ACG2021 Ch 3 Concept Overview Videos (TCC)

The following transactions are typical operating activities for Corner Café, a local coffee shop. Corner Café has a calendar year-end and uses accrual basis accounting. Knowledge Check 01 Indicate how each of the following transactions on June 30 affect the company's financial statements. 1. On June 30, The Corner Café paid cash for insurance for the six-month period that covers the last two quarters of the year. 2. On June 30, Corner Café paid in wages to employees who worked during the last week of June. 3. On June 30, Corner Café received a bill for electricity used during June. The company will not pay the bill until shortly before its due date in July.

1. An asset (other than Cash) on the balance sheet is increased. 2. An expense on the income statement is increased. 3. A liability on the balance sheet and an expense on the income statement are both increased.

Matisse Co. reported total revenues of $100,000 and total expenses of $90,000. The net profit margin is:

10%

Under accrual basis accounting, if cash is received from the customer before the product is delivered to that customer, in addition to the cash that is received, which of the following is reported by the company?

A liability on the balance sheet

Under accrual basis accounting, if cash is received from the customer when the product is delivered to that customer, in addition to the cash that is received, which of the following is reported by the company?

A revenue on the income statement

Under accrual basis accounting, if a company delivers a product on account to the customer, which of the following is reported by the company?

An asset on the balance sheet A revenue on the income statement

Which of the following is (are) increased with a debit?

Asset accounts

Berry Dive Shop receives a total of $500 today from its customer for scuba diving lessons. The lessons begin in the next fiscal year. Which of the following describes how the company will account for this transaction?

Credit Deferred Revenue for $500

Neeta Landscaping Company provides lawn care services to a customer and immediately receives $45. Which of the following describes how the company will account for this transaction?

Credit Service Revenue for $45

Brown Company prepared a tax return for a client and sent that client a bill for $750. Which of the following describes how Brown Company will account for the fee relating to this work?

Credit Service Revenue for $750.

During May, Aldine Company advertised its products and received a bill, dated May 31, for $2,000 to be paid during the following month. Which of the following describes how Aldine will account for the receipt of the bill for advertising services?

Debit Advertising Expense for $2,000

Matisse Co. pays $12,000 for rent of office space that will cover the next six months. Which of the following describes how Matisse will account for the payment for rent?

Debit Prepaid Rent for $12,000

On June 30, Manning Company wrote checks to employees, totaling $1,500 for wages related to hours worked in June to provide services to its customers. Which of the following describes how Matisse will account for the payment to employees?

Debit Salaries and Wages Expense for $1,500

Under accrual basis accounting, which of the following is required by the expense recognition principle?

Expenses are recognized in the same period as the revenues to which they relate

If you want to compute a company's net profit margin, which of the following financial statements do you need?

Income statement only

Which of the following statements is true about an unadjusted trial balance?

It lists the balance of each account to check the equality of total debits and credit.

Which of the following appear at the end of the income statement?

Net income

Which of the following statements about revenues are true?

Operating activities include transactions impacting revenue accounts Revenues are the amounts a business charges its customers for services it provides or goods it sells to them. Revenue is reported when the company fulfills its promise to transfer control of a good or service to a customer.

Which of the following is not an example of an operating activity?

Purchasing a long-term asset

Which of the following is increased with a credit?

Sales Revenue

Match the description of each step used to apply the revenue recognition principle with its step number.

Step 1. Identify the contract Step 2 Identify the seller's performance obligation(s) Step 3 Determine the transaction price Step 4 Allocate the transaction price to the performance obligation(s) Step 5 Recognize revenue when (or as) each performance obligation is satisfied

Which of the following statements about financial statements are true?

The balance sheet takes stock of what exists at a point in time. Balance sheet accounts are considered permanent. Income statement accounts are considered temporary.

When are revenues recorded under the accrual basis method of accounting?

When they are generated