Exercise 2-10 The following are transactions recorded by Avaval Corp, during the

Question

Exercise 2-10 The following are transactions recorded by Avaval Corp, during the current year 1. Ordinary operating maintenance on equipment was recorded as follows: Equipment 2,600 Accounts Payable 2,600 2. Ayayai received an advance on a custom order for merchandise that will be shipped during the next accounting year Cash 19,500 Sales Revenue 19,500 3. Ayayal Corp, is holding inventory on consignment for Rubber Ltd. Ayayai will only pay Rubber when a sale is made to a customer. Avayai made the following entry when it received the inventory Inventory 16,600 Accounts Payable 16,600 4. On the last day of the accounting period, a 12-month insurance policy was purchased. T insurance coverage is for the next accounting year he Insurance Expense 6,100 Cash 6,100 (a2) each transaction, if there was a violation of component of the conceptual framework (i.e., qualitative characteristic, element. or principle),give the entry that should have been recorded, if any. (Credit account titles are automatically indented when the amount is entered Do not indent manually. It no entry is required, select "No entey for the account titles and enter o for the amounts

Explanation / Answer

1.) Operating Maintenance Expenses are debited to profit and loss Account.

Journal Entry ::

a. Operating Maintenance Expenses A/c Dr. 2600

To Account Payble A/c 2600

b. Profit & Loss A/c Dr. 2600

To Operating Maint. Exp. 2600

2.) Advance received for Sales in next year will not shown in current revenue account.

Cash A/c Dr. 19500

To Advance received for Sales A/c 19500

3.) In consignment Consignee No entry show in books on goods Received from Consignor. So Ayayai will not made any entry in books.

4.) Prepaid Insurance Account Dr. 6100

To Cash Account 6100

Prepaid insurance will be transferred in profit & loss Account in next year.

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