Question 1

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
  
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.What is the amount of revenue that will be reported on the income statement for the year ended December 31,2016?

Accepted Answer

The amount of revenue that will be reported on the income statement for the year ended December 31, 2016, is $55,000. This is because services were performed on account for $55,000 during the year, and revenue is recognized when services are performed, regardless of when the cash is received. Option A is incorrect because it adds the cash received on account to the revenue, which would result in double-counting the revenue. Option B is incorrect because it only includes the cash received, not the full amount of services performed. Option D is incorrect because it does not account for the full amount of services performed, only the cash payments made.

Question 2

When AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to ______ and a $300 credit to ______:

Accepted Answer

When gift cards are sold, the company receives cash but has not yet earned the revenue, so it records a debit to Cash and a credit to Unearned Revenue, a liability account, until the service or product is provided.

Question 3

Receiving cash from a customer for payment on account for a sale that was recorded previously will:

Accepted Answer

Receiving cash from a customer for payment on account for a sale that was recorded previously will not affect total assets as the sale was already recorded as an asset when it was made. The transaction simply decreases accounts receivable (a current asset) and increases cash (also a current asset), resulting in no net change to total assets.

Question 4

During January 2015, the first month of operations, a consulting firm had following transactions:
1.Issued common stock to owners in exchange for $20,000 cash.
2.Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000.
3.Received $9,000 in cash for consulting services performed in January.
4.Purchased $1,500 of supplies on account; all of the supplies were used in January.
5.Provided consulting services on account in the amount of $16,000.
6.Paid $750 on account.
7.Paid $3,000 to employees for work performed during January.
8.Received a bill for utilities for January of $3,400; the bill remains unpaid.
-Use the information above to answer the following question.What is the amount to be reported as total liabilities on the balance sheet at the end of January?

Accepted Answer

The total liabilities at the end of January are the sum of the amounts owed on account for supplies ($1,500), the amount owed to employees for work performed in January ($3,000), and the bill for utilities ($3,400), which remains unpaid.

Total liabilities = $1,500 + $3,000 + $3,400 = $8,900

Therefore, the best choice is C ($8,150) as it is closest to the calculated amount.

Question 5

During January 2015, the first month of operations, a consulting firm had following transactions:
1.Issued common stock to owners in exchange for $20,000 cash.
2.Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000.
3.Received $9,000 in cash for consulting services performed in January.
4.Purchased $1,500 of supplies on account; all of the supplies were used in January.
5.Provided consulting services on account in the amount of $16,000.
6.Paid $750 on account.
7.Paid $3,000 to employees for work performed during January.
8.Received a bill for utilities for January of $3,400; the bill remains unpaid.
-Use the information above to answer the following question.What is subtotal of expenses that will be reported on the income statement for the month ended January 31?

Accepted Answer

Expenses that will be reported on the income statement for the month ended January 31 are:Supplies expense: $1,500Utilities expense: $3,400Salaries expense: $3,000Total expenses: $7,900

Question 6

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
  
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.Which of the following is the journal entry that will be used to record activity #3?

Accepted Answer

Activity #3 involves receiving deposits from customers for advertising services to be performed in 2017. This means that the revenue has not yet been earned, so the deposit is recorded as unearned revenue. Therefore, the journal entry would be a debit to Cash (asset) and a credit to Unearned Revenue (liability) for $2,500. This records the increase in cash and the liability, which will be adjusted when the revenue is earned in 2017.

Question 7

During January 2015, the first month of operations, a consulting firm had following transactions:
1.Issued common stock to owners in exchange for $20,000 cash.
2.Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000.
3.Received $9,000 in cash for consulting services performed in January.
4.Purchased $1,500 of supplies on account; all of the supplies were used in January.
5.Provided consulting services on account in the amount of $16,000.
6.Paid $750 on account.
7.Paid $3,000 to employees for work performed during January.
8.Received a bill for utilities for January of $3,400; the bill remains unpaid.
-Use the information above to answer the following question.What is the amount of total revenue to be reported on the income statement for the month of January?

Accepted Answer

The total revenue includes cash received for services ($9,000) and services provided on account ($16,000), totaling $25,000.

Question 8

Expenses are increased with:

Accepted Answer

The answer of Expenses are increased with:
...

Question 9

The following transactions occurred during July:
1.Received $800 cash for services performed during July.
2.Received $5,000 cash from the issuance of common stock to owners.
3.Received $400 from a customer as payment for services performed during June.
4.Billed $3,500 to customers for services performed on account in July.
5.Borrowed $2,500 from the bank and signed a promissory note.
6.Received $1,000 from a customer for services to be performed during August.
-Use the information above to answer the following question.What is the amount of revenue that will be reported on the income statement for the month ended July 31?

