Question 1

On the last day of December 2018, Billings Inc. entered into a transaction that resulted in a receipt of $54,000 cash in advance related to services that will be provided during January 2019. During December of 2018, the company also performed $34,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company had recorded service revenue of $800,000 for the year. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.
If Billings Inc. makes the appropriate adjusting entry, how much will be reported on the December 31, 2018 balance sheet as accounts receivable?

Accepted Answer

The $34,000 for services performed but not billed nor paid in December 2018 should be recognized as accounts receivable on the December 31, 2018 balance sheet. The $54,000 received in advance for services to be provided in January 2019 is a liability (unearned revenue) and not an account receivable.

Question 2

On April 1, Lightpath Technologies paid $40,000 for rent on warehouse space one year in advance. If Lightpath makes the appropriate adjusting entry, how much will be reported on the December 31 income statement for rent expense?

Accepted Answer

Rent for 9 months (April through December) is expensed in the current year, so $40,000 for 12 months means $3,333.33 per month. For 9 months, that's $3,333.33 * 9 = $30,000.

Question 3

On April 1, Smith & Sons paid $30,000 for rent on warehouse space one year in advance. If Smith & Sons makes the appropriate adjusting entry, how much will be reported on the December 31 balance sheet as prepaid rent?

Accepted Answer

By December 31, nine months of the prepaid rent have been used, leaving three months remaining. Therefore, $30,000 / 12 months * 3 months = $7,500 will be reported as prepaid rent.

Question 4

On October 1, Tanaka entered into a lease agreement to rent out its old warehouse space it was no longer using. This agreement calls for Tanaka to receive $3,000 per month from the lessee, due and payable at the end of the 4-month lease term. At December 31, none of the rental payments from the lessee had yet been received.
If Tanaka makes the appropriate adjusting entry, how much will be reported on the December 31 balance sheet as rent receivable?

Accepted Answer

The answer of On October 1, Tanaka entered into a...

Question 5

Mrs. Beard's Bagels has 6 employees who are paid $12 per hour. At December 31 each of Mrs. Beard's employees had worked 18 hours which had not been paid or recorded. Prior to adjustments, the company had recorded $85,700 in wages expense for the year.
If Mrs. Beard makes the appropriate adjusting entry, how much will be reported on the December 31 income statement as wage expense?

Accepted Answer

The appropriate adjusting entry for the unpaid wages is calculated as follows: 6 employees * 18 hours each * $12 per hour = $1,296. This amount needs to be added to the previously recorded wages expense of $85,700, resulting in a total of $86,996 ($85,700 + $1,296) to be reported on the income statement.

Question 6

Mrs. Beard's Bagels purchases its inventory, on account, daily. At December 31 the company had taken receipt of $40,000 of inventory from its suppliers which had not been recorded in the accounts.
If Mrs. Beard makes the appropriate adjusting entry, how much will be reported on the December 31 balance sheet as accounts payable?

Accepted Answer

The correct amount to be reported as accounts payable is $40,000, which represents the inventory received but not yet recorded in the accounts. This adjusting entry ensures that the expense is matched with the period in which the inventory was received, adhering to the accrual basis of accounting.

Question 7

Which of the following is a permanent account category?

Accepted Answer

The answer of Which of the following is a permanent...

Question 8

Which of the following is a permanent account?

Accepted Answer

Permanent accounts are those that carry their balances over into the next accounting period. Accounts Receivable is a permanent account because it tracks the amounts owed to the company, which are carried over from one period to the next until paid.

Question 9

Which of the following is a permanent account?

Accepted Answer

Retained Earnings is a permanent account because it carries its balance from one accounting period to the next, reflecting the cumulative amount of net income retained in the business.

Question 10

Which of the following is a temporary account?

Accepted Answer

Cash Dividends is a temporary account because it represents a distribution of earnings to shareholders and is closed to Retained Earnings at the end of the accounting period.

Question 11

Which of the following is a temporary account?

Accepted Answer

Wages Expense is a temporary account, meaning it is closed at the end of each accounting period to summarize the year's expenses. Permanent accounts, like Notes Payable, Land, and Common Stock, carry their balances over into the next period.

