Determine whether each of the following is an asset, liability, revenue, expense
ID: 2773993 • Letter: D
Question
Determine whether each of the following is an asset, liability, revenue, expense, equity, or nothing. If more than one account is affected, analyze the impact on all accounts. Assume a year-end of December 31st. Justify your answer with appropriate "theory." An example of a "theory" would be revenue recognition, historical cost, etc. Indicate both sides of the transaction and whether the account will increase or decrease.
k. Company incurs subsanstial costs in rearranging the layout of its plant which was done to expedite the flow of materials and decrease materials handling.
l. Company owns 1000 shares of stock in another corporation. The stock has decrease in value compared to what it orginally cost earlier in the year.
q. Company holds a note receivable as of December 31st from a customer who files bankruptcy in January before the current year financial statements are made public in March of next year.
t. The company's advertising campaign over several years has been so successful that the general public now consider the company's brand to be synonymous with the product.
Explanation / Answer
k.
Plant is an asset and it increases the plant as the cost is substantial and it increases the plant value. Plant account is debited and the cash account is credited. as the cash is incurred in rearranging the layout of plant.
L.
Assuming that the purchase of stock is a current investment and it is an asset and the investment value changes according to the market value of the stock at the year end. Thus the investment value will get decreased according to the market price and the loss is an expense and is debited to profit and loss account.
q.
The note recievable is an asset and it is decreased and the bad debts is an expense and it is debited to the profit and loss account.
t.
The increase in the brand value will not have any ajustments in the financial statements. it is considered only when the company is sold to anither company.
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