The Acme Company is undergoing a reorganization to improve its financial structure. As part of this process, the company is…

Identify the applicable accounting convention for each of the following business scenarios. More than one convention may apply to each scenario. Please explain your choices for each scenario.

Scenario 1: The Acme Company is undergoing a reorganization to improve its financial structure. As part of this process, the company is considering lowering its expense calculations to improve the bottom line net income.

Scenario 2: Regal Enterprises has purchased $45,000 worth new equipment for use in its manufacturing operations and would like to write off the cost of this equipment in just a couple of years, instead of the usual 10 years for this equipment type. The company’s president fears that the economic conditions in its industry will worsen and cause the company to sell the equipment sooner than expected.

Scenario 3: Bozrah Industries, a small independent retailer, wants to change its accounting system from cash-based to accrual-based, and is concerned about how this change will affect the recording of sales and expenses.

Scenario 4: Randolph, Inc., has experienced major turnover in its accounting department, and the new head of accounting has been going through the current records of transactions. A couple of those transactions appear problematic. The first contains an error of $10,000 that the previous accountant decided was not large enough to adjust before the financial statements were prepared. This error would understate income and make the company look more profitable than it actually is.

Scenario 5: The Morrison Company receives much of its revenue from those customers who buy or rent furniture and appliances on the installment plan. Because the company uses an accrual-based accounting system, revenue is recognized at the point of sale, even though cash comes in on a monthly basis from customers. Lately, the company’s accountant is questioning the use of the accrual basis for recognizing revenue, because several customers have defaulted on their contracts, causing problems in the accounting system.

Scenario 6: Charter Communications has recently found itself at the wrong end of multiple lawsuits for failure to provide necessary services according to their contractual obligations. Senior management does not want to disclose the potential liability of these lawsuits on its financial statements.

u01a1

BUS 3061 – Fundamentals of Accounting

Unit 1 Template for all assignments

Instructions: When placing a (+) or (-) in the appropriate cell, be sure to use ( ) around the character.

Also, Some cells may have both a (+) and (-) denoting an increase and decrease in the same equation category.

Assets

Liabilities

Owner’s Equity

1. Purchased supplies on account

2. Received cash for providing a service

3. Paid expenses in cash

4. Owner invested cash in the business

5. Owner withdraws cash from the business

6. Received cash from a customer who had previously been billed for services provided

7. Paid cash to purchase equipment

8. Paid employee salaries

9. Paid a creditor from whom the business had previously purchased supplies on account

10. The company sells new shares of stock

11. Paid cash for monthly rent on the office space

12. Paid cash for monthly utility bills

13. Performed services on account

14. Made a payment on a loan received from the bank

15. Purchased for cash merchandise that will be later resold for profit

U01a2

BUS 3061 – Fundamentals of Accounting
Unit 1 Template for all assignments

Answer w/Calculations

1. The liabilities of the Smith Company are $120,000 and the owner’s equity is $232,000. What is the the amount of Smith’s total assets?

2. The total assets of Jones Company are $190,000 and its owner’s equity is $91,000. What is the amount of its total liabilities?

3. The total assets of Greene Company are $800,000 and its liabilities are equal to one-half of its total assets. What is the amount of Greens’s owner’s equity?

4. Beginning the new year, Orange Company had total assets of $800,000 and total liabilities of $300,000. If total assets increased $150,000 during the year and total liabiities decreased $80,000, what is the owner’s equity total at the end of the year?

5. Beginning the new year, Orange Company had total assets of $800,000 and total liabilities of $300,000. If during the year Orange Company’s total liabilities increased $100,000, and owner’s equity decreased $70,000, what is the company’s ending amount of total assets?

6. Beginning the new year, Orange Company had total assets of $800,000 and total liabilities of $300,000. If total assets decreased $80,000 and owner’s equity increased $120,000 during the year, what is the company’s year-end total liabilities amount?