Question 12

The distinguishing feature of a permanent account is that any balance in the account at the end of an accounting period is:

Accepted Answer

Permanent accounts carry their balances over into the next accounting period. This means that the balances are not closed or reset at the end of the accounting year but are carried forward to the next period.

Question 13

The distinguishing feature of a temporary account is that any balance in the account at the end of an accounting period is:

Accepted Answer

Temporary accounts are closed at the end of the accounting period, and their balances are transferred to permanent accounts in the stockholders' equity section, such as the Retained Earnings account, to prepare the accounts for the next period.

Question 14

Corporation revenue and expense accounts are considered temporary subdivisions of the corporation's:

Accepted Answer

Revenue and expense accounts are temporary accounts that are closed to the retained earnings at the end of the accounting period. This process helps in determining the net income or loss, which is then added to or subtracted from the retained earnings.

Question 15

A complete accounting cycle occurs once every:

Accepted Answer

A complete accounting cycle typically occurs once every fiscal year, encompassing all the steps from recording transactions to preparing financial statements.

Question 16

Which of the following accounting cycle steps occurs only at the end of the accounting year?

Accepted Answer

The preparation of a post-closing trial balance occurs only at the end of the accounting year to ensure that all temporary accounts have been closed and the ledger is ready for the next accounting period.

Question 17

On December 15, 2018, a company receives an order from a customer for services to be performed on December 28, 2018. Due to a backlog of orders, the company does not perform the services until January 3, 2019. The customer pays for the services on January 16, 2019.
The revenue recognition principle requires the revenue to be recorded by the company on:

Accepted Answer

The revenue recognition principle dictates that revenue should be recognized when the service is performed, which in this case is January 3, 2019, regardless of when payment is received or when the order was placed.

Question 18

Under the accrual basis of accounting:

Accepted Answer

Under the accrual basis of accounting, revenues and expenses are recognized when they are earned or incurred, regardless of when the cash is actually received or paid. This principle is reflected in choice C, which accurately describes the accrual basis by stating that financial events are recognized in the period they occur, not necessarily when cash transactions happen. Choices A, B, and D describe characteristics of the cash basis of accounting, not the accrual basis.

Question 19

Which of the following reflect the impact on liabilities and revenues, if unearned revenue is not adjusted when the revenue is earned?

Accepted Answer

Unearned revenue is initially recorded as a liability because it represents money received before services are provided. If it is not adjusted when the revenue is earned, the liabilities remain overstated because the obligation to provide services or goods still appears outstanding. Simultaneously, revenue is understated because the earned revenue has not been recognized in the income statement.

Question 20

On March 1, Roberts & Sons reported a balance in Supplies of $250. During March, the company purchased supplies (properly recorded) for $950 and consumed supplies of $800.
If no adjusting entry is made for supplies at the end of the month:

Accepted Answer

If no adjusting entry is made, the consumed supplies of $800 will not be recorded as an expense, causing stockholders' equity to be overstated by $800 due to the unrecorded expense.

Quiz 3: Accrual Basis of Accounting

On April 1, Lightpath Technologies paid $40,000 for rent on warehouse space one year in advance. If Lightpath makes the appropriate adjusting entry, how much will be reported on the December 31 income statement for rent expense?

On April 1, Smith & Sons paid $30,000 for rent on warehouse space one year in advance. If Smith & Sons makes the appropriate adjusting entry, how much will be reported on the December 31 balance sheet as prepaid rent?

Which of the following is a permanent account category?

Which of the following is a permanent account?

Which of the following is a permanent account?

Which of the following is a temporary account?

Which of the following is a temporary account?

The distinguishing feature of a permanent account is that any balance in the account at the end of an accounting period is:

The distinguishing feature of a temporary account is that any balance in the account at the end of an accounting period is:

Corporation revenue and expense accounts are considered temporary subdivisions of the corporation's:

A complete accounting cycle occurs once every:

Which of the following accounting cycle steps occurs only at the end of the accounting year?

Under the accrual basis of accounting:

Which of the following reflect the impact on liabilities and revenues, if unearned revenue is not adjusted when the revenue is earned?

On March 1, Roberts & Sons reported a balance in Supplies of $250. During March, the company purchased supplies (properly recorded) for $950 and consumed supplies of $800. If no adjusting entry is made for supplies at the end of the month: