Question 1

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Accepted Answer

Service Revenue is credited.

Question 2

Watson Tax Planning Service has the following plant assets: Communications Equipment: Cost,$7,200 with useful life of eight years; Furniture: Cost,$24,000 with useful life of 12 years; and Computer: Cost,$13,200 with useful life of four years.(Assume residual value of all the assets is zero.)Watson's monthly depreciation expense calculated using the straight-line method is ________.(Round any intermediate calculations and your final answer to the nearest cent.)
A) $275.00
B) $166.67
C) $75.00
D) $516.67

Accepted Answer

D) Straight-line depreciation = (Cost - Residual value) / Useful life
Straight-line depreciation for:
Communications 11ea8873_d44f_fd55_bb89_3981a4e7c963_TB5026_00 11ea8873_d450_2466_bb89_eb166a8a6d77_TB5026_00 11ea8873_d450_2467_bb89_97dc311f15eb_TB5026_00 11ea8873_d450_2468_bb89_217f358af13a_TB5026_00

Question 3

On July 1,Delta Company prepaid rent for an equipment storage building.Delta paid $20,000 to rent the building from July 1 through the end of the year.Prepare the journal entry needed on July 1 when the payment is made.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.

Accepted Answer

The answer of On July 1,Delta Company prepaid rent for...

Question 4

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.
A) accrued revenue
B) accrued expense
C) deferred revenue
D) deferred expense

Accepted Answer

The situation described in the question is referring to a deferred revenue liability, which occurs when a business receives payment from a customer before providing the goods or services. This liability will be recognized as revenue once the product is delivered or the service is completed. Accrued revenue, on the other hand, refers to revenue that has been earned but not yet received or recorded, while accrued expense refers to an expense that has been incurred but not yet paid or recorded. Deferred expense occurs when a payment is made in advance for an expense that will be incurred in the future.

Question 5

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

Accepted Answer

Deferred revenue refers to the situation where cash is received from a customer or client before the goods or services are delivered. The revenue is not recognized until the goods or services are provided, even though the cash has already been received. Therefore, the statement is true.

Question 6

ABC Tax Planning Service started business in January 2018.The company rented an office for $1,800 per month starting from January 1,2018.On that day,ABC prepaid the rent through June 30.The company makes adjusting entries at the end of each month.What is the balance in the Prepaid Rent account as of April 30,2018?
A) $3,600
B) $300
C) $1,800
D) $900

Accepted Answer

A) 11ea8873_d44f_891e_bb89_e160cde39860_TB5026_00

Question 7

In the case of deferred revenue,the adjusting entry at the end of the period includes a credit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Accepted Answer

When deferred revenue is initially recorded as a liability, it means that the company has received payment for goods or services that have not yet been provided to the customer. As the goods or services are provided over time or at a later date, the liability is gradually reduced and the corresponding revenue is recognized. At the end of the period, an adjusting entry is made to reflect the amount of revenue that has been earned during that period. This entry includes a credit to Service Revenue, which increases the revenue account and ultimately reduces the liability account.

Question 8

Hudson Landscaping Service bought equipment for $10,800 on January 1,2019.It has an estimated useful life of five years and zero residual value.Hudson uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2019,the book value of this equipment shown on its balance sheet will be ________.
A) $9,720
B) $10,800
C) $11,880
D) $10,980

Accepted Answer

A) Straight-line depreciation = (Cost - Residual value) / Useful life
Straight-line depreciation = ($10,800 - 0) / 5 years = $2,160 per year 11ea8873_d44f_d643_bb89_6177e0e6ba0f_TB5026_00 11ea8873_d44f_d644_bb89_b57172789a67_TB5026_00 Book value of equipment = $10,800 - $1,080 = $9,720

Question 9

Improvements,a home improvement magazine,collected $240,000 in subscription revenue on June 30.Each subscriber will receive an issue of the magazine in each of the next 12 months,beginning with the July issue.The company uses the accrual method of accounting.What is the amount of Subscription Revenue that has been earned by the end of December? (Round any intermediate calculations to two decimal places,and your final answer to the nearest whole number.)
A) $100,000
B) $140,000
C) $240,000
D) $120,000

Accepted Answer

D) 11ea8873_d450_e7c1_bb89_63f1f88901e9_TB5026_00

Question 10

Unearned Revenue is classified as a(n)________ account.
A) liability
B) asset
C) revenue
D) equity

Accepted Answer

Unearned Revenue is money received in advance for goods or services that haven't been delivered yet. Therefore, it represents a liability because the business owes the customer a product or service. Unearned Revenue is an obligation that the business has to fulfill, and it will become revenue only when the service or product is delivered.

