Accounting 2100 Test 1

On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Olive should record: A. A debit to Cash for $7,500 and a credit to an expense for $7,500. B. A debit to a prepaid expense and a credit to Cash for $7,500. C. A debit to an expense and credit to a prepaid expense for $7,500. D. A credit to a prepaid expense and a debit to Cash for $7,500. E. A debit to an expense and credit to Cash for $7,500. accounting-and-taxation

B. A debit to a prepaid expense and a credit to Cash for $7,500.

In its first year of operations, Grace Company reports the following: earned revenues of $60,000 ($52,000 cash received from customers); incurred expenses of $35,000 ($31,000 cash paid toward them); prepaid $8000 cash for costs that will not be expensed until next year. Net income under the cash basis of accounting is: A. $21,000 B. $ 17,000 C. $25,000 D. $13,000

C. $25,000 Because Net Income= Earned revenues - incurred expenses

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? A. Liabilities, $30,000 decrease; equity, $30,000 increase .B. Assets, $30,000 decrease; equity $30,000 decrease. C. Assets, $30,000 decrease; liabilities, $30,000 decrease. D. Assets, $30,000 decrease; liabilities, $30,000 increase .E. Assets, $30,000 increase; equity, $30,000 increase.

C. Assets, $30,000 decrease; liabilities, $30,000 decrease.

All of the following are asset accounts except: A. Equipment B. Prepaid Insurance C. Accounts Receivable D. Supplies expense E. Buildings

D. Supplies Expense

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be: a. Assets increase $4,500 and liabilities decrease $4,500 .b. Equity decreases $4,500 and liabilities increase $4,500. c. Liabilities decrease $4,500 and assets increase $4,500. d. Assets increase $4,500 and liabilities increase $4,500. e. Equity increases $4,500 and liabilities decrease $4,500.

d. Assets increase $4,500 and liabilities increase $4,500.

Determine the net income of a company for which the following information is available for the month of September. Service Revenue: $300,000 Rent Expense: $48,000 Utilities Expense: $3,200 Salaries Expense: $81,000

$167,800

if equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000

A law firm billed a client $1,800 for work performed in the current month. Which of the following general journal entries will the firm make to record this transaction? A) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800. B) Debit Cash, $1,800; credit Unearned Legal Fees Revenue, $1,800. C) Debit Legal Fees Revenue, $1,800; credit Accounts Receivable, $1,800. D) Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800. E) Debit Cash, $1,800; credit Accounts Receivable, $1,800.

A) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800.

If a company receives $12,000 from its sole stockholder to establish a corporation, the effect on the accounting equation would be: A. Liabilities increase $12,000 and equity decreases $12,000. B. Assets increase $12,000 and equity increases $12,000. C. Assets decrease $12,000 and equity decreases $12,000. D. Assets increase $12,000 and liabilities increase $12,000. E. Assets increase $12,000 and liabilities decrease $12,000.

B. Assets increase $12,000 and equity increases $12,000. When stocks are issued, Cash will flow into the firm. So cash will increase. Stocks issued are the equity of the firm. So equity will increase by the amount of stocks issued. Cash will also increase

Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction? Multiple Choice A. Utilities Expense 400 Cash 400 B.Cash 400 Utilities Expense 400 C. Utilities Expense 400 Accounts Payable 400 D. Accounts Payable 400 Utilities Expense 400 E. No journal entry is required

C. Utilities Expense 400 Accounts Payable 400 Electricity Bill is received for the current month it means expenses will be debited to revenue account and recording for expenses is done as below, Utility Expenses Debit $ 400 But electricity expenses is due for paid after the end of next month it means it will be payable after next month and this will be recorded as below, Account Payable Credit $ 400

Willow Rentals purchased $800 of office supplies on credit. Which of the following general journal entries will Willow Rentals make to record this transaction? A) Debit Accounts Payable, $800; credit Office Supplies, $800. B) Debit Accounts Receivable, $800; credit Office Supplies, $800. C) Debit Office Supplies, $800; credit Accounts Receivable, $800. D) Debit Office Supplies, $800; credit Accounts Payable, $800. E) Debit Cash, $800; credit Office Supplies, $800.

D) Debit Office Supplies, $800; credit Accounts Payable, $800.

Identify the accounts that would normally have balances in the debit column of a business's trial balance. a. assets and expenses b. liabilities and dividends c. assets and revenues d. Liabilities and expenses e. revenues and expenses

a. assets and expenses

if a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be: a. Assets increase $1,300 and liabilities decrease $1,300. b. One asset increases $1,300 and another asset decreases $1,300, causing no effect. c. Assets decrease $1,300 and equity decreases $1,300. d. Assets decrease $1,300 and equity increases $1,300. e. Assets increase $1,300 and liabilities increase $1,300.

b. One asset increases $1,300 and another asset decreases $1,300, causing no effect.

On July 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the current year ended December 31? a. $1,000 b. $400 c. $1,200 d. $1,400 e. $2,400

c. $1,200 Insurance expense for the year (6 months from 1st July till 31st Dec) = $2,400 x (6 / 12) = $1,200