Exercise 5 Direction: Identify (by using letters) the basic concept that best describes each situation: Concepts: A Exchange Price D Business Entity G Realization B. Matching E Objectivity H Accrual Feedback Value F Predictive Value I Disclosure 1. Joshua bought land for his business and issued a three year note due 2021 for P300,000. This was higher than the cash price of P250,000. The land was recorded for P250,000. 2. Bernie Flower Shop issued a bill to a customer for floral service on a wedding that will take place in the first month of 2020. On October 2, 2019 Bernie Flower Shop received a down payment and recorded it as an unearned revenue. 3. Merchandise sold for P500,000 was recorded as sales revenue by MORE Company. The accountant also recognized P300,000 cost of sales for this in the same year. 4. The company was confronted by a lawsuit in 2019 for breach of contract in the amount of P500,000. No final judgment has been rendered as at Dec 31, 2019 and the firm has some doubts about the outcome of the case. Nevertheless, accountant added this information to the financial report for the benefit of all readers. 5. Company accountant prepared a report analyzing the financial statements of the business as to its liquidity, profitability and solvency for the past three years. 6. Using no. 5 as a guide, management was able to foresee the future direction of the company and a master budget was prepared to improve its financial performance. 7. Stationeries and supplies were purchased on several separate occasions and some of them were usable for a period longer than a year. This was expensed as incurred. 8. Refer to no. 1. The land was appraised in 2020 for P350,000. The accountant still presented the land at P250,000 in its current statement of financial position but with a supporting note of its appraised value. (Give three principles supporting this procedure). 9. The owner of Bernie Flower Shop took home some flowers. The accountant recorded this as personal drawing of the owner. 10. Sales revenue of P1,000,000 was recorded in 2020. Related to this was the recording of salesmen commission based on 10% of sales. Exercise 5 Direction: Identify (by using letters) the basic concept that best describes each situation: Concepts: A Exchange Price D Business Entity G Realization B. Matching E Objectivity H Accrual Feedback Value F Predictive Value I Disclosure 1. Joshua bought land for his business and issued a three year note due 2021 for P300,000. This was higher than the cash price of P250,000. The land was recorded for P250,000. 2. Bernie Flower Shop issued a bill to a customer for floral service on a wedding that will take place in the first month of 2020. On October 2, 2019 Bernie Flower Shop received a down payment and recorded it as an unearned revenue. 3. Merchandise sold for P500,000 was recorded as sales revenue by MORE Company. The accountant also recognized P300,000 cost of sales for this in the same year. 4. The company was confronted by a lawsuit in 2019 for breach of contract in the amount of P500,000. No final judgment has been rendered as at Dec 31, 2019 and the firm has some doubts about the outcome of the case. Nevertheless, accountant added this information to the financial report for the benefit of all readers. 5. Company accountant prepared a report analyzing the financial statements of the business as to its liquidity, profitability and solvency for the past three years. 6. Using no. 5 as a guide, management was able to foresee the future direction of the company and a master budget was prepared to improve its financial performance. 7. Stationeries and supplies were purchased on several separate occasions and some of them were usable for a period longer than a year. This was expensed as incurred. 8. Refer to no. 1. The land was appraised in 2020 for P350,000. The accountant still presented the land at P250,000 in its current statement of financial position but with a supporting note of its appraised value. (Give three principles supporting this procedure). 9. The owner of Bernie Flower Shop took home some flowers. The accountant recorded this as personal drawing of the owner. 10. Sales revenue of P1,000,000 was recorded in 2020. Related to this was the recording of salesmen commission based on 10% of sales