Accounting for Security Deposits and Warranty Sales: A Comprehensive Guide

Abstract

Question 4 If a tenant pays a security deposit for rental of an apartment, how does the landlord account for that deposit? Why? A landlord accounts for the security deposit by debiting the asset account Cash. The landlord also credits the liability account security deposits returnable The landlord accounts for the security deposit this way, because the amount is supposed to be sent back to the tenant at the end of the contract term. However, the amount to be returned is calculated after deducting the value of the damage done by the renter in the house. Question 6 Larry Corporation made a credit sale of $30000 which are subject to 6% sales tax. The corporation also made cash sales which totalled $20670 including the 6% sales tax. Prepare the entry to record Larry’s credit sales Prepare the entry to record Larry’s Cash sales Question 7 Both the current ratio and the acid quick test ratio essentially measures the same short-term debt paying ability of the company. What then is the major difference between these two rations and why would it probably be important for a company to calculate both? Acid test ratio which is commonly known as quick ratio refers to a method of determining the liquidity of a company using the current assets and the inventory while the current ratio uses the current assets only to measure the liquidity of the company. The acid test ratio works best for corporations with large amounts of inventory while the current ratio works for all the enterprises/. When calculating the acid test ratio, we use the current assets and less the inventory, and then divide by the current liabilities while for the current ratio, we divide the current assets using the current liabilities. The acid ratio test mostly focuses in measuring the liquidity of a company while the current ratio measures the liquidity of a firm. Question 8 The Guardian Newspapers sold 11000 of annual subscriptions at $79 each on September 1. How much unearned revenue will exist as of 31 December? Total Amount Received= 11000*79= $869000 Unearned Revenue= Total Amount Received/ Number of Months Unearned Revenue= $869000/4= $217,250 Question 9 Zhang Inc is involved in a lawsuit at December 31, 2020. Prepare...