OS 1.6 Identifyeng accounting principles and assumptions C2 Identify the accounting principle or assumption that best explains each situation. 1. In December of this year, Chavez. Landscaping received a customer's order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. Chavez should record the revenue from the customer order in March of next year, not in December of this year. 2. If $1,000 cash is paid to buy land, the lind is reported on the buyer's balance sheet at $1,000. 3. Mike Derr owns both Sailing Passions and Dockside Digs. In preparing financial statements for Dockside Digs, Mike makes sure that the expense transactions of Sailing Passions are kept separate from Dockside Digs's transactions and financial statements. Exerclse 12 dientifyng accounting wees and uses c1 Part A. Identify the following questions as most likely to be asked by an Internal user or an External user of accounting information. 1. Which imventory items are ont of stock? 2. Should we make a five year loan to that business? 3. What are the costs of our product's ingredients? 4. Should we buy, hold, or sell a company's stock? 5. Should we spend additional money for redesign of our product? 6. Which firm reports the highest sales and income? 7. What are the costs of our service to customers? Part B. Identify the following uscrs as either an Internal user or an External user. 1. Research and development exceutive 5. Distribution manager 2. Human resources executive 6. Creditor 3. Politician 7. Production supervisor 4. Shareholdet 8. Purchasing manager Identify the accounting principle or assumption that best reflects each situation. a. A company reports details behind financial statements that would impact users' decisions. b. Financial statements reflect the assumption that the business continues operating. c. A company records the expenses incurred to generate the revenues reported. d. Each business is accounted for separately from its owner or owners. e. Revenue is recorded when products and services are delivered. f. Information is based on actual costs incurred in transactions. Indicate in which financial statement each item would most likely appear, income statement, balance sheet, or statement of cash flows. a. Assets b. Cash from operating activities e. Liabilities c. Equipment f. Net decrease (or increase) in cush OS 112 Identityng teems w financial statement d. Expenses g. Revenues P2 h. Total liabilities and equity a. Total ausets of Charter Company equal $700,000 and its equity is $420,000, What is the amount of its Fiabiliticer? b. Total assets of Martin Marine equal $500,000 and its liabilities and equity umounts are equal to each other. What is the amount of its liabilities? What is the amount of its equity
