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ACCT 2101 – Ch. 3 Practice Exam – Flashcards

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14 July 2022

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question

if a company is using the accrual basis acctg method, when should it record its earned revenue

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when services are rendered, even though cash may be received at a later date

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when does a company account for earned revenue if it follows cash basis acctg

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when cash is received, either prior to the services being rendered or at a time after the services are rendered

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which account does cash basis acctg ignore

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payables

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a company receives payment on august 5th for services rendered, two weeks earlier, to one of its customers on account. which would be recorded if the company uses accrual basis acctg

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cash debited 1000 accounts receivable credited 1000

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which would be recorded if a company uses the cash basis method of acctg

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rent expense debited 1000 cash credited 1000 (bc this shows that the expense is being paid right now in cash)

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which is true of accrual basis acctg

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accrual basis acctg is required by GAAP

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which would result in an increase in income under accrual method, but not result in an increase under cash method

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performance of services on account

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which account would be used under accrual method, but not cash basis

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unearned revenue

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a fiscal year is

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12 months

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revenue is said to be earned when the business has

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delivered a good or service to the customer

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the acctg principle that ensures all expenses are recorded when they are incurred during the period and offsets those expenses against the revenues of the period, is called

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the matching principle

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the matching principle matches...

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expenses and revenues

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matching principle states that

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all expenses should be recorded when they are incurred during the period

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kostner financial services inc performed acctg. services in december. a bill was mailed to the client on dec 30. the company received the clients check by mail jan 5. which account should appear on the income statement for the year ended dec 31 as per the revenue recognition principle?

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service revenue

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kostner financial services inc performed acctg. services in december. a bill was mailed to the client on dec 30. the company received the clients check by mail jan 5. as per the revenue recognition principle, the related account that should appear on the balance sheet as of dec 31 is

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accounts receivable

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kostner financial inc. purchased computers that are to be used in consultancy services. as per the matching principle, the related account that should appear on the income statement for the year ended dec. 31 2014 is... equipment expense; accum. dep.; depreciation expense; service revenue

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depreciation expense

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kostner financial inc. purchased computers that are to be used in consultancy services. as per the matching principle, the related account that should appear on the balance sheet as of dec. 31 2014 is accum. dep.; equipment expense; service revenue; depreciation expense

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accumulated depreciation

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employees worked last two weeks of dec. they received paychecks on jan 2. which account should appear on balance sheet as of dec 31 according to matching principle

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salaries payable (bc it's a liability acct)

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employees worked last two weeks of dec. they received paychecks on jan 2. which account should appear on the income statement for the year ended dec 31 2014, as per the matching principle

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salary expense (bc it's an exp acct)

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the entry to record depreciation includes a debit to the

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depreciation expense account

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the entry to record depreciation includes a credit to the

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accumulated depreciation account

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if an adjusting entry includes a debit to rent expense, that would indicate that the payment of rent had been previously recorded as a

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prepaid expense

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the allocation of a plant assets cost over its useful life is called

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depreciation

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the value of a depreciable asset at the end of its useful life is called

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residual value

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a depreciable assets cost minus accumulated depreciation is called

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book value

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book value formula

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cost - accumulated depreciation

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the liability created when a business collects cash from its customers before completing a service or delivering a product is called ___ (aka unearned revenue)

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deferred revenue

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formula for calculating depreciation under the straight-line method

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straight-line depreciation = (cost - residual value) / useful life

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sum of all depreciation expense recorded to date for a depreciable asset is called

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accumulated depreciation

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accumulated depreciation is a _____ account

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contra

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unearned revenue is revenue that

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the business has collected in cash, but not yet earned

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an adjusting entry that credits salaries payable is an example of accrued rev.; accrued exp.; unearned rev.; prepaid exp.

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accrued expense

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an exp that has been incurred but not yet paid is called

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accrued expense

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the advance cash receipts of future revenues are called

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unearned revenues

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the advance cash payments of future expenses are called

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prepaid expenses

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in acctg, depreciation refers to the

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method of spreading the cost of a plant asset over its useful life

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the accumulated depreciation account is

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a record of the sum of all the depreciation expense recorded

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qwerty inc. prepaid 3,600 on nov 1 2014 for a one-year insurance premium. on jan 1 2015 of the next year (after dec 31 adjustments) the prepaid insurance acct will have a debit balance of

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3000 (3600/12 = 300 per month; paid two months worth so credit 600, balance of prepaid would be debit of 3000)

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pluto inc. sells tix in advance...on march 1, unearned revenue had credit balance of 4000. during march, sold 300 tix, $20 each and 250 tix were used during the month. what is unearned rev balance at end of march

