1. Misty Briggs, owner of Briggs Machine Shop, maintains two checking accounts—one for personal affairs and one for the business. What basic accounting concept does this arrangement illustrate?
2. Henman Company made sales of $350,000 to customers, of which it received $200,000 in cash from customers. Henman incurred $210,000 in operating expenses, of which it paid $160,000 in cash. What was Henman’s accrual basis income?
Collins Company made sales totaling $500,000 but received only $350,000 in cash from sales to customers. It paid $400,000 in cash for operating expenses but incurred only $200,000 of expenses this period. What was Collins Company’s cash basis income (loss)?
Classify the following as revenues or expenses assuming Bowen Company uses the accrual basis of accounting:
A. Bowen Company provides $4,500 in services to a client and sends the client a bill.
B. Bowen Company provides $1,500 in services to a client who pays in cash.
C. Bowen Company receives a bill for $200 for utilities from the power company.
D. Bowen Company pays $250 in cash for this week’s advertising.
E. Bowen Company’s employees work all week earning $4,000. Bowen pays its employees monthly.
F. Bowen Company provides $8,000 in services to a client. The client has no money so he gives Bowen some computer equipment instead.
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