Financial Accounting Question Set

Qingji Corp., an oil separator manufacturer, rented a warehouse on January 1st and paid $30,000 for the rent for the next two years. How would this transaction impact the accounting equation of Qingji Corp.? Please enter the amounts in the boxes below.

Quiz Q13 FA Mod 1 Assets increase by $30,000 as the company now has a right to receive the benefits of prepaid rent for two years. In addition, assets also decrease by $30,000 as the company no longer has the cash they paid out.

For the year 2015, Dark Horse Corp.'s sales revenue was $1,600,000. Cost of goods sold (COGS) was 40% of sales revenue. Their income statement shows that operating expense was $150,000. What was Dark Horse Corp.'s gross profit for 2015? $640,000 $960,000 $1,600,000 $720,000

Gross Profit is equal to Sales Revenue minus Cost of Goods Sold, in this case $1,600,000 - $640,000 = $960,000. The Cost of Goods Sold of $640,000 is found by multiplying $1,600,000 by 40%.

At the end of the fiscal year, December 31, 2015, Three Bears Porridge Co. had the following revenue and expense accounts: Rent Expense $3,000 Cost of Goods Sold $1,150 Salary Expense $1,600 Porridge Sales $10,000 Depreciation $500 What is the total value of all the expense accounts on January 1, 2016? 0 3,750 6,250 15,260

Quiz Q: 20 FA Mod 3 Three Bears Porridge Co. closed their books on December, 31, 2015, which means that all nominal accounts (expense and revenue accounts) were set to 0 for the beginning of the new fiscal year, beginning January 1, 2016.

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.

Which of the following accounts is increased by a credit? Inventory Cost of Goods Sold (COGS) Deferred Revenue is correct Cash

Deferred Revenue is a liability account, and liabilities increase with a credit.

Suppose for the year 2015, Tasty Cakes Restaurant had a Gross Profit of $1,280,623. Tasty Cakes had the following expenses: Cost of Goods Sold $1,250,142 Selling Expense $69,553 Rent Expense $155,916 Utilities Expense $72,969 Insurance Expense $34,123 Wages $504,220 General & Administrative $23,333 Miscellaneous $31,943 Interest Expense $3,034 Income Tax Expense $59,571 What would Tasty Cakes' Income Before Taxes be for 2015? $355,324 $385,532 $295,753 $325,961

Income Before Taxes is calculated by subtracting Operating Expenses and Non-Operating Expenses from Gross Profit (note that Cost of Goods Sold has already been subtracted to get Gross Profit, and Income Tax Expense should not be subtracted to get Income Before Taxes so these two figures can be ignored in this case). $1,280,623 - $69,553 - $155,916 - $72,969 - $34,123 - $504,220 - $23,333 - $31,943 - $3,034 = $385,532

Address You, a fancy dress manufacturer, sold a dress for $8,000 on credit. The cost of producing this dress was $1,000. First, how would the revenue and receivable from this transaction impact the accounting equation of Address You? At the same time, how will the related expense from this transaction impact the accounting equation of Address You?

Quiz Q1 FA Mod 1 First, assets increase by $8,000 because the company now has a receivable, or right to receive cash, and owners' equity increases by $8,000 to recognize the revenue gained from the sale. At the same time, assets decrease by $1,000 because the company no longer has the inventory, and owners' equity decreases by $1,000 to recognize the expense associated with the sale.

The principle of Conservatism says that a company should choose measurement methods that anticipate and record _____________ but don't anticipate and record _____________. a) past losses; future gains b) future gains; future losses c) future losses; future gains d) past gains; future losses

Quiz Q15 FA Mod 1 Conservatism says that we should anticipate and record future losses but not future gains. Correct answer: c

Perfect Printers is able to obtain 30 days credit terms to purchase a heavy duty printing machine for $200,000. How will this purchase impact the accounting equation of Perfect Printers at the time of the purchase? Select all that apply.

Quiz Q9 FA Mod 1 Assets increase by $200,000 because the company now has a machine, and liabilities increase by $200,000 because the company now has the obligation to pay for the machine within 30 days.

