In Each of the Following Situations, the Accountant for Sydney

question 30

Essay

In each of the following situations, the accountant for Sydney Design Services (Sydney) must decide how to record the information in the financial statements. Sydney is a proprietorship owned and operated by Gloria Steinwald.
1. In April, Sydney purchased some furniture that will be used in a client's newly designed office. Sydney paid $4,000 for the furniture, and the client will pay Sydney $5,600 when it is delivered and assembled in May. The accountant wants to know at which amount the furniture should be reported on the April 30 balance sheet.
2. In June, Sydney signed a long-term contract with a hotel chain to review all of their hotels' décor annually and recommend updates as fashions change. The fees will be based on the amount of time spent on the annual review. The first location will be evaluated starting in September. The accountant believes this contract is of great value to Sydney even though no money has changed hands yet, and wonders how it can be shown in the June 30 financial statements.
Instructions
For each of the situations, identify which generally accepted accounting principle would guide the accountant in deciding how to report the situation, and describe the correct treatment.