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3 years ago

Boone’s Cleaning Service performed cleaning services during December 2014, but had not collected any cash from its

Business

1 answer:

mezya [45]3 years ago

8 0

Answer:

B. The service increased assets and increased stockholders’ equity.

Explanation:

Revenue is earned as immediately the service agreed by the parties involved has been delivered whether cash has been collected or not.

The accounting equation shows the relationship between the elements of the balance sheet namely the assets, liabilities and equity.

Given that Boone’s Cleaning Service performed cleaning services during December 2014, but had not collected any cash from its customers as of December 31, 2014, the amount earned is recognized in revenue and accounts receivables as credits and debits respectively.

The effect of this on the accounting equation is an increase in equity(via revenue earned) and an increase in assets (account receivables)

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Answer:

Use of an objective appraisal.

Explanation:

I would recommend Dokota uses the data he has to do an objective appraisal which would give feedback on how to evaluate and support the drivers.

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3 years ago

Rip garage, inc. (459 ellis avenue, harrisburg, pa 17111), is an accrual basis taxpayer that repairs automobiles. in late decemb

mixas84 [53]

Answer:

MEMO

To: Treasurer of Trip Garage, Inc.

From: Me

Subject: Dispute over accrued revenue

Mrs. S. Apple,

Good evening. Regarding your dispute over accrued revenue generated form the repair of Mr. Mosley's car, I must inform you the following:

Trip Garage, Inc., is an accrual basis taxpayer, therefore, revenues must be recorded once the repair service was completed, not when the invoice was collected.

In future occasions when similar problems show up, you should record an allowance for doubtful accounts. This way, if you believe that an account receivable is unlikely to be collected, it will be not considered for the year's financial records. This adjusting journal entry must be recorded before the end of the year, if not, all related revenues must be included in the years income statement.

Regards,

Explanation:

Accrual taxpayers are required to record revenues once the revenue generating activity has been completed, i.e. Trip should have recorded $1,000 in revenue during 2017:

Dr Accounts receivable 1,000

Cr Service revenue 1,000

If Trip didn't consider that it would be able to collect the $1,000 receivable, then it should have recorded it as bad debt expense:

Dr Bad debt expense 1,000

Cr Allowance for doubtful accounts 1,000

If thy did not record the bad expense, then the IRS agent is right, and the $1,000 must be included in the 2017 income statement.

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4 years ago