Hawks Corp. had the following liabilities by the end of 2014: Accounts Payable $40,000 Wages Payable $80,000 Unearned Revenue $105,000 (60% will be earned in 2015) Notes Payable $120,000 ($25,000 payable in 2015) What is the amount that Hawks Corp. should report as Total Current Liability on its balance sheet as of December 31, 2014?

The Total Current Liability reported would be the sum of Accounts Payable, Wages Payable, $63,000 of Unearned Revenue, and $25,000 of Notes Payable. 40,000 + 80,000 + 63,000 + 25,000 = $208,000

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.

Which of the following is an example of a liability? a) Cash owed to you by a customer b) Inventory to be sold to customers c) A note payable for a bank loan

Quiz Q14 FA Mod 1 a) This is a likely future cash inflow, so it is an asset, not a liability. b) This is an asset because the inventory will be sold to customers for cash. c) This is an example of a liability because it is an obligation to pay. Correct answer: c

Which of the following is an example of a proper application of materiality? a) Suppose Starbucks had a legal dispute with Kraft related to a delivery agreement they had signed years ago. Starbucks decides not to disclose information because they don't want a long trial and they are making internal efforts to solicit a mediator. b) International Investments has been pursuing an aggressive profit strategy and invested in many developing countries. However, they are highly exposed to exchange rate risks and they do not disclose its diversifying instruments. c) A microfinance institution has been relying on government collateral subsidies to finance start-ups in rural areas. However, the government has cut the program recently. The company reports this situation in its financial statements as this might affect the decisions of stakeholders.

Quiz Q16 FA Mod 1 a) This is not a proper application of materiality because Starbucks would have to disclose information to its stakeholders. b) This is not a proper application of materiality because the investment company has not addressed all the relevant information to its shareholders. c) The idea that certain information may affect the decisions of users of the financial statements underlies the concept of materiality, so this description of a microfinance institution is an example of a proper application of materiality. Correct answer: c

Dongfeng, an automobile manufacturer, purchased raw materials for $600,000 on credit on January 1st. Dongfeng promised to pay for the raw materials in three equal monthly installments beginning from February 1st. How will this purchase impact the accounting equation on the books of Dongfeng? Please enter the amounts in the boxes below.

Quiz Q18 FA Mod 1 Assets increase by $600,000 because the company now has raw materials it will use in the manufacturing process, and liabilities increase by $600,000 because the company now has an obligation to pay for these materials.

We Like to Rock (WLR), a granite countertop manufacturer, delivered 5 countertops at $2,000 each to their client. The cost of producing the countertops was $500 each. The client paid cash for the countertops. First, how would the revenue from this transaction impact the accounting equation for WLR? At the same time, how will the related expense from this transaction impact the accounting equation of WLR?

Quiz Q2 FA Mod 1 First, assets increase by $10,000 (5 countertops at $2,000 each) as the company now has a receivable, or right to receive cash, and owners' equity increases by $10,000 to recognize the revenue associated with the sale. At the same time, assets decrease by $2,500 (5 countertops at $500 each) as the company no longer has the inventory, and owners' equity decreases by $2,500 to recognize the expense associated with the sale.

Leak Geeks, a plumbing supply company, sold $25,000 of plumbing supplies to one of their larger customers. The supplies had an inventory value of $12,000. How will the revenue and cash inflow from this transaction impact the accounting equation of Leak Geeks? How will the related expense from this transaction impact the accounting equation of Leak Geeks? Please enter the amounts in the boxes below.

Quiz Q20 FA Mod 1 First, assets increase by $25,000 because the company now has that amount of cash, and owners' equity increases by $25,000 to recognize the revenue associated with the sale. At the same time, assets decrease by $12,000 because the company no longer has the supplies, and owners' equity decreases by $12,000 to recognize the expense associated with the sale.

AQG Industries receives payment of $200,000 from P4U Enterprises for 5 generators that were delivered and invoiced on credit in the previous month. How would this receipt impact the accounting equation of AQG? Select all that apply. INCREASE $200,000 ASSETS DECREASE $200,000 = INCREASE $200,000 LIABILITIES DECREASE $200,000 + INCREASE $200,000 OWNERS' EQUITY DECREASE $200,000

Quiz Q6 FA Mod 1 Assets increase by $200,000 because the company receives cash, and assets also decrease by $200,000 because the company no longer has a right to receive the cash (the receivable previously recorded at the time of the sale).

