Assets Practice Quiz Quickbooks Assets in Accounting

If the accumulated depreciation for Eternal Summer's mobile massage van increases to $3,000, what would the Total Assets balance be after this entry? (Based off the balance sheet where Total Assets $44,500 and depreciation was at -$2500)

$44,000 -Increasing a contra-asset account will decrease the Total Assets. Because it has a credit balance this acts as a negative amount when added to the debit balances of the rest of the asset accounts. $44,500 + (-$500) = $44,000.

Question 9 If Eternal Summer purchased $500 worth of Inventory using Cash, what would the total assets be after the transaction? (Based off the balance sheet where Total Assets $44,500)

$44,500 -Paying for one asset with another does not change the total assets (and would not impact Liabilities or Equity).

If Eternal Summer purchased $500 worth of Inventory using their supplier credit line, what would the total assets be after the transaction? (Based off the balance sheet where Total Assets $44,500)

$45,000 -Paying for an asset with credit will increase Total Assets and increase Liabilities by an equal amount.

Question 4 What would the balance in the Prepaid rent account be on May 1? (Remember- Rent for Eternal Summer is $1,200/month, but if it is prepaid, rent is only $12,000 for the year.)

$8,000 -After April, we've "used up" four $1,000 expenses from Prepaid rent and debited $1,000 to the Rental expense account each month. The Profit and Loss statement shows revenue and expense accounts, including Rental expense. It would not show the Prepaid rent asset account.

Which of these would be considered a current asset? (select all that apply)

Accounts receivable -Accounts receivable and prepaid expenses are current assets. Accumulated depreciation and Vehicle accounts are long-term assets. You'll get more practice with these accounts throughout the lesson. Prepaid expenses -Accounts receivable and prepaid expenses are current assets. Accumulated depreciation and Vehicle accounts are long-term assets. You'll get more practice with these accounts throughout the lesson.

To book Prepaid Expenses, you must be using which type of accounting method?

Accrual-With accrual accounting, we can match up the portion of the prepaid expense to its corresponding month. With a cash-base, we would recognize the entire expense in the month it's paid.

What happens on Feb 1? Remember that $1,000 (1/12) of the $12,000 Prepaid rent has been "used up" or realized as an expense during January. So we need to _____ Prepaid rent (asset account) and _____ Rental expense (expense account) (Remember- Rent for Eternal Summer is $1,200/month, but if it is prepaid, rent is only $12,000 for the year.)

Credit, Debit Credit Prepaid rent (asset account) and Debit Rental expense (expense account)

Rent for Eternal Summer is $1,200/month, but if it is prepaid, rent is only $12,000 for the year. If Eternal Summer pays $12,000 on January 1, how would you book this transaction?

Debit Prepaid rent for $12,000 and Credit Cash rent for $12,000.

Question 8 How would you categorize $3,500 worth of computer equipment that the business will use as part of its operations?

Long-term assets -Computer equipment is typically categorized as a long-term asset. It's unlikely you would convert it to cash within a year. However, computer equipment that happens to be inventory because you run an electronics store would be a current asset.

If we create a Balance Sheet for Eternal Summer on May 1st, which of these would appear on the statement?

Prepaid Rent $8,000 The balance sheet lists all assets, including Prepaid rent. It does not list expense accounts, like Rent expense.

Question 5 If we run a Profit & Loss (or Income Statement) for Eternal Summer for the month of April, which of these would appear on the statement?

Rental Expense $1,000. The Profit and Loss statement shows revenue and expense accounts, including Rental expense. It would not show the Prepaid rent asset account.