You are reviewing the accounting records of Cathy's Antiques, Inc. owned by Cathy Miller. You have uncovered the following situations. Compose a memo to Ms. Miller that cites the appropriate accounting principle and the suggested action for each separate situation.
1.In August, a check for $500 was written to Wee Day Care Center. This amount represents child care for her son Brandon.
2. Cathy plans a Going out of Business Sale for May, since she will be closing her business for a month-long vacation in June. She plans to reopen July 1 and will continue operating Cathy's Antiques indefinitely.
3. Cathy received a shipment of pine furniture from Quebec, Canada. The invoice was stated in Canadian dollars.
4. Joseph Clark paid $1,500 for a dining table. The amount was recorded as revenue. The table will be delivered to Mr. Clark in six weeks.
Q2. Mr. Eid is a businessman and your friend. He is having difficulty understanding the objective of financial reporting and why it is important to his business users. Please write a letter to Mr. Eid explaining the objective of financial reporting and why it is important to his business users.
Q3. The accounting standards are set by specific Organizations depends on the country location and regulations. You are asked to answer the following questions :
What are the developing US Financial Accounting Standards Organizations with each organization responsibilities? Please write one paragraph. What are the processes of setting a new accounting standard in the USA? Please write one paragraph.
Q4. Prepare the necessary adjusting entry for the following:
a. During the year, Able Co. purchased $39,600 worth of supplies, at the end of the year, the balance sheet showed a balance of $1,760 in the supplies account.
b. June 30, 2010, the end of the quarter is on a Wednesday. Employees get paid each Friday for the week worked. Abel Co. has five employees who earn $100 per day each. Make the necessary adjusting journal entry for June 30.
c. An asset that cost $50,000 was purchased on January 1. The asset has an estimated useful life of three years and an estimated salvage value of $3,200. Prepare the necessary adjusting journal entry for the end of the year.
d. A company has 20 employees who each earn $500 per week for a 5-day week that begins on Monday. December 31 of 2011 is a Monday and all 20 employees worked that day.
1. Prepare the required adjusting journal entry to record accrued salaries on December 31,
2011.
2. Prepare the journal entry to record the payment of salaries on January 4, 2012.