Question

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.

Answer 1

Answer and Explanation:

The accounting principles and the suggestions are shown below:

a. Business Entity Concept:

In this given situation, the amount of $500 should be refunded to the business or it can be recognized as the withdrawal amount by Cathy Miller. The suggestion is that She should use a personal check for paying daycare in the future for her son

b. Going Concern Concept:

Since the business is closed for month-long vacation in the month of June. As Cathy's Antiques is not closing the business for permanent. As she plans for reopening on July 1. The suggestion is that she should hold an inventory decline sale or for other relevant sales.

c.  Monetary Unit Concept:

The invoice should be restated in the united states for the purpose of accounting

d. Revenue Recognition Concept:

The revenue should be recognized when it is realized or earned. As the table is not delivered so the revenue should not be recognized.

The amount of $1,500 should be recorded for an account like deposits received from the customers until the delivering of the table is not done