Help with holiday homework

[yermum]

Warning: kinda long
I'm new to this site and accounting is probably one of my worst subjects.
Sorry, I don't really know how to use this yet. I'm probably posting in the wrong place and annoying everybody. I guess others could post their holiday homework stuff here too..? Is that how this works?

I have a lot of questions that I'll try to make short. I've answered them myself, but I'm not sure if I'm right. I don't have answers that I can compare them to, so I would love some help with that.

Answers need reference to SAC thingies

1. If you borrowed a computer on a regular basis from a family member to keep track of transactions, how would it be treated in the books?
-If you were to exchange goods with them as payment for the computer, how would it be treated then?
-What if they paid $1500 for the computer. Now is it an asset?

2. If a magazine company were to accept prepaid subscriptions for three-year subscriptions, would the total money received be a liability or revenue item?

3. If proprietor bought $200 of stationery and realised later that a box of pens ($5) are unopened, should the entire $200 be recorded as an expense? Relevance and reliability.. how do they tie in here?
- What if unused stationery was $150 rather than $5?

4. Alfie rents business premises from City Real Estate. $40000 per annum. The two firms agree on a one-off payment ($99000) for 3 years. Should it be written off as an expense? But a friend argues this could distort profits of firm. Reference to SAC2 and relevant qualitative characteristics.

[yermum]

And there's more I don't really get

1. A proprietor bought a few items he estimated would have a useful life in business for three years (computer, printer, stapler, ruler), yet a friend told him items are expensive and represent economic sacrifice.  They're assets, aren't they? But there are some reasons why they could be expenses, right?
How is Relevance applied to this situation?

2. Reference to accounting principles.. how applied to these scenarios?
- Business premises purchased for $320 000. Now valued at $480 000 , $490 000, and $510 000 by 3 valuers
- Preparing income statements based on her memory and not from business docs
- Roger prepares a balance sheet on the basis of what he expects to receive if he sells firm's assets next year
- Nancy does not prepare an income statement every year and completed accounting reports for a three-year period (profit of $65000)

Thank you so much to anyone who answers T_T this will help me immensely

[The Usual Student]

Warning: kinda long
I'm new to this site and accounting is probably one of my worst subjects.
Sorry, I don't really know how to use this yet. I'm probably posting in the wrong place and annoying everybody. I guess others could post their holiday homework stuff here too..? Is that how this works?

I have a lot of questions that I'll try to make short. I've answered them myself, but I'm not sure if I'm right. I don't have answers that I can compare them to, so I would love some help with that.

Answers need reference to SAC thingies

1. If you borrowed a computer on a regular basis from a family member to keep track of transactions, how would it be treated in the books?
-If you were to exchange goods with them as payment for the computer, how would it be treated then?
-What if they paid $1500 for the computer. Now is it an asset?

2. If a magazine company were to accept prepaid subscriptions for three-year subscriptions, would the total money received be a liability or revenue item?

3. If proprietor bought $200 of stationery and realised later that a box of pens ($5) are unopened, should the entire $200 be recorded as an expense? Relevance and reliability.. how do they tie in here?
- What if unused stationery was $150 rather than $5?

4. Alfie rents business premises from City Real Estate. $40000 per annum. The two firms agree on a one-off payment ($99000) for 3 years. Should it be written off as an expense? But a friend argues this could distort profits of firm. Reference to SAC2 and relevant qualitative characteristics.

Nah your all g man, next time post in the accounting questions thread on the accounting board
Accounting Questions Thread

Q1
The Entity principle states that the firm is assumed separate from the owner and other businesses, due to this the computer should not be recorded as an asset as it is not controlled by the firm but by the family member making it their personal asset and not the firm's. - (not entirely sure on this one but i think this makes reasonable sense)
- If goods are exchanged as a payment for the computer then they computer would become an asset ( I am assuming payment indicates that the computer has come into the firms ownership) and this computer would be recorded as an asset as it is a resource controlled by the entity as a result of past transaction and is intended to lead to an inflow of future economic benefit. The computer would have to be valued at an agreed value.
- Same answer as above but note that the computer would be valued at 1500 as that is its historical cost.

Q2
The total money received would be a revenue as it is an inflow of economic benefit in the form of an increase in assets ( bank ) that increases owner's equity as a result of business activity. The actual subscriptions are a liability to the firm but not the total money received.

Will get back to others soon! Just in a rush right now

[yermum]

thank you so much!
Don't worry, no rush no rush

[Hannibal]

I'm gonna have a stab at these they may not be 100% correct.

