Accounting Homework
Accounting Homework
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| Payson Sports, Inc., sells sports equipment to customers. Its fiscal year ends on December 31. The following transactions occurred in 2015: |
| a. | Purchased $250,000 of new sports equipment inventory; paid $90,000 in cash and owed the rest on account. |
| b. | Paid employees $180,300 in wages for work during the year; an additional $3,700 for 2015 wages will be paid in January 2016. |
| c. | Sold sports equipment to customers for $750,000; received $500,000 in cash and the rest on account. The cost of the equipment was $485,000. |
| d. | Paid $17,200 cash for utilities for the year. |
| e. | Received $70,000 from customers as deposits on orders of new winter sports equipment to be sold to the customers in January 2016. |
| f. | Received a $1,930 bill for December 2015 utilities that will be paid in January 2016. |
| Required: |
| 1. | Complete the following statements.
|
Which basis of accounting (cash or accrual) provides more useful information to investors, creditors, and other users?
| Revenues are normally recognized when the delivery of goods or services has occurred, there is persuasive evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured. The amount recorded is the cash-equivalent sales price. The following transactions occurred in September 2016: |
| a. | A popular ski magazine company receives a total of $13,045 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company’s standpoint.. |
| b. | On September 1, 2016, a bank lends $1,800 to a company; the note principal and $216 ($1,800 × 12 percent) annual interest are due in one year. Answer from the bank’s standpoint. |
| c. | Fucillo Hyundai, Inc., sells a truck with a list, or “sticker,” price of $21,350 for $18,950 cash. |
| d. | Macy’s department store orders 1,160 men’s shirts for $11 each for future delivery from Phillips-Van Heusen Corporation, manufacturer of Izod, Arrow, Van Heusen, and Calvin Klein shirts. The terms require payment in full within 30 days of delivery. Answer from Phillips-Van Heusen’s standpoint. |
| e. | Phillips-Van Heusen Corporation completes production of the shirts described in (d) and delivers the order. Answer from Phillips-Van Heusen’s standpoint. |
| f. | Phillips-Van Heusen receives payment from Macy’s for the events described in (d) and (e). Answer from Phillips-Van Heusen’s standpoint. |
| g. | A customer purchases a ticket from American Airlines for $720 cash to travel the following January. Answer from American Airlines’s standpoint. |
| h. | Ford Motors issues $21.3 million in new common stock. |
| i. | Michigan State University receives $18,710,000 cash for 71,000 five-game season football tickets. |
| j. | Michigan State plays the first football game referred to in (i). |
| k. | Precision Builders signs a contract with a customer for the construction of a new $1,540,000 warehouse. At the signing, Precision receives a check for $192,000 as a deposit on the future construction. Answer from Precision’s standpoint. |
| l. | A customer orders and receives 17 personal computers from Dell; the customer promises to pay $9,700 within three months. Answer from Dell’s standpoint. |
| m. | Sears, a retail store, sells a $180 lamp to a customer who charges the sale on his store credit card. Answer from Sears’s standpoint. |
| Required: |
| For each of the transactions, if revenue is to be recognized in September, indicate the revenue account title and amount. (If revenue is not recognized choose “None”. Round “Interest revenue” answer to 2 decimal places.) |
