FA MODULE #2 Questions

Which of the following accounts increase with a debit? A.) cash B.) depreciation expense C.) prepaid rent D.) sales revenue E.) deferred revenue

A.) cash B.) depreciation expense C.) prepaid rent

Which of the following is an expense account? A.) cost of goods sold B.) prepaid expense C.) wages payable D.) rent expense E.) wages expense

A.) cost of goods sold D.) rent expense

Which of the following is decreased by a debit? A.) sales revenue B.) rent expense C.) Deferred revenue D.) interest expense E.) prepaid rent

A.) sales revenue C.) Deferred revenue

Which of the following accounts decreases with a credit? A.) accrued wages B.) cost of goods sold C.) sales D.) preferred stock E.) accounts receivable F.) Cash

B.) COGS E.) accounts receivable F.) cash

Which of the following is TRUE regarding journal entries? A.) there are always only two affected accounts B.) the total amount debited must equal the total amount credited C.) journal entries show debits on the right and credits on the left D.) journal entries show credits first, debits second

B.) the total amount debited must equal the total amount credited

Which of the following is FALSE regarding Accrual Accounting? A.) Revenues are recorded when earned B.) Accrual accounting follows the matching principle C.) Expenses are recorded as incurred D.) Transactions are only recorded when there is an exchange of cash

D.) Transactions are only recorded when there is an exchange of cash

Which of the following accounts is increased by a credit? A.) Inventory B.) COGS C.) Deferred Revenue D.) Cash

Deferred Revenue since it is a liability account

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the revenue on the books of Traxx?

The correct answer is to debit Accounts Receivable for $16,000 as the company now has the right to receive cash and credit Revenue for $16,000 to recognize the revenue associated with the sale.

Wise Guys Consulting receives payment in full totaling $9,000 from a client for services which were rendered and invoiced the previous month. What would be the impact at the time the payment is received?

The correct answer is to debit Cash (an asset) for $9,000 as the company now has the cash and credit Accounts Receivable (also an asset) for $9,000 as the company no longer has the right to receive cash.

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on December 31, 2013 to record the payments received for these subscriptions?

The correct answer is to debit Cash for $120,000 as the company now has the cash, and credit Deferred Revenue for $120,000 as the company now has the obligation to provide services in the future.

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the cost of the inventory transfer on the books of Traxx?

The correct answer is to debit Cost of Goods Sold for $7,000 to recognize the expense associated with the sale of shoes, and credit Inventory for $7,000 as the company no longer has the inventory.

Cakery Bakery received $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when the cake is successfully delivered?

The correct answer is to debit Deferred Revenue (a liability) for $1,000 as the company no longer has an obligation to provide services and credit Revenue (part of owners' equity) for $1,000 to recognize the revenue associated with the sale.

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on January 31, 2014 related to the subscription services provided for one month?

The correct answer is to debit Deferred Revenue for $10,000 as the company no longer has the liability for one month's worth of subscription, and credit Revenue for $10,000 to recognize the revenue associated with one month's worth of services provided.

Curls Just Want to Have Fun, a small salon, purchased 200 wigs from their supplier for $25,000 and paid by check. What entry should the salon make to record this purchase?

The correct answer is to debit Inventory for $25,000 as the company now has the inventory (the wigs), and credit Cash for $25,000 as the company paid with cash (remember checks are considered cash in accounting terms).

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchase $80,000 of open airline tickets in advance that can be used for a variety of destinations because they need the flexibility and savings provided by such tickets. What entry should Friends International make to record this purchase?

The correct answer is to debit Prepaid Expense for $80,000 as the company now has the right to receive benefits from the prepaid tickets and credit Cash for $80,000 as the company no longer has the cash.

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchased $80,000 of open airline tickets in advance that can be used for a variety of destinations. Using the accrual method, build the entry to record the use of $40,000 of these tickets on March 15, 2014 for multiple passengers on a flight from New York to Kigali, Rwanda.

The correct answer is to debit Travel Expense for $40,000 to recognize the expense associated with the use of the tickets and credit Prepaid Expense for $40,000 as the company no longer has the right to receive benefits from the prepaid tickets.