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credit balance of 5000 (unearned rev acct starts w credit balance of 4000, credit another 6000 for the 300*$20, then debit 5000 bc 250*20 were used. that is credit of 10,000, debit of 5000, leaves the credit balance of 5000)

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techo services is working on a six-month job, starting feb 1. will collect $19,200 when job is finished. on march 1, companys accounts receivable had debit bal of $3200. at end of march after monthly adj entries have been made, what will be the balance in AR

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debit balance of 6,400 (AR starts w debit bal of 3200. 19200/6 months = 3200. from feb 1 to march 1 is one month worth which is where that 3200 comes from, then end of march is debiting AR 3200, which gives the debit balance of 6400.

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a business purchased equipment for 130000 on jan 1 2015. the equipment will be depreciated over 5 years of its useful life using the straight line dep method. the business records dep once a year on dec 31. which of the following is the adj entry required to record dep on equipment for the year 2015?

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debit 26000 to depreciation expense - equipment, and credit 26000 to accumulated depreciation - equipment 26000 comes from 130000 / 5

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satum. inc signed a one-year $36,000 note payable at 8% interest on may 1 2015. how much interest exp must be accrued on may 31 2015?

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$240. 36000 / 12 months = 3000 per month * .08 interest = 240

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saturn inc signed a one-year $47,000 note payable at 8% interest on may 1 2014. if saturn inc only adjusts its accounts once a year at year-end, how much interest was accrued on dec 31 2014?

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$2,507 May 1 2014 - Dec 31 2014 is 8 months 47000 / 12 months = 3916.7 per month * .08 interest = 313.3 * 8 months = 2506.7 --> 2507

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accumulated depreciation is a ____ account and carries a ____ normal balance

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contra asset; credit

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unearned rev is a ___ acct and carries a ____ normal balance

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liability; credit

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what type of acct is prepaid rent and what is its normal balance

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it is an asset account and has a debit balance

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hank tax service started business in jan 2014. the comp rented an office for 7000 per month starting from jan 1. on jan 1, hank prepaid rentals thru june 30. the comp makes accrual adjustments monthly. whats the balance in prepaid rent account as of april 30?

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14000 the entire prepaid is jan - june, 6 months. 7000 * 6 months is 42000, so that goes on the debit of prepaid rent. january - april is 4 months credit 7000 4 times for those months, gives 28,000 debit balance of prepaid is then 42,000 - 28000 = 14000

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henry tax service bought computer equipment for 23ooo on jan 1 2014. estimated life of 4 years, 0 residual value. henry uses straight line dep method to calculate dep and records dep exp in books at end of every month. calculate the amount of depreciation expense for the period jan 1 2014 to sept 30 2014 for this equipment.

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$4,313 23000 / 4 = 5750 5750 yearly 5750/12 = 479.17 monthly 479.17 * 9 = 4,313

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viva inc bought machine x for 16000 two years ago. the machine had no residual value and had an estimated life of 10 years. if company uses straight line dep. method, calculate the current book value of the machine.

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12,800 book value = cost - accum. dep. 16000 / 10 = 1600 yearly accum. dep. at 2 years = 3200 16000 - 3200 = 12800

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financial stmts are prepared from the balances in an

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adjusted trial balance

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all of a companys accounts and their balances appear on the

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adjusted trial balance

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the salaries are 4000 per week of 5 working days and are paid weekly at the end of fridays. end of month falls on a thurs. the accountant made the appropriate acct adjustment and posted it to ledger. the final adjusted balance of salaries payable, as shown on adj tb, will be a ____

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credit balance of 3200 salaries payable account, credit 4000 3 times for 3 weeks paid since last week ends in thurs they dont get paid. for the last week, you will do 4000 / 5 = 800 pay per day. the week was only 4 days, so 800 * 4 = 3200 debit balance is then 4000 for 3 weeks = 12000 credit balance is then 4000 for 3 plus one of 3200 = 15200 15200 cr - 12000 dr = 3200 cr

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on the first day of jan., maywood inc. borrowed 3000 on a one-year note payable bearing interest at 3% per year. the note specifies that principal and interest must be paid in full at the end of the one-year period. on june 30, the adj tb will show interest payable of

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$45 credit 3000 / 12 = 250 250 * .03 = 7.5 per month 7.5 * 6 months = 45

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the account names in a worksheet are taken from and listed in the same order as the

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chart of accounts

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to fill the unadjusted trial balance columns in a worksheet, the account balances before adjustments are copied directly from the

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ledger

ACCT 2101 – Ch. 3 Practice Exam – Flashcards

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