100 points Exercise 3-2 Determine the timing of expense recognition (LO3-1 Consi

Question

100 points Exercise 3-2 Determine the timing of expense recognition (LO3-1 Consider the following sitatin Required: For each situation, detemmne the date for which the company necognizes the expense under accrual-basis accounting 1. American Aitines operates a fight from Dailas to Los Angeles on August 16. The plots salaries associaned with te fignt ane paid on Sepnember 2 2 Eddie Bauer pays cash on January & to purchase sunglasses from a wholesale disibuler The sunglasses ane sold to ustomers on anuary 27 danuary 6 January 27 . On January 1, Pizne Hut peys for a one-year property insurance polcy wth coverage starting immedialety January 1 of insurance Sports Musdrated signs an agreement with CBS on Januery the Super Bowl Sports ustrated makes the payment on February 23 12 t0 providle television advertisements during the Super Bowl Payment is due within 3 weeks after February 4, the day of Fabruary 4 February 23 cBook Pro 30

Explanation / Answer

3-2)

1. The salaries is accrued on August 16. so under accrual system of accounting it should be recorded on:

August 16  Answer

2. Since the purchase is made on January 6, expenses should be recognized on

January 6 Answer

3. Insurance expenses are recognised when they are expired so in this case the proper recording would be:

One months worht of Insurance is recorded each month Answer

4. Since advertisement is played on february 4, expense should be recognised on

February 4 Answer

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