E1-9 Identify GAAP. (LO 3, 5, 6) C James Company, a proprietorship, had the following selected business transactions during the year: 1. Land with a cost of $415,000 was recorded at its fair value of $465,000. 2. A lease agreement to rent equipment from an equipment supplier starting next year was signed. The rent is $500 per month and the lease is for two years. Payments are due at the start of each month. Nothing was recorded in James Company's accounting records when the lease was signed. 3. James paid the rent for an apartment for the owner's personal use and charged it to Rent Expense. 4. James prepaid for a one-year insurance policy for $1,200. The amount was charged to Insurance Expense. 5. James included a note in its financial statements stating the company is a going concern and is following ASPE. Instructions (a) In each situation, identify whether the accounting treatment is correct or not, and why. (b) If it is incorrect, state what should have been done.E1-10 Determine events to be recognized. (LO 3, 5) C The following is a list of independent events: 1. A company pays $10,000 cash to purchase equipment at a bankruptcy sale. The equipment's fair value is $15,000. 2. A Canadian company purchases equipment from a company in the United States and pays US$5,000 cash. It cost the company $5,200 Canadian to purchase the U.S. dollars from its bank. 3. A company provides $4,000 of services to a customer on account. 4. A company hires a new chief executive officer, who will bring significant economic benefit to the company. The company agrees to pay the new executive officer $500,000 per year. 5. A company signs a contract to provide $10,000 of services to a customer. The customer pays the company $4,000 cash at the time the contract is signed. The performance obligation required by the company has not been completed. Instructions (a) Should the transaction be recorded in the accounting records? Explain why or why not. (b) If the transaction should be recorded, indicate the amount. Explain.E1-15 Prepare income statement and statement of owner's equity. (LO 6) AP Atlantic Cruise Co. is owned by Irina Temelkova. The following information is an alphabetical listing of financial statement items for the company for the year ended May 31, 2017: Accounts payable $ 47,750 Interest expense $ 20,960 Accounts receivable 42,950 Investments by owner 5,847 Advertising expense 3,640 Maintenance expense 82,870 Building 122,570 Notes payable 379,000 Cash 20,080 Other expenses 66,500 Equipment 553,300 Prepaid insurance 1,283 I. Temelkova, capital, June 1, 2016 311,182 Salaries expense 126,950 I. Temelkova, drawings 33,950 Supplies 16,800 Insurance expense 2,566 Ticket revenue 350,640 Instructions Prepare an income statement and a statement of owner's equity for the year
