Question

The following independent situations require professional judgement to determine when to recognize revenue under the revenue recognition principle.  

Identify the month in which revenue should be recognized for the following transactions:

8.   On January 2nd, 2019 you order and pay for 2 tickets on your Visa card for the February 28th, 2019 Canucks game against San Jose. You receive the tickets in the mail on January 9th. You receive the Visa bill in late January but you don’t pay your Visa bill until April 15^th, 2019.   Due to a massive snowstorm the February 28^th game is postponed until March 1^st, 2019. The Canucks should record revenue in the month of:       

a) January 2019

b) February 2019

c) March 2019

9. You buy a skimboard from an eBay retail store on May 31, 2019 and pay online with PayPal just before midnight on June 1, 2019.     PayPal takes the money out of your bank account on June 1, 2019. The eBay retailer invoices you as of May 31, 2019 and ships the product on June 28, 2019. You receive the board on July 7. The eBay store should record revenue in the month of:    

a) May 2019

b) June 2019

c) July 2019

Questions 10 through 16:  

For each of the following select the best answer:

10. The entry to close a net loss for the period would include a debit to the income summary account.

a) True

b) False

11. The Matching Principle provides guidance on accounting for:

            a) Expenses

            b) Revenues

            c) Assets

            d) Liabilities

12. The t-account ‘Equipment’ will show the original cost minus the accumulated amortization.

a) True

b) False

13. As at December 31, Starboard Company has assets of $7,000,000 and owners’ equity of

      —$500,000 (negative balance).   What are the total liabilities at December 31?

a) cannot be determined.

b) $7,500,000                                

c) $7,000,000

1. $6,500,000                   

14. A payment of an accounts payable that is over 90 days overdue results in a reduction of owner’s equity.

a) True

b) False

15. Use the account balances in the table below.

Interest Expense	$600	Sales	$1050
Income Tax expense	$ 50	Operating expenses	$120
Administrative expenses	$150	Merchandise inventory	$ 60

Net income is:

a) $400

b) $340

c) $190

d) $130

16. Net income for O'Neal Company is $25,000 for the current year. The owner withdrew $3,000 every month during the fiscal year for personal living expenses. The owner's capital account will show a net:

a) decrease of $25,000

b) decrease of $11,000

c) increase of $11,000

d) increase of $25,000

PART 2 - QUESTION I                                                                                                 

DoubleBlack Consulting Services completed these transactions during October, 2018:

Oct. 1^st    Ian Jacobson, the owner, invested $50,000 cash into the business and then made credit purchases of computer equipment for $6,500.

8^th           Ian completed $5,000 consulting work for a client and immediately received $2,000 cash with the remaining balance to be collected later.

12^th         Ian signed an agreement to provide management consulting work in January 2019 for Whistler Mountain Corp. for which Ian will be paid $20,000 upon completion of the work.

13^th         Paid the account payable created on October 1^st.

19^th         Agreed to pay $4,800 on November 1^st as the 2-year premium on a liability insurance policy.

23^rd         Received one-half (50%) of the outstanding amount for the work completed on October 8^th.

28^th         Ian withdrew $1,400 from DoubleBlack to buy a Whistler seasons pass for personal use.

Required:   Prepare the October 2018 journal entries (in the space below) to record each of the above transactions. If no entry is required then state “No Entry”.    Explanations and dates are not required.

Note: You must get the entire journal entry correct for full marks.

Account Titles                                                                                                   Debit            Credit       

                          

               

Answer 1