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# A Discussion On Accounting Principles

1) Receiving a cash dividend from an available-for-sale investment requires the following journal entry:
A) a debit to Cash and a credit to Dividend Revenue.
B) a debit to Cash and a credit to Unrealized Gain on Investments.
C) a debit to Unrealized Gain on Investment and a credit to Dividend Revenue.
D) no journal entry. Investor makes a memorandum entry in the accounting records.

2) Estimated warranty payable are reported on the balance sheet as:
B) a long-term liability.
C) a current liability.
D) part of cost of goods sold.

3) The accounting principle requiring that a company record the warranty expense in the same period that it records sales revenue is the:
A) going concern principle.
B) matching principle.
C) conservatism principle.
D) consistency principle.

4) Omaha Bank lends Nebraska Paper Company \$100,000 on January 1. Nebraska Paper Company signs a \$100,000, 8%, 6-month note. The entry made by Nebraska Paper Company on January 1 to record the proceeds and issuance of the note:

5) Monthly sales were \$200,000. Warranty costs are estimated at 4% of monthly sales. In the month of sale, the company should record :

#### Solution Preview

Let's take a look at each of your study questions.

1) Receiving a cash dividend from an available-for-sale investment requires the following journal entry:
A) a debit to Cash and a credit to Dividend Revenue.
B) a debit to Cash and a credit to Unrealized Gain on Investments.
C) a debit to Unrealized Gain on Investment and a credit to Dividend Revenue.
D) no journal entry. Investor makes a memorandum entry in the accounting records.

-- We would want to credit cash, as we're increasing cash. This is an available for sale (AFS) security. We would want to credit the source of that cash, ...

#### Solution Summary

This solution illustrates and explains the correct entries needed to solve the problems given. This solution also answers and explains the accounting multiple choice questions listed.

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