quick exercises and HW to review

On September 1 of the current year, a bank lends $3,000 to a company; the note principal and $360 ($3,000 × 12 percent) annual interest are due in one year. Answer from the bank's standpoint.

Interest revenue will inc by $30

At December 31 of the current year, wages earned by employees totaled $13,000. The employees will be paid on the next payroll date in January of the next year.

L 13,000 SE (13,000) E13,000 NI (13,000)

Accrual basis accounting records ______. (Check all that apply.)

expenses when incurred to generate revenue expenses even when cash has not yet been paid revenue when earned revenue even when cash has not been collected

True or false: Since Retained Earnings is involved in the closing process, it is considered a temporary account.

false Reason: Although Retained Earnings is involved in the closing process, it is a permanent, not a temporary, account.

Company X receives $10,000 from issuing 10,000 shares of $1 par value common stock to its owners. The effect on the accounting equation is ______. (Check all that apply.)

stockholders' equity increases assets increase

Z Best, Inc. issued $1,000,000 of stock for cash. Z Best recorded the transaction by increasing cash and decreasing common stock and additional paid-in capital. As a result of this entry, ______. (Check all that apply.)

stockholders' equity is understated the accounting equation is out of balance contributed capital is understated

Hass Company, a farm equipment company, receives its phone bill at the end of January for $322 for January calls. The bill has not been paid to date.

utilities expense, 322

Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles.

$1,000

In June, Jackson Programming Company paid its June rent of $500. This transaction causes a decrease in (Expenses/Cash/Revenue) and an increase in (Expenses/Cash/Revenue)revenue

Blank 1: Cash Blank 2: Expenses

true or false: Adjustments ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False

All of the current year's entries for Zimmerman Company have been made, except the following adjusting entries. The company's annual accounting year ends on December 31 On September 1 of the current year, Zimmerman collected six months' rent of $7,920 on storage space. At that date, Zimmerman debited Cash and credited Unearned Rent Revenue for $7,920.

Liabilities (5,280) SE 5,280 Revenue5,280 Net income 5,280

On July 1, Squid Roe, Inc., collected cash in advance from a customer in July for services to be performed in July, August and September and recorded a debit to Cash and credit to Unearned Revenue for $3,000. Which of the following is the proper treatment of this event assuming monthly financial statements are prepared?

On July 31, an adjusting entry should be recorded that debits Unearned Revenue and credits Service Revenue for $1,000.

Which of the following events are transactions that should be entered in the accounting system? (Check all that apply.)

Paying the office secretary's monthly salary of $2,000 Paying $48 for 4 cases of copy paper that were delivered last month Receiving 3 cases of copy paper that cost $12 per case

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period? (Check all that apply.)

Revenues earned at the end of the period, but not yet billed to Accounts Receivable, should be recorded as a revenue. Payments received in advance, and originally recorded as a liability, should be reduced for any portion earned during the current period.

Interest Revenue is ______. (Check all that apply.)

a peripheral revenue meaning it is normal but not central to the operations of the business the amount earned from lending money a result of investments in bonds in other companies

Adjustments ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods.

asset

Paying cash for an expense incurred in the same period has what effect on the accounting equation?

assets decrease stockholders' equity decreases

When accrual basis accounting is used and an expense is debited, then ____________ was credited.

cash, a payable and/or a prepaid expense

What amount should be reported on the current year's balance sheet for Prepaid Advertising? For Construction Equipment (at net book value)?

construction equipment: 367,600

PVH Corp., manufacturer of IZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger apparel among other brands, completes production of 900 men's shirts ordered by Macy's department stores at a cost of $40 each and delivers the order in January. Answer from PVH Corp.'s standpoint.

cost of goods sold, 36000

On May 10, BC Company ordered $500 of supplies, promising to pay for them in June. The supplies were received and recorded on May 15. BC paid the $500 on June 1. The journal entry that BC makes on June 1 would include a ______. (Check all that apply.)

credit to Cash of $500 debit to Accounts Payable of $500

Received investment of cash by organizers and distributed to them 1,120 shares of $1 par value common stock with a market price of $10 per share.

debit cash 11,200, credit common stock 1120 and credit apic 10080

Received an additional contribution from investors who provided $4,800 in cash and land valued at $33,000 in exchange for 2,800 shares of stock in the company.

debit cash 4800 debit land 33000 credit common stock 560 and credit apic 37240

Received $88,000 cash from the six investors; each investor was issued 10,200 shares of common stock with a par value of $0.20 per share.

debit cash 88000, credit common stock 12240 and credit apic 75760

Prepare the adjusting journal entry that was made, if any at year-end. Recorded a full year of accrued interest expense on a $19,800, 12 percent note payable that has been outstanding only since November 1.

debit interest expense 2376 and credit interest payable 2376

Prepare the adjusting journal entry that should have been made at year-end. Did not accrue $1,700 owed to the company by another company renting part of the building as a storage facility.

debit rent receivable 1700 and credit rent revenue 1700

dividends declared and paid during the year, $1,060.

debit retained earnings 1060, credit cash 1060

Declared $798 in dividends at the end of the year to be paid the following year.

debit retained earnings 798 and credit dividends payable 798

Pasta Disasta received $500 in cash for interest earned on investments. The journal entry to record this transaction includes a $500 ______. (Check all that apply.)

debit to Cash credit to Investment Income

Paid payroll, $8,740 during the year.

debit wages expense 8740 and credit cash 8740

Paid $830 in income tax recorded as an expense in the prior year.

decrease assets and liabilities by 830