The amount of cash, $5,000, includes $2,000 in the companys bank account, $1,200 on hand in the
Question:
The amount of cash, $5,000, includes $2,000 in the company’s bank account, $1,200 on hand in the company’s safe, and $1,800 in Joe’s personal savings account. 2. One of the notes receivable in the amount of $600 is an IOU that Joe received in a poker game five years ago. The IOU is signed by “G.W.,” who Joe met at the game but has not heard from since. 3. Office furniture includes $2,500 for an Indian rug for the office purchased on November 15. The total cost of the rug was $10,000. The business paid $2,500 in cash and issued a note payable to Jana Interiors for the balance due ($7,500). As no payment on the note is due until January, this debt is not included in the liabilities given. 4. Also included in the amount for office furniture is a computer that cost $800 but is not on hand because Joe donated it to a local charity. 5. The “Other Assets” of $25,000 represent the total amount of income taxes Joe has paid the federal government over a period of years. Joe believes the income tax law to be unconstitutional, and a friend who attends law school has promised to help Joe recover the taxes paid as soon as he passes the bar exam. 6. The asset “Land” was acquired at a cost of $15,000 but was increased to a valuation of $60,000 when one of Joe’s friends offered to pay that much for it if Joe would move the building off the lot. 7. The accounts payable include business debts of $30,000 and the $2,000 balance owed on Joe’s personal MasterCard. Instructions a. Prepare a corrected balance sheet at November 30, current year. b. For each of the seven numbered items, use a separate numbered paragraph to explain whether the treatment followed by Joe is in accordance with generally accepted accounting principles.
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer