ACG 2021 Quiz 4, ACG 2021 Quiz 3,
ACG 2021 Quiz 2, ACG 2021 Paterson
FSU Ch.1 Quiz and All Actual Answers.
A company accepts a customer's order on December 10. On December 11, the company
delivers the goods to the customer with an invoice stating payment is due no later than
December 21. The company receives a check from the customer for the full amount due on
December 20. The company follows the revenue recognition principle and accrual-basis
accounting. On what day should the company recognize revenue for this order? - Answer
December 11
Solution:
Under the revenue recognition principle, revenue is earned when the performance obligation is
satisfied. The performance obligation is satisfied when the company provides the goods to the
customer.
In Year 1, Costello Company performed work for a customer and billed the customer $10,000. In
Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the
company incurred and paid $3,000 of wage expense. If Costello Company uses the cash-basis of
accounting, then it will report - Answer revenue of $10,000 in in Year 2 and expense of
$3,000 in Year 1.
Solution:
The cash-basis of accounting recognizes revenues in the year cash is collected from customers
regardless of when the performance obligation is satisfied and it recognizes expenses in the year
they are paid regardless of when they are incurred. The company collected cash from the
customer in Year 2 so it recognizes the revenue in Year 2. It paid the employees the wage in Year
1 so it recognizes the expense in Year 1.
The following is information from Lewis Corporation's financial records for the current fiscal
year.
i. Cash received from customers, $310,000
ii. Revenue earned, $330,000
iii. Cash paid for wages, $140,000
iv. Wages incurred, $125,000
v. Cash received from shareholders for additional shares of stock, $10,000
What is the company's net income for the current year using the accrual basis of accounting? -
Answer $205,000
Solution:
,Net income using the accrual basis = Revenue earned - expenses incurred including depreciation
Net income using the accrual basis = $330,000 - 125,000 = $205,000
Adjusting entries can be classified as: - Answer accruals and deferrals
Solution:
Accrual-basis accounting means that transactions that change a company's financial statements
are recorded in the periods in which the events occur, even if cash is not exchanged in the same
period. Two types of adjusting entries exist: (i) accruals and (ii) deferrals.
Which of the following is not a typical example of a prepaid expense?
rent
insurance
supplies
wages
all of these are examples of prepaids - Answer wages
Solution:
Wages are not paid to employees until after employees perform work for the employer. In other
words, wages are not prepaid. In contrast, companies pay for supplies, rent, and insurance
before using or consuming them. Supplies are purchased before acquiring them and using
them. Insurance is paid for before insurance coverage is received. Rent is paid at the beginning
of the period.
On August 1, Crestview Company purchased equipment for $16,000. The equipment's
estimated salvage value is $1,000. The machine will be depreciated using straight-line
depreciation and a five year life. If the company prepares annual financial statements on
December 31, the appropriate adjusting journal entry to make on December 31 of the first year
would be a - Answer $1,250 debit to Depreciation Expense and a $1,250 credit to
Accumulated Depreciation.
Solution:
Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (16,000 - 1,000)/5 =
$3,000 per year
The correct adjusting entry to record depreciation for 5 months (i.e., August 1 through
December 31) is $3,000 per year x 5/12 = $1,250.
The year-end adjusting entry to record depreciation includes a debit to Depreciation Expense
and a credit to Accumulated Depreciation.
,Intuitive Design Company started business this year and it purchased $7,000 of office supplies
and debited Supplies for the full cost. Supplies on hand at the end of the accounting period
were $800. The company's appropriate adjusting journal entry to be made would be a - Answer
debit to Supplies Expense for $6,200 and a credit to Supplies for $6,200.
Solution:
Supplies expense can be computed as beginning supplies plus the cost of supplies purchased in
the current period minus the cost of supplies on hand at the end of the period. Since this
company started business this year (and no beginning supplies were mentioned), beginning
supplies should be determined to be zero. Thus, supplies expense = $0 + $7,000 - $800 =
$6,200. The year-end adjusting journal entry to record Supplies Expense (and to decrease
Supplies to the correct ending balance) would be a debit to Supplies Expense for $6,200 and a
credit to Supplies for $6,200.
A company uses accrual-basis accounting. Shortly before the end of the current year, the
company earned $1,000 by providing services to a customer but the customer does not pay the
company until the following year. Nothing is recorded regarding these events, including year-
end adjusting entries. This omission would cause the company's current year - Answer
stockholders' equity to be understated.
Solution:
The firm should record a year-end adjusting entry for services earned:
Debit: Accounts receivable for $1,000
Credit: Revenue for $1,000
Overlooking this adjusting-entry would cause accounts receivable (and assets) to be
understated, and it would cause revenues, net income, retained earnings, and equity to be
understated.
The year-end trial balance for Beltway Corporation appears as follows:
Beltway Corporation
Trial Balance
December 31
Debit
Credit
Cash
$ 300
, Accounts Receivable
500
Prepaid Insurance
60
Supplies
140
Equipment
4,000
Accumulated Depreciation, Equipment
$ 800
Unearned Revenues
300
Common Stock
1,000
Retained Earnings
1,400
Service Revenue
ACG 2021 Quiz 2, ACG 2021 Paterson
FSU Ch.1 Quiz and All Actual Answers.
