Income Recognition Using the Accrual Method

a. When are revenues recognized under the accrual accounting model? What conditions must be met?

b. Use the matching concept to determine the amount of expense or other items to be recognized in the income statement of the current year for each of the following:
1. The Morales Company purchases a delivery truck for $40,000 at the beginning of the year and expects to use the truck for 5 years. Repairs and operating costs during the first year are $4,700.
2. Takayama Company received $25,000 from the sale of a building that originally cost $100,000 and had a carrying value of $60,000 at the time of sale.
3. Lucinda Company purchased inventory costing $48,000 last year and $30,000 this year. A total of three-fourths of the inventory purchased last year was sold during that year. The remaining one-fourth was sold this year, along with one-half of the inventory purchased this year. What amount of cost of goods sold should be recognized in each of the years?
4. Tasis Company borrowed $50,000 on July 1 of the current year. The amount of the note and all accumulated interest are to be repaid in 18 months, assuming an annual interest rate of 8 percent. What amount of interest expense should to be recognized for the current year?