Answer to Question #243040 in Accounting for samantha

Question

7. Suppose Ms. Ellana has to owe you money for selling goods on May 12, 2021, and she

will be going to pay only on November 2, 2021, prove that your accounts receivable is

current in nature.

8. What is the normal balance of Bonds Payable?

9. Differentiate a service, merchandising, and manufacturing entity by providing 2 examples for each type of business.

Answer 1

Solution:

7.). Current in nature means that your accounts fall within one financial period. That is from January 1^st to December 31^st for a particular year.

From the following, the accounts receivable falls within the current accounting period of the year 2021 and they are only 6 months old and hence current. They are current assets that are expected to be converted to cash within a year.

 

8.). The normal balance of Bonds Payable is always a credit balance. It is a long-term liability account.

 

9.). A service entity refers to companies that provide services to their clients rather than sell a physical product. Two major examples of service entities include accounting firms and law firms.

 

A merchandising entity refers to companies that purchase products from manufacturing companies for resell purposes. They are made up of wholesalers and retailers. Two major examples of merchandising entities include Wal-Mart and Target.

 

A manufacturing entity refers to companies that make new products using raw materials, parts, and components to assemble finished goods, which are either sold directly to consumers or to merchandising firms to reach consumers. Two major examples of manufacturing entities include General Motors and Ford automotive companies.