A company purchased 20 printers at $12,000 each for cash. Management has approve

Question

A company purchased 20 printers at $12,000 each for cash. Management has approved the following requests.  1. The sales team wants to use one as a demo unit on the floor for 3 months because they think it will help with sales. 2. The research department wants one to use as part of their work.  3. The accounting department wants one that they plan to use over the next 4 years. The rest will be sold to the public.

Please answer the following questions. :

1. What affect does the usage have on how the printers are accounted for in the books?

2.  What additional information do you need.

3. Based on the usage ( there are 4 alternatives) how would each accounting treatment appear on the income statement and balance sheet.

Explanation / Answer

1. The usage of any item purchase will decide the fate of the item whether it will be apper in Income statment or will apper in Balance sheet of the Purchaser because usage will decide the item will use in current period or over the period of time.

Therfor the Usage of the Printers will affect the head in which he will be accounted in the book.

2. No Additional Information will be need other than provided for accounting of the printer. Provide information is enough for the intial accounting Purpose.

3. From the 20 Printers Purchased Follwing 4 alternatives ways are there accounted based on usage.

A. Printer Given to Sales Team will Recognise as sales Expense in Income statment because it use for three months only.

B. Printer Given to Reserch department also accounted as reserch and Development expenses (apper in assets only when the reaserch is under process and 100% assurance of sucess then only capitalise other wise above given accounting has to be done)

C. Printer given to Accounts Deparrtment Will appear on the Fixed Assets Side and the Depreciation on the same will be charge to income statment over Four Years.

D. Balance 17 Printer will be Accounted in Stock held by company for the sales purpose.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.