contestada

Identify which accounting principle or assumption best describes each of the following practices.
a. 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.
b. If $51,000 cash is paid to buy land, the land is reported on the buyer’s balance sheet at $51,000.
c. 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.

Respuesta :

Answer:

a. Revenue recognition

b. Historical cost principle

c. Separate entity assumption

Explanation:

a. Revenue recognition: The principle of revenue recognition occurs when the revenue is realized or earned whether cash is obtained or not and it also meets the accounting accrual basis. Realizable here means that the consumer receives the product but the payment is made afterwards.

b. Historical cost principle: According to this principle the assets and liabilities are to be reported in the financial statements on the purchase or acquisition price.

c. Separate entity assumption: The activity is distinct from its owners in this assumption. The transactions the company does are separated from the owners ' transactions.

Otras preguntas