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.

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.

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

a) Under Accrual Accounting revenues are recorded when earned. b) The matching principle says that we should match expenses to the revenues they helped generate. Accrual Accounting allows us to do this. c) Under Accrual Accounting expenses are recorded as incurred. d) This is true for Cash Basis Accounting, but not for Accrual Accounting.

Careful Captains Cruise Lines (CCCL) receives $20,000 in advanced payments for an upcoming Mediterranean cruise. What would be the impact at the time of the receipt of these advance payments?

Quiz Q3 FA Mod 2 The correct answer is to debit Cash (an asset) for $20,000 as the company now has the cash and credit Deferred Revenue (a liability) for $20,000 as the company now has an obligation to provide services in the future.

Which of the following is an expense account? Select all that apply. a) Cost of Goods Sold b) Prepaid Expense c) Deferred Tax Asset d) Rent Expense e) Accrued Expense

Quiz Q2 FA Mod 2 a) Cost of Goods Sold is an expense account. b) Prepaid Expense is an asset account. c) Deferred Tax Asset is an asset account. d) Rent Expense is an expense account. e) Accrued Expense is a liability account. Correct answer: a & d

Careful Captains Cruise Lines (CCCL) previously received $20,000 in advanced payments for a Mediterranean cruise. What entry will be needed to record the $20,000 advance payments as revenue on the books of CCCL after the cruise is successfully completed?

The correct answer is to debit Deferred Revenue (a liability) for $20,000 as the company no longer has an obligation to provide services and credit Revenue (part of owners' equity) for $20,000 to recognize the revenue associated with the sale.

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).

Dobby & Dumbledor's Candy Store (DDCS) receives 12 candy dispensers from Potter's Plastics to be installed for its grand opening on June 30. DDCS bought the dispensers for $2,000 each. DDCS is granted credit terms, which gives them 30 days to pay for the dispensers. What journal entry would be made at the time of the purchase?

The correct answer is to debit Property, Plant, & Equipment for $24,000 as the company now has the candy dispensers, and credit Accounts Payable for $24,000 as the company now has the obligation to pay.

Which of the following accounts is decreased by a debit? Select all that apply. a) Sales Revenue b) Rent Expense c) Deferred Revenue d) Interest Expense e) Prepaid Rent

Quiz Q1 FA Mod 2 a) Sales Revenue is a revenue account as part of owners' equity and therefore increases with a credit and decreases with a debit. b) Rent Expense is an expense account as part of owners' equity and therefore increases with a debit and decreases with a credit. c) Deferred Revenue is a liability account and therefore increases with a credit and decreases with a debit. d) Interest Expense is an expense account as part of owners' equity and therefore increases with a debit and decreases with a credit. e) Prepaid Rent is an asset account and therefore increases with a debit and decreases with a credit. Correct answer: a & c

Which of the following would cause a decrease to liabilities? Select all that apply. a) A company pays $550, which is the current portion due on a long term bank loan b) A company sells $1,000 worth of gift cards c) A company prepays for 12 months of landscaping services d) After one month, a company recognizes revenue equal to 1/12 of an annual magazine subscription they sold to a customer

Quiz Q10 FA Mod 1 a) This event would cause a decrease in cash and a decrease in notes payable, which is a liability account. b) This event would cause an increase in cash and an increase in deferred revenue. c) This event does not impact liabilities. It would cause a decrease in cash and an increase in prepaid expense. d) This event would cause a decrease in cash and a decrease in mortgage loan payable, which is a liability account. Correct answer: a & d

Which of the following demonstrates the Money Measurement principle? Select all that apply. a) The catch-phrase for Carl's Consulting Company (CCC) is "Our employees are our biggest asset." However, if you look at the Balance Sheet of CCC, there is no such asset. b) Upon successful completion of extensive flight tests for a new aircraft model, Boeing Aircraft sends an invoice to the customer per the terms of the contract and recognizes a portion of the revenue related to the order. c) The HR Director at AQG Industries proposes a change to the employee benefits plan. The CEO rejects the proposal because it would change the relative cost of the benefits plans in AQG. d) After winning a prestigious supplier of the year award, Mack Manufacturing saw an increase in their stock price. This increase does not appear on the company's financial statements.

