Question

1.

A credit sale of $1100 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

$980

$1100

$1050

$1078

2.

Which one of the following is not a justification for adjusting entries?

Adjusting entries are necessary to ensure that the expense recognition principle is followed.

Adjusting entries are necessary to ensure that the revenue recognition principle is followed.

Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.

Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

3.

If a resource has been consumed but a bill has not been received at the end of the accounting period, then:

an expense should be recorded when the cash is paid out.

an adjusting entry should be made recognizing the expense.

it is optional whether to record the expense before the bill is received.

an expense should be recorded when the bill is received.

4.

An architecture firm earned earned $1720 for architecture services provided with the fee to be paid in the future. No entry was made at the time the service was provided. If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause:

liabilities to be understated.

revenues to be understated.

revenues to be overstated.

net income to be overstated.

5.

A law firm received $1640 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause:

revenues to be understated.

liabilities to be understated.

net income to be overstated.

expenses to be overstated.

6,

On January 1, 2022, Metlock, Inc. purchased equipment for $48600. The company is depreciating the equipment at the rate of $680 per month. The book value of the equipment at December 31, 2022 is:

$0.

$40440.

$8160.

$48600.

7.

The Pina Colada Corp. purchased $9350 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1650 on hand. The adjusting entry that should be made by the company on June 30 is:

debit Supplies, $1650; credit Supplies Expense, $1650.

debit Supplies Expense, $7700; credit Supplies, $7700.

debit Supplies, $7700; credit Supplies Expense, $7700.

debit Supplies Expense, $1650; credit Supplies, $1650.

8.  

On July 1 the Swifty Corporation paid $18240 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Swifty Corporation is:

debit Prepaid Rent, $3040; credit Rent Expense, $3040.

debit Rent Expense, $18240; credit Prepaid Rent, $3040.

debit Rent Expense, $18240; credit Prepaid Rent, $15200.

debit Rent Expense, $3040; credit Prepaid Rent, $3040

Answer 1

1. Amount is received as payment in full on July 24 = Sales - return - discount

= $1100-100-(1100-100)*2%

= $980

2. Adjusting entries are necessary to ensure that the expense recognition principle is followed

3. an adjusting entry should be made recognizing the expense.

4. revenues to be understated.

5. revenues to be understated.

6. book value of the equipment at December 31, 2022 = 48600-680*12 = $40440

7. Supplies expense = 9350-1650 = $7700

debit Supplies Expense, $7700; credit Supplies, $7700.

8. Rent for july = 18240/6 = $3040

debit Rent Expense, $3040; credit Prepaid Rent, $3040