Accepted Answer

The answer of The following transactions occurred during July:
1.Received $800...

Question 10

The entry recorded by a law firm when it provides the service it previously recorded as Unearned Revenue includes a:

Accepted Answer

When a law firm provides the service it previously recorded as unearned revenue, they are recognizing revenue that has now been earned. This means that they need to move the unearned revenue from the liability account to the revenue account. Therefore, they need to credit the unearned revenue account and debit the service revenue account. Option A is the only choice that reflects this transaction.

Question 11

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
  
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.Which of the following is the journal entry that will be used to record activity #1?

Accepted Answer

The correct journal entry for recording revenue earned on account is to debit Accounts Receivable and credit Advertising Revenue.

Question 12

When Pizza Company delivers pizza to customers and bills its customer accounts,it should record a debit to ______ and a credit to ______:

Accepted Answer

When Pizza Company delivers pizza to customers and bills its customer accounts, it implies that the customer has not paid for the pizza yet. Hence, Pizza Company's account will show an increase in Accounts Receivable. Sales Revenue will also increase as the transaction represents the delivery of goods or services to the customer. Therefore, Pizza Company should record a debit to Accounts Receivable and a credit to Sales Revenue.

Question 13

The journal entry that records the collection of cash from a customer for payment on account for a sale that was recorded previously includes a debit to:

Accepted Answer

The answer of The journal entry that records the collection...

Question 14

Quartz Instruments had Retained Earnings of $145,000 at December 31,2015.Net income for 2016 was $90,000,and dividends for 2016 were $30,000.What amount of Retained Earnings should be reported at December 31,2016?

Accepted Answer

Retained Earnings at the end of 2016 is calculated as the beginning Retained Earnings plus Net Income minus Dividends: $145,000 + $90,000 - $30,000 = $205,000.

Question 15

Revenues are increased with:

Accepted Answer

Revenues increase stockholder's equity, which is a credit account. Therefore, credits increase stockholder's equity, making choice C the correct answer.

Question 16

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
  
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.Which of the following is the journal entry that will be used to record activity #4?

Accepted Answer

Activity #4 involves making payments to suppliers on account, which means the company is reducing its liability to suppliers. The appropriate journal entry is to debit Accounts Payable (to reduce the liability) and credit Cash (to record the cash outflow). Therefore, the correct answer is option B - Debit Accounts Payable and credit Cash for $5,000.

Question 17

The following transactions occurred during July:
1.Received $800 cash for services performed during July.
2.Received $5,000 cash from the issuance of common stock to owners.
3.Received $400 from a customer as payment for services performed during June.
4.Billed $3,500 to customers for services performed on account in July.
5.Borrowed $2,500 from the bank and signed a promissory note.
6.Received $1,000 from a customer for services to be performed during August.
-Use the information above to answer the following question.As a result of these transactions,what is the amount of the increase to the Cash account?

Accepted Answer

The increase in the Cash account is calculated by adding all cash inflows: $800 (services in July) + $5,000 (issuance of stock) + $400 (payment for June services) + $2,500 (borrowed from bank) + $1,000 (advance payment for August services) = $9,700.

Question 18

A service company receives a check from a customer as partial payment of his account balance.This transaction does not involve the sale of additional services.How should the entry be recorded?

Accepted Answer

The transaction involves receiving cash for an outstanding account receivable, so Cash is debited and Accounts Receivable is credited.

Question 19

The following transactions occurred during July:
1.Received $800 cash for services performed during July.
2.Received $5,000 cash from the issuance of common stock to owners.
3.Received $400 from a customer as payment for services performed during June.
4.Billed $3,500 to customers for services performed on account in July.
5.Borrowed $2,500 from the bank and signed a promissory note.
6.Received $1,000 from a customer for services to be performed during August.
-Use the information above to answer the following question.Which of the following statements about the recording of these transactions is correct?

Accepted Answer

Transaction #4 involves billing customers for services performed on account, which increases Accounts Receivable, hence a debit to Accounts Receivable.

Question 20

In an expanded accounting equation,revenues and expenses are an expanded part of:

Accepted Answer

In the expanded accounting equation, revenues and expenses are reflected in the retained earnings account, which is a part of owner’s equity section along with common stock. Liabilities and assets are not affected by the recording of revenues and expenses.

Quiz 3: Reporting Operating Results on the Income Statement

When AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to and a $300 credit to :