A company accepts a customer's order on December 10. On December 11, the company
delivers the goods to the customer with an invoice stating payment is due no later than
December 21. The company receives a check from the customer for the full amount due on
December 20. The company follows the revenue recognition principle and accrual-basis
accounting. On what day should the company recognize revenue for this order? - Answer
December 11
Solution:
Under the revenue recognition principle, revenue is earned when the performance obligation is
satisfied. The performance obligation is satisfied when the company provides the goods to the
customer.
In Year 1, Costello Company performed work for a customer and billed the customer $10,000. In
Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the
company incurred and paid $3,000 of wage expense. If Costello Company uses the cash-basis of
accounting, then it will report - Answer revenue of $10,000 in in Year 2 and expense of
$3,000 in Year 1.
Solution:
The cash-basis of accounting recognizes revenues in the year cash is collected from customers
regardless of when the performance obligation is satisfied and it recognizes expenses in the year
they are paid regardless of when they are incurred. The company collected cash from the
customer in Year 2 so it recognizes the revenue in Year 2. It paid the employees the wage in Year
1 so it recognizes the expense in Year 1.
The following is information from Lewis Corporation's financial records for the current fiscal
year.
i. Cash received from customers, $310,000
ii. Revenue earned, $330,000
iii. Cash paid for wages, $140,000
iv. Wages incurred, $125,000
v. Cash received from shareholders for additional shares of stock, $10,000
What is the company's net income for the current year using the accrual basis of accounting? -
Answer $205,000
Solution:
,Net income using the accrual basis = Revenue earned - expenses incurred including depreciation
Net income using the accrual basis = $330,000 - 125,000 = $205,000
Adjusting entries can be classified as: - Answer accruals and deferrals
Solution:
Accrual-basis accounting means that transactions that change a company's financial statements
are recorded in the periods in which the events occur, even if cash is not exchanged in the same
period. Two types of adjusting entries exist: (i) accruals and (ii) deferrals.
Which of the following is not a typical example of a prepaid expense?
rent
insurance
supplies
wages
all of these are examples of prepaids - Answer wages
Solution:
Wages are not paid to employees until after employees perform work for the employer. In other
words, wages are not prepaid. In contrast, companies pay for supplies, rent, and insurance
before using or consuming them. Supplies are purchased before acquiring them and using
them. Insurance is paid for before insurance coverage is received. Rent is paid at the beginning
of the period.
On August 1, Crestview Company purchased equipment for $16,000. The equipment's
estimated salvage value is $1,000. The machine will be depreciated using straight-line
depreciation and a five year life. If the company prepares annual financial statements on
December 31, the appropriate adjusting journal entry to make on December 31 of the first year
would be a - Answer $1,250 debit to Depreciation Expense and a $1,250 credit to
Accumulated Depreciation.
Solution:
Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (16,000 - 1,000)/5 =
$3,000 per year
The correct adjusting entry to record depreciation for 5 months (i.e., August 1 through
December 31) is $3,000 per year x 5/12 = $1,250.
The year-end adjusting entry to record depreciation includes a debit to Depreciation Expense
and a credit to Accumulated Depreciation.
,Intuitive Design Company started business this year and it purchased $7,000 of office supplies
and debited Supplies for the full cost. Supplies on hand at the end of the accounting period
were $800. The company's appropriate adjusting journal entry to be made would be a - Answer
debit to Supplies Expense for $6,200 and a credit to Supplies for $6,200.
Solution:
Supplies expense can be computed as beginning supplies plus the cost of supplies purchased in
the current period minus the cost of supplies on hand at the end of the period. Since this
company started business this year (and no beginning supplies were mentioned), beginning
supplies should be determined to be zero. Thus, supplies expense = $0 + $7,000 - $800 =
$6,200. The year-end adjusting journal entry to record Supplies Expense (and to decrease
Supplies to the correct ending balance) would be a debit to Supplies Expense for $6,200 and a
credit to Supplies for $6,200.
A company uses accrual-basis accounting. Shortly before the end of the current year, the
company earned $1,000 by providing services to a customer but the customer does not pay the
company until the following year. Nothing is recorded regarding these events, including year-
end adjusting entries. This omission would cause the company's current year - Answer
stockholders' equity to be understated.
Solution:
The firm should record a year-end adjusting entry for services earned:
Debit: Accounts receivable for $1,000
Credit: Revenue for $1,000
Overlooking this adjusting-entry would cause accounts receivable (and assets) to be
understated, and it would cause revenues, net income, retained earnings, and equity to be
understated.
The year-end trial balance for Beltway Corporation appears as follows:
Beltway Corporation
Trial Balance
December 31
Debit
Credit
Cash
$ 300
, Accounts Receivable
500
Prepaid Insurance
60
Supplies
140
Equipment
4,000
Accumulated Depreciation, Equipment
$ 800
Unearned Revenues
300
Common Stock
1,000
Retained Earnings
1,400
Service Revenue