Quiz Q11 FA Mod 1 a) The value of good employees cannot be accurately represented in monetary terms on the company's books. b) This is an example of revenue recognition. c) This is just a business decision. d) The increase in stock price cannot be accurately represented in monetary terms on the company's books. Correct answer: a & d

Bianca's Bicycles is a small shop that sells bicycles and offers repair services. Which of the following would be considered an asset on the balance sheet of Bianca's Bicycles? Select all that apply. a) Amounts owed to a supplier in 30 days for bike parts b) Bicycles in the store showroom c) Amounts prepaid by customers for 6 months worth of unlimited repair services d) Amounts owed by customers for repair services previously provided e) Amounts prepaid for next year's subscription to Bicycles Weekly, a cycling magazine

Quiz Q17 FA Mod 1 a) This is an example of accounts payable, which belongs in the liabilities section of the balance sheet. b) This is an example of inventory, which belongs in the asset section of the balance sheet. c) This is an example of deferred revenue, which belongs in the liabilities section of the balance sheet. d) This is an example of an account receivable, which belongs in the asset section of the balance sheet. e) This is an example of a prepaid expense, which belongs in the asset section of the balance sheet. Correct answer: b, d, e

Gilligan and Skipper's Tour Boat Co. (GSTBC) receives $150,000 in advance payments for an upcoming 3-hour tour. How will the accounting equation of GSTBC be impacted when these advance payments are received? Please enter the amounts in the boxes below.

Quiz Q19 FA Mod 1 Assets increase by $150,000 because the company now has that amount of cash, and liabilities increase by $150,000 because the company now has the obligation to provide services on the upcoming cruise.

Harvard University Bookstore paid $67,000 for books purchased on credit in the previous month. How would this payment impact the accounting equation?

Quiz Q3 FA Mod 1 Assets decrease by $67,00 as cash is paid, and liabilities decrease by $67,000 as Harvard no longer has the obligation to pay for the books.

Which of the following demonstrates the historical cost principle? a) John is wondering which method of accounting for inventory in his bike shop would be most appropriate. He decides that he should use the same method that he has been using for the last few years, since his business has been operating essentially the same way. b) Real Estate prices in Orderville have increased dramatically over the last five years. Although the land under Chad's office building is currently believed to be worth $500,000, it is recorded at $250,000 because that is the price he paid for it. c) Shelley's Automotive received a large order from a customer, who prepaid the entire amount. Shelley recorded the prepayment as revenue at the time she received the cash. Shelley delivered to parts 30 days after the payment was received.

Quiz Q4 FA Mod 1 a) This is an example of consistency, not historical cost. b) The idea that assets are recorded at their original cost underlies the historical cost principle, so the land under Chad's office being recorded at the price he paid for it is an example of the historical cost principle. c) This is an example of the cash method of accounting, not historical cost. Correct answer: b

Which of the following is TRUE regarding journal entries: a) There are always only two accounts affected 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, then debits

Quiz Q4 FA Mod 2 a) At least two accounts will be affected, possibly more. b) Total debits MUST equal total credits. c) Debits are on the left and credits are on the right. d) Debits are shown first, followed by credits.

Below are some of the accounts that Company J has on their books: Cash and Cash Equivalents $1,000 Insurance Expense $500 Accounts Payable $700 Prepaid Rent $200 Accounts Receivable $500 Deferred Revenue $1,200 Inventory $600 Which of the amounts below is the correct total of liabilities? a) $2,300 b) $1,900 c) $700 d) $1,200

Quiz Q5 FA Mod 1 The correct answer is $1,900, which includes: Accounts Payable $700 Deferred Revenue $1,200

Below are some of the accounts that Company J has on their books: Cash and Cash Equivalents $1,000 Insurance Expense $500 Accounts Payable $700 Prepaid Rent $200 Accounts Receivable $500 Deferred Revenue $1,200 Inventory $600 Which of the amounts below is the correct total of assets? a) $2,300 b) $2,100 c) $1,800 d) $1,200