1. A proprietor bought a few items he estimated would have a useful life in business for three years (computer, printer, stapler, ruler), yet a friend told him items are expensive and represent economic sacrifice.  They're assets, aren't they? But there are some reasons why they could be expenses, right?
How is Relevance applied to this situation?
The computer and the printer are considered non-current assets as they are resources controlled by the entity (as a result of past events), from which future economic benefits are expected after a period of 12 months, proven as they are estimated to have a useful life of three years. The stapler and ruler are not assets however, as while they are a resource controlled by the entity from which future economic benefits are expected, they are not of enough financial value to make an impact on the accounting reports, hence they are not relevant in decision-making. As a result, they are categorised as stationery expense as they are a consumption of economic benefits that decreases assets (Bank), which leads to a decrease in OE (Stationary expense)

2. Reference to accounting principles.. how applied to these scenarios?
- Business premises purchased for $320 000. Now valued at $480 000 , $490 000, and $510 000 by 3 valuers
Historical cost principle states that the recording of a transaction should be valued at cost price, as this value is verifiable by reference to a source document. In this case the premises will be valued in accounting reports at $320 000.
- Preparing income statements based on her memory and not from business docs
Historical cost principle states that transactions should be recorded at their cost price, as this value is verifiable by reference to a source document. By recording transactions from memory, the figures are not verifiable by reference o a source document, and hence this principle is breached.
- Roger prepares a balance sheet on the basis of what he expects to receive if he sells firm's assets next year
The going concern principle states that the life of the business is assumed to be continuous, and it's records are to be kept on this basis. Therefore, Roger should maintain business records on the assumption that the life of the business is ongoing, not based off expectations that he will sell the firms assets.
- Nancy does not prepare an income statement every year and completed accounting reports for a three-year period (profit of $65000)
The reporting period principle states that the life of the business must be divided into periods of time, as this allows for reports to be prepared, these reports should reflect the reporting period in which a transaction occurs. The ATO require that the business prepare reports at lease once a year, for taxation purposes. Hence, this principle is breached as the income statement has not been prepared for three years.

[The Usual Student]

Warning: kinda long
I'm new to this site and accounting is probably one of my worst subjects.
Sorry, I don't really know how to use this yet. I'm probably posting in the wrong place and annoying everybody. I guess others could post their holiday homework stuff here too..? Is that how this works?

I have a lot of questions that I'll try to make short. I've answered them myself, but I'm not sure if I'm right. I don't have answers that I can compare them to, so I would love some help with that.

Answers need reference to SAC thingies

1. If you borrowed a computer on a regular basis from a family member to keep track of transactions, how would it be treated in the books?
-If you were to exchange goods with them as payment for the computer, how would it be treated then?
-What if they paid $1500 for the computer. Now is it an asset?

2. If a magazine company were to accept prepaid subscriptions for three-year subscriptions, would the total money received be a liability or revenue item?

3. If proprietor bought $200 of stationery and realised later that a box of pens ($5) are unopened, should the entire $200 be recorded as an expense? Relevance and reliability.. how do they tie in here?
- What if unused stationery was $150 rather than $5?
The box of pens worth $5 have not been used and hence not consumed meaning they are are not expenses as they are not outflows of economic benefit, the remaining $195 should be recorded as an expense as they are a consumption of economic benefit that come in the form of a deduction in assets (Bank) and lower the owner's equity. The 195 dollar stationary expense should be recorded as it is relevant information and is useful for business decision making.I would also argue that the $5 of the unopened pens would be a current asset as it represent a resource controlled by the entity that is expected to lead to an inflow of future economic benefit within 12 months. If the unused stationary was 150$ and not $5, it would not change anything, two different values. ( I think )

4. Alfie rents business premises from City Real Estate. $40000 per annum. The two firms agree on a one-off payment ($99000) for 3 years. Should it be written off as an expense? But a friend argues this could distort profits of firm. Reference to SAC2 and relevant qualitative characteristics.
I am not too sure what SAC 2 is since the STATEMENT OF ACCOUNTING CONCEPTS is outside the scope of the study design, but the one of payment of 99,000 for 3 years actually represent a prepaid expense with 4000 being a Current assets and the remaining 86000 being a non current asset, this is because they represent a resource controlled by the entity, as a reuslt of past transaction, that is expected to lead to an inflow of economic benefit within the next 12 months for the 4000 and beyind the next 12 months for the 86000. These should not be recorded as expenses as they have not yet been consumed hence do not represent a consumption of economic benefit in the form of a decrease in assets that affect owner's equity. In terms of the qualitative characteristics, mention relevance as this information should be recorded assets as it is useful for business decision making 

[yermum]

Thank you very very much!!