantially higher than its cost. The increase in value was included in the income statement.

(v) The personal assets of M.Mutiso and K.Kyalo are not included in the financial statements of the business although M.Mutiso and K.Kyalo are agreeable to guaranteeing the bank overdraft of the business.

Required:

For each of the above items, explain which basis of accounting principle(s), concept(s) or convection(s), if any, are violated or observed. In each case, indicate the correct treatment 

Prepare the following for Mobi Electronics for the year ended 21 February 2021:

3.1      General journal entries to record the adjustments for additional information

           Number 1 to 7. Include a brief narration.                                                                        (15)

3.2      The statement of profit or loss and other comprehensive income for the year

           ended 28 February 2021. 

Accounts Payable $27,000 Service Revenue $98,000 Rent Expense $22,000 Salaries and Wages Expense $51,000 Owner's Drawings $15,000 Owner's Capital $42,000 Accounts Receivable $ 38,000 and Supplies Expense $7,000. will be the balance of income summary account after the first journal?

Diffuculties experienced when perfoming direct analyses for two companies

Seljuk Company has the following balances in selected accounts of its adjusted trial balance.

Accounts Payable $27,000 Service Revenue $98,000 Rent Expense $22,000 Salaries and Wages Expense $51,000 Owner's Drawings $15,000 Owner's Capital $42,000 Accounts Receivable $ 38,000 and Supplies Expense $7,000.

What will be the balance of income summary account after the first journal?

he Ethelco Appliance Company recorded installment sales of Br600,000 in 2002. A record was kept of the different articles sold on the installment basis. At the end of the year the total cost of goods sold on the installment basis was calculated at Br405,000. The total collections on installment sales for the year were Br360,000. The estimated value of the merchandise repossessed was Br24,000, and balances owed on the repossessions were Br40,000. Perpetual inventory accounts were maintained. Instructions Prepare the journal entries required for the data above, including the entries: To set up the total realizable gross profit at the end of the year, To record the cash collections To record the repossessions, and To record the realized gross profit

The following events occurred during the month of May for McLain Company.

1.

McLain sells 240 units for $20 each. McLain collects cash for 200 of these units. The units cost McLain $8 each to purchase.

2.

McLain purchases $1,800 worth of inventory on account.

3.

McLain collects $500 in cash on its A/R.

4.

McLain takes out a loan for $400.

5.

McLain pays out $350 cash in dividends.

6.

McLain receives a contribution of $600 from its owners.

7.

McLain purchased a new piece of equipment. The new equipment cost $1,000 and was paid for in cash.

8.

McLain pays $500 of its accounts payable.

9.

McLain incurs $500 in salaries expense, but will not pay workers until next month.

10.

McLain incurs $300 in rent expense and pays it in cash.

11.

McLain prepays $200 in cash for insurance.

12.

Taxes, paid in cash, are $110.

Required:

1.

Prepare journal entries for the above transactions.

2.

Complete the T-accounts below

1. prepare trail balance

5.

State which balance, debit, or credit is normally held by the following accounts:

1.

Cash

2.

Dividends

3.

Notes payable

85 Financial Accounting

4.

Unearned revenue

5.

Cost of goods sold

6.

Prepaid rent

7.

Accounts receivable

8.

Capital stock

Seljuk Company has the following balances in selected accounts of its adjusted trial balance.

Accounts Payable $27,000 Service Revenue $98,000 Rent Expense $22,000 Salaries and Wages Expense $51,000 Owner's Drawings $15,000 Owner's Capital $42,000 Accounts Receivable $ 38,000 and Supplies Expense $7,000.

Which account or accounts will be Credited in the first closing entry journal?