The following transactions relate to Eli Lily and Company, a pharmaceutical firm. Indicate whether or not each transaction immediately gives rise to an asset of the company under generally accepted accounting principles. If accounting recognizes an asset, state the account title and amount.

a. The firm sends a check for $12,000,000 to an insurance company for liability insurance. The period of coverage begins next month.

b. The firm issues a check for $500,000 as a deposit on specially designed scientific equipment. The equipment will have a total purchase price of $12,000,000 and will be completed and delivered next year.

c. The firm acquires shares of common stock in Genetic Engineering, Inc., a leading firm in genetics research, for $325,000. Eli Lilly holds these shares with expectation of developing long-term relationship with this genetic engineering firm.

d. The firm acquires chemicals used as raw materials in its pharmaceutical products at a list price of $800,000, with payment made in time to secure a 2 percent discount for prompt payment. Eli Lilly treats cash discounts as a reduction in the acquisition cost of inventory.

Answer rating: 100% (QA)

The answers are as per the below a Yes payment to insurance company for liability insurance creates ... View the full answer