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Part a. Sparrow Company bought a truck by giving a check to the seller. The...

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Accounting

Part a. Sparrow Company bought a truck by giving a check to the seller. The seller asked for $11,000, but Sparrow negotiated and was able to buy the truck for only $10,000. The owner of Sparrow, Rehn Byrd, believes he got a great deal because he believes the truck is actually worth the entire $11,000 that the seller was asking, or perhaps even more, but the seller needed to raise cash quickly, and that is why Rehn was able to have Sparrow Company buy it for $10,000. Required: Make the journal entry that Sparrow ought to have made when it bought the truck.

Part b. Snell Company performed services for a client and bills the client for $1,000 at the end of the month in which the services were performed. Let us call that month 1. In month 2, the client paid $300 of the amount that had been billed in month 1. In month 3, the client paid the remaining $700 that had been billed in month 1. Required: Make journal entries that are necessary in an accrual accounting system. Identify in what time periods they should be recorded. Also, in what time period(s) should Snell Company recognize revenue if Snell uses an accrual accounting system?

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