Quiz Q7 FA Mod 1 The correct answer is $2,300, which includes: Cash and Cash Equivalents $1,000 Prepaid Rent $200 Accounts Receivable $500 Inventory $600

Which of the following accounts decreases with a credit? Select all that apply. a) Accrued Wages b) Cost of Goods Sold c) Sales d) Preferred Stock e) Accounts Receivable f) Cash

a) Accrued Wages is a liability account and therefore increases with a credit and decreases with a debit. b) Cost of Goods Sold is an expense account and therefore increases with a debit and decreases with a credit. c) Sales is a revenue account and therefore increases with a credit and decreases with a debit. d) Preferred Stock is an equity account and therefore increases with a credit and decreases with a debit. e) Accounts Receivable is an asset account and therefore increases with a debit and decreases with a credit. f) Cash is an asset account and therefore increases with a debit and decreases with a credit. Correct answer: b, e & f

Which of the following accounts increase with a debit? Select all that apply. a) Cash b) Depreciation Expense c) Prepaid Rent d) Sales Revenue e) Deferred Revenue

a) Cash is an asset account and therefore increases with a debit and decreases with a credit. b) Depreciation Expense is an expense account and therefore increases with a debit and decreases with a credit. c) Prepaid Rent is an asset account and therefore increases with a debit and decreases with a credit. d) Sales Revenue is a revenue account and therefore increases with a credit and decreases with a debit. e) Deferred Revenue is a liability account and therefore increases with a credit and decreases with a debit. Correct answer: a, b & c

Which of the following are steps in the closing process? Select all that apply. a) Nominal accounts are reset to zero. b) Real accounts are reset to zero. c) Net income is transferred to the cash account on the balance sheet. d) Net income is transferred to the retained earnings account on the balance sheet. e) The retained earnings account is reset to zero.

a) This is one of the correct answers. Accounts on the income statement are nominal accounts, which means that they are reset to zero as part of the closing process. b) Accounts on the balance sheet are real accounts, which means that their balances are carried forward and are not reset to zero as part of the closing process. c) Net income is transferred to the retained earnings account on the balance sheet. d) This is one of the correct answers. The net balance of total revenues less total expenses (Net Income) is transferred to the retained earnings account. e) Retained earnings is a real account on the balance sheet, which means that the balance is carried forward and not reset to zero as part of the closing process. Correct answers: a & d

The income statement reflects a company's: a) Financial position over a given period of time. b) Financial position at a given point in time. c) Financial performance over a given period of time. d) Financial performance at a given point in time.

The income statement shows a company's financial performance, because it shows the accumulation of all nominal accounts over a period of time. Answer: c

Suppose that before 2012 Apple recognized revenue on domestic sales when the goods were shipped and recognized revenue on international sales when the goods were delivered to the customer. Let's also suppose that in 2012 Apple began recognizing revenue on all sales, domestic and international, when they were shipped. a) Apple's accounting prior to 2012 violated the consistency principle. b) Apple's accounting in 2012 violated the consistency principle. c) Neither Apple's accounting before or during 2012 violated the consistency principle. d) Both Apple's accounting before and during 2012 violate the consistency principle.

Quiz Q12 FA Mod 1 a) The consistency principle deals with being consistent over time, not in methodology. Refer to the correct answer below. b) Apple's accounting in 2012 violated the consistency principle because it started using different revenue recognition policies than it had used in the previous year. c) The consistency principle deals with being consistent over time, not in methodology. Refer to the correct answer above. d) The consistency principle deals with being consistent over time, not in methodology. Refer to the correct answer above. Correct answer: b

Wise Guys Consulting issues an invoice for $9,000 to one of their clients for services provided. The terms of the invoice call for payment 30 days after the invoice date. What would be the impact at the date the services are completed and invoiced?

The correct answer is to debit Accounts Receivable (an asset) for $9,000 as the company now has the right to receive cash, and credit Revenue (part of owners' equity) for $9,000 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.

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.

