Expense Recognition

[fri_1986]

Sun microsystems uses the accural basis of accouniting and recognizes revenue at the time it sells goods or renders services. It applies US GAAP accounting principles. Indicate the amount of expenses (if any) the firm recognizes during the months of June, July, and August, the firm does the following:

Purchases office supplies on account costing $12,600 during july. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on july 1 cost $2,400, on July 31 cost $9,200 and on August 31 cost $2,900.

so....the answer is supposed to be:
June: $0 expnense recognized
July: $5,800 expense recognized
August: $6,300 expense recognized

but why?
I figured there would just be $12,600 recognized in July, when they purchased the office supplies on account...

 

[fri_1986]

Thanks I agree with what you are saying, but the answer given still doesn't quite make sense. I actually think that the answer given is incorrect. :shock:

 

[HallsofIvy]

The point is that this is NOT a "mathematics" question- it is a question about accounting practices.

 

[fri_1986]

The point is that this is NOT a "mathematics" question- it is a question about accounting practices.

yes you are right it more about accounting principles...am i posting in the wrong spot? If I am, sorry, I'm new...if I am do you know a good alternative? i thought accounting---> sort of similar to finance/business math

 

[HallsofIvy]

yes you are right it more about accounting principles...am i posting in the wrong spot? If I am, sorry, I'm new...if I am do you know a good alternative? i thought accounting---> sort of similar to finance/business math

I don't know if there is an "accounting" website! We might be able to help if you will define the special accounting terms (like "US GAAP accounting principles" and "FIFO").