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On January 1 2019, A company purchased an asset for $40,000 that is expected to generate revenue for 4 years
On January 1 2019, A company purchased an asset for $40,000 that is expected to generate revenue for 4 years. At time of purchase, A company paid $15,000 with balance due in 2 years. How much expense as a result of the purchase will appear on the 2019 income statement? $10,000 $40,000 O $15.000 $0 QUESTION 26 On December 1, 2019, We Cheatem, Attorney received an advanced payment for services of $12,000 from a client. Cheatem bills at a rate of $1,000 per day. During December Cheatem, performs 3 days of service for the client. The revenue from above that will appear on the 2019 income statement: $12,000 $9,000 $3,000 $0 QUESTION 27 On December 27 2019 Smith company ships $30,000 worth of goods to Taylor Company, FOB destination the goods arrive on January 6, 2020. Taylor had paid Smith a $10,000 deposit on December 27, 2019 and paid the $20,000 balance on February 1, 2020. As a result of the above Smith Company has: $10,000 revenue in 2019 and $20,000 revenue in 2020 $30,000 revenue in 2019 $30,000 revenue in 2020 $20,000 revenue in February 2020
Expert Solution
25 ) $ 0
BECAUSE ASSET PURCHASE IS NOT AN EXPENSES IT GET CAPITALISED IN BALANCE SHEET UNDER ASSETS . SO NO EXPENSES WILL BE CHARGE FOR PURCHASE OF FIXED ASSETS IN INCOME STATEMENT.
NOTE:
THE OTHER OPTION $ 10,000 , $ 40,000 , $ 15000 THESE ARE ALL THE WRONG BECAUSE PURCHASING ASSETS IS CAPITALISE INSTEAD BOOK AS AN EXPENSES
26) $ 3000
BECAUSE UNDER ACCRUAL SYSTEM OF ACCOUNTING REVENUE RECEIVED IN ADVANCE ARE REPORTED AS A LIABILTY. AS THE ADVANCE RECEIVED EARNED IT WILL BE RECOGNIZE REVENUE. SO IN THIS CASE PERFORM 3 DAYS OF SERVICE SO REVENUE $ 3000 WILL BE APPEAR IN INCOME STATEMENT.
NOTE :
WELL OPTION $ 12000 IS INCORRECT BECAUSE ONLY 3 DAYS SERVICE IS PERFORM , & BILL RATE IS $1000.SO THE EARNED REVENUE IS $ 3000 & NOT $ 12000, $ 9000 , $ 3000
27) $ 30000 REVENUE IN 2020
BECAUSE IT IS A TRANSACTION OF FOB DESTINATION WHICH MEANS SELLER RETAIN LIABILITY OF LOSS UNTILL GOODS ARE DELIVERED TO BUYER.
NOTE
CONSIDERING $ 10,000 REVENUE IN 2019 AND $ 20,000 REVENUE IN 2020 IS INCORRECT BECAUSE $ 10,000 IS ADVANCE WHICH IS LIABILTY TILL IT DIDN'T EARNED.
TITLE IN GOODS DID'NT PASS TO BUYER SINCE IT IS FOB DESTINATION TRANSACTION , PROPERTY TO BE PASS ON 6TH JAN ON ACTUAL DELIVERY TO BUYER 6TH JAN .
CONSIDERING $ 30000 REVENUE IN 2019 IS INCORRECT BECAUSE , SALE TRANSACTION DID'NT HAD HAPPENEND ,SINCE THE TITLE IN GOODS DIDN'T PASS .
$ 20,000 REVENUE IN FEBRUARY 2020 IS INCORRECT BECAUSE TO DETERMINE REVENUE SALE TRANSACTION IS ENOUGH
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