For the year 2015, McGuire's Auto had Operating Income of $320,000. It also had the following expenses: Salaries and Wages Expense $75,000 Building and Utilities Expense $86,000 Interest Expense $122,000 Income Tax Expense $84,000 Cost of Goods Sold (COGS) for the year was $440,000 What would McGuire's Auto's gross profit be for 2015?

To get to Gross Profit from Operating Income, we must add back any Operating Expenses. In this case we start with $320,000 Operating Income and add back Salaries and Wages Expense of $75,000 and Building and Utilities Expense of $86,000, to get Gross Profit of $481,000.

Which of the following demonstrates the going concern concept? a) AQG Industries sold $20,000 of product on credit to SSA Manufacturing. SSA did not pay on time. AQG decides that it is fruitless to pursue collection so they write off the receivable from SSA. b) Gail's Garments has been in business for 20 years and during that period the company has gained a good reputation. Gail would like the Controller to acknowledge the value of that reputation by including it as an asset worth $100,000 but the controller says she cannot do it. c) AQG Industries purchases $20,000 of product on credit from RSI Manufacturing. AQG records the purchase as an increase in inventory and an increase in accounts payable. AQG feels that they will be able to realize the value from the inventory and settle the obligation to RSI in the weeks to come.

Quiz Q8 FA Mod 1 a) This is not an example of the going concern. The going concern concept relates to the accounting for your own business, not to the business of others. b) This is an example of the money measurement not the going concern concept. c) The idea that a company will be able to realize the benefits from its assets and settle any obligations from its liabilities underlies the going concern concept, so this description of AQG recording the transaction with RSI is an example of the going concern concept. Correct answer: c

Company A's accounting period goes from January 1 through December 31. Which of the following describes the difference between the trial balance on December 31, 2013 and the trial balance on January 1, 2014? a) The trial balance on January 1, 2014 does not balance because all nominal accounts were reset in the closing process. b) The trial balance on January 1, 2014 does not balance because the company has not yet earned any income for the period. c) The trial balance on January 1, 2014 shows no balance in all nominal accounts because they were closed to retained earnings in the closing process. d) The trial balance on January 1, 2014 shows no balance in all accounts because the accounting books were reset in the closing process.

Quiz Q: 1 FA Mod 3 a) Remember that the trial balance must always balance. b) Remember that the trial balance must always balance. c) This is the correct answer! During the closing process, the balance of all nominal accounts are closed to retained earnings and reset to zero. d) The trial balance maintains the cumulative balance of all real accounts over time.

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.

Like A Wrecking Ball is a demolition company. At the end of a project, they presented their client with an invoice for $18,000 and immediately received a check for the full amount. What is the journal entry to record this receipt?

The correct answer is to debit Cash for $18,000 as the company now has the cash (remember--checks are considered cash!) and credit Revenue for $18,000 to recognize the revenue associated with the services provided.

Which of the following items represents the net income/(loss) for the year? a) The difference between the revenues and expenses. is correct b) The difference between the cash receipts and payments. c) The difference between the funds raised by stock issuance and the dividends paid. d) The difference between the net increase in assets and in liabilities.

The sum of all revenues and expenses (all nominal accounts) is used to find the net income/(loss) for the year. Correct answer: a

Which of the following is true regarding the trial balance? Select all that apply. a) The trial balance includes all of the accounts needed to create the balance sheet and the income statement. b) The trial balance is much less detailed than the balance sheet and income statement. c) The accounting principle of materiality says that the information on the trial balance can be combined and simplified into more general reporting items. d) The accounting principle of money measurement says that the information on the trial balance can be combined and simplified into more general reporting items. e) The trial balance shows only nominal accounts.

a) This is one of the correct answers. The trial balance includes all of the accounts needed to create the balance sheet and the income statement. b) The trial balance is much MORE detailed than the balance sheet and income statement. c) This is one of the correct answers. The accounting principle of materiality says that the information on the trial balance can be combined and simplified into more general reporting items. d) The accounting principle of materiality says that the information on the trial balance can be combined and simplified into more general reporting items. e) The trial balance includes not only the nominal accounts used to build the income statement, but also the real accounts used to build the balance sheet.