5. A parcel of land is: offered for sale at $150,000, assessed for tax purposes

Question

5. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for S137,000. The land should be recorded in the purchaser's books at: A. $95,000 B. S137,000 C. $138,500 D. S140,000 E. $150,000 6. To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the: A. Objectivity principle B. Realization principle C. Business entity principle D. Going-concern principle E. Revenue recognition principle 7. On December 15, 2008, Myers Legal Services signed a $80,000 contract with a client to provide legal services to the client in 2009. Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2009 and not 2008? A. Monetary unit principle B. Going-concern principle C. Cost principle D. Business entity principle E. Revenue recognition principle

Explanation / Answer

5)

Answer B $137,000

Cost principle:Acquired assets and services should be recorded at their actual cost(historical cost)

So the land should be recognised at purchase price $137000

6)

Answer C.Business entity principle

A business is a separate legal entity whose identity is separate from its owners.it is an artifical person

7)

E.Revenue recognition principle

Recognize revenues in the accounting period when they become realised or when they become earned.

the advance in 2008 is unearned revenue which is recognised as a liabiltiy

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