accounting chapter 3

Monster Music Company provided music lessons to customers and earned $10,000, receiving $6,000 in cash and the rest on account. What is Monster Music Company's revenue under the accrual basis of accounting?

10,000

Quartz Instruments had Retained Earnings of $145,000 at December 31, 2020. Net Income for 2021 was $90,000, and Dividends for 2021 were $30,000. What amount of Retained Earnings should be reported at December 31, 2021?

205,000 add all them up

Monster Music Company provided music lessons for customers for $10,000, receiving $6,000 in cash and the rest on account. What is Monster Music Company's revenue if it used the cash basis of accounting instead of accrual basis accounting?

6,000 (received in cash)

Deferred Revenue is

A liability created when a business collects cash from customers in advance of completing a service or delivering a product.

basis accounting is the only acceptable method for external reporting of net income

Accrual

During the month of September, AppGame Company wrote checks to employees totaling $8,100 for wages earned in September and not previously expensed. Which of the following is the correct entry?

Debit Wages Expense and credit Cash for $8,100

Which of the following is not a revenue account that appears on the income statement?

Deferred Revenue

In its 1st year of operation, Jetway Airlines paid Salaries Expense of $40 million. On December 31, it recorded an entry for additional Salaries Expense of $2 million that will be paid at the beginning of the 2nd year. What should Jetway report in the income statement and balance sheet for its first year ended December 31?

Income statement: Salaries Expense $42 million; Balance sheet: Salaries Payable $2 million

n January, Pizza Company bought pizza ingredients on account for $100, with payment due to the supplier in March. The pizza ingredients were used for pizzas made in January. In which month should Pizza Company record the cost of the pizza ingredients as an expense

January

If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and a credit to Sales Revenue, how will this error affect net income for the current period?

Net income will be too high.

In June, customers paid $3,900 for services they received in May. How much revenue should be recognized in June under accrual accounting?

No revenues are recognized in June.

Revenue is recognized when the seller ______.

Provides goods or services to customers

The journal entry to record the purchase of supplies on account is debit ______.

Supplies and credit Accounts Payable

Under which of the following circumstances would cash basis accounting report lower revenue than accrual basis accounting in a company's 1st year of business?

When it makes sales on account

A seller records an increase to the asset account called. . when it sells to a customer on credit. (Enter one word per blank.)

accounts receivable

Revenue on the income statement for the year ended December 31, 2020 equals the ______.

amount recognized by selling goods or services to customers during 2020

Retained Earnings represents:

amounts earned (revenues minus expenses) that have been kept by the company. net income generated by the company through profitable operations that has not been distributed to its stockholders.

If Sales Revenue is credited, then which of the following would be the corresponding debit?

cash

When a company receives cash from a customer in advance of performing the service, the company will debit

cash & credit deferred revenue

Under which of the following circumstances would cash basis accounting report higher expenses than accrual basis accounting in the current accounting period?

cash is paid in advance of services being provided

Revenues are increased with ______.

credits because they increase stockholders' equity

are the costs of operating a business that are incurred to generate revenues in the period covered by the income statement.

expenses

True or false: In accordance with generally accepted accounting principles, the timing of cash receipts dictates when revenues are recognized.

false

Receiving cash from a customer to pay for a previously recorded accounts receivable will:

have no effect on total assets. have no effect on liabilities. have no effect on stockholders' equity.

In June, Cellars, Inc. collected $1,000 from a customer in advance. In July, Cellars completed the first half of the job. In August, Cellars completed the work. If Cellars uses the cash basis of accounting, it will record revenues of ______.

in june when the cash is collected $1000

The. . is the financial statement that summarizes the financial impact of operating activities and reports the amount of profit earned during the accounting period. (Enter only one word per blank.)

income statement

Identifying the performance obligation is an important step in determining whether to recognize revenue especially when the contract involves ______.

multiple obligations

Collecting cash from customers for services provided is a(n) ______ activity.

operating

In accrual basis accounting, revenue is recorded when the seller ______.

performs the work promised to the customer and thus is entitled to receive compensation

Under the expanded accounting equation, assets equal liabilities plus common stock and . earnings.

retained

. is the quantity sold times the price charged from selling goods or services to customers.

revenue

In accrual accounting, according to . the recognition principle, revenues should be recognized when the seller performs the work promised, not necessarily when cash is received. (Add only one word per blank.)

revenue

increases to stockholders' equity are recorded on the side of the T-account. (Enter one word per blank)

right

Accounts Receivable arises when a company ______.

sells on credit and is an asset

True or false: Operating activities are the primary sources of revenue and expenses involved in running a business.

true