Accounting Principles Study

Question 1. Identify which basic principle of accounting is best described in each of the following items: (20 points)a. ABBA Company, in addition the Financial Statements, publishes also notes to its financial statements and supplementary information. (5 points)b. Gamma Co. reports trading investments on its statement of financial position at their estimated fair value. (5 points)c. EdilCentro recognizes supplies cost as an expense when using them, instead of when purchasing them. (5 points)d. KCC Co. records revenues when it performs a service for its customers even though cash is collected later. (5 points)Question 2. Presented below is information related to Brown Co (amounts in thousands) (80 points)Interest revenue € 30,000 Sales revenue 2,800,000 Sales returns and allowances 120,000 Sales discounts 36,000 Cost of goods sold 1,000,000 Advertising Expense 200,000 Sales Commissions 160,000 Salaries of Sales personnel 240,000 Depreciation of Office Buildings 120,000 Office Supplies Expenses 68,000 Other general expenses 80,000 Interest expense 160,000 Gain from sale of equipment 320,000 Loss from sale of a division 80,000 Dividends paid on preferred shares 18,000 Assume the total effective tax rate on all items is 20%. 100,000 ordinary shares were outstanding during the year Required Prepare an Income Statement. (80 points)