Expense RecognitionSolution1 No expense will be recognized i

Expense Recognition

Solution

1) No expense will be recognized in this case because cash of $178 is paid for the outstanding electricity expense of the month of january.

2) Yes, the expense will be recognized with the amount of $165 because the given advertising expense is for the month of february. The advertising expense will be debited and advertisiong expense payable will be credited with $165 as cash is not paid.

3) No expense will be recognized in this case because purchase of fryer is a capital expenditure hence the amount of $5,200 will be capitalized.

4) Yes, the repair expense will be recognized for $1,600. The repair of truck is a revenue expenditure which is payable in March (i.e. not paid in cash in February).

5) No expense will be recognized because payment is made for outstanding sales commissions for the month of january of $4,200.

6) Yes, sales commissions expense will be recognized for $7,200 and sales commissions payable account will be credited with $7,200.

7) No expense will be recognized becuase only inventory is received and no sale is made. (if sale is made then cost of goods sold will be debited as an expense).

8) Yes, the cost of goods sold expense will be recognized for $4,500 (30 books*$150 per book).

9) No expense will be recognized as cash is paid in advance (i.e. prepaid).