Question 11

Oakland Tax Planning Service bought computer equipment for $24,000 on January 1,2018.It has an estimated useful life of four years and zero residual value.Oakland uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month.Calculate the amount of Depreciation Expense for the period,January 1,2018 through September 30,2018,for this equipment.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)
A) $6,000
B) $4,500
C) $6,500
D) $5,000

Accepted Answer

B) Straight-line depreciation = (Cost - Residual value) / Useful life
Straight-line depreciation = ($24,000 - 0) / 4 years = $6,000 per year 11ea8873_d44f_891f_bb89_cf0d6bbf2778_TB5026_00 Depreciation Expense from January to 11ea8873_d44f_af30_bb89_eb412fb05706_TB5026_00

Question 12

Maxwell Tax Planning Service bought communications equipment for $10,200 on January 1,2019.The equipment has an estimated useful life of five years and zero residual value.Maxwell uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month.As of June 30,2019,the balance in the Accumulated Depreciation account for this equipment is ________.
A) $170
B) $2,040
C) $850
D) $1,020

Accepted Answer

D) Straight-line depreciation = (Cost - Residual value) / Useful life
Straight-line depreciation = ($10,200 - 0) / 5 years = $2,040 per year 11ea8873_d44f_af31_bb89_0bc47319abd5_TB5026_00 11ea8873_d44f_d642_bb89_8bc64855e136_TB5026_00

Question 13

Wellness,a healthy living magazine,collected $516,000 in subscription revenue on May 31.Each subscriber will receive an issue of the magazine in each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.What is the balance in the Unearned Revenue account as of December 31?
A) $215,000
B) $301,000
C) $516,000
D) $387,000

Accepted Answer

The balance in the Unearned Revenue account as of December 31 is $215,000. This is because the company has collected $516,000 in subscription revenue, but only $301,000 of this revenue has been earned as of December 31. The remaining $215,000 of revenue will be earned in the next six months.

Question 14

On January 1,Unearned Revenue of Commercial Plumbing Services Company had a beginning balance of $1,300.During January,the company earned $1,000 of the deferred revenue.The company also collected $3,000 from a new customer for services to be performed the following month.At the end of January,the Unearned Revenue account should have a balance of $3,000.

Accepted Answer

Unearned Revenue = $1,300 - $1,000 + $3,000 = $3,300

Question 15

If a company receives cash before it does the work or delivers a product,no journal entry is needed until the revenue has been earned.

Accepted Answer

If a company receives cash before it does the work or delivers a product, Cash is debited and Unearned Revenue is credited.

Question 16

Deferred Revenue is a liability created when a business collects cash from customers in advance of completing a service or delivering a product.

Accepted Answer

Deferred Revenue is a liability because the business still owes its customers the service or product that was paid for in advance.

Question 17

Justice Company purchased a machine for $15,000 two years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.
A) $12,000
B) $3,000
C) $16,500
D) $15,000

Accepted Answer

A) Book value
 11ea8873_d450_728d_bb89_8da1747cf1ee_TB5026_00

Question 18

On July 1,Lamba Company paid rent of $15,000 for an equipment storage building from July 1 until December 31.Prepare the adjusting journal entry on July 31.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.

Accepted Answer

The answer of On July 1,Lamba Company paid rent of...

Question 19

On April 1,Beta Company purchased office supplies for $1,500.At the end of April,Beta's employees took a count of the remaining supplies and found that there was $500 of supplies left.Provide the adjusting entry needed at the end of April.(Ignore explanation).Assume the office supplies were initially recorded as an asset.Assume there were no office supplies on hand prior to the purchase on April 1.

Accepted Answer

The answer of On April 1,Beta Company purchased office supplies...

Question 20

Big Rig Delivery Service has the following plant assets: Communications Equipment: Cost,$3,840 with useful life of 8 years; Delivery Equipment: Cost,$17,712 with useful life of 12 years; and Computer: Cost,$12,960 with useful life of 4 years.Assume the residual value of all the assets is zero and the straight-line method is used. Big Rig's monthly depreciation journal entry will include a ________.
A) debit to Depreciation Expense - Equipment of $5,196
B) credit to Depreciation Expense - Equipment of $5,196
C) debit to Accumulated Depreciation - Equipment of $433
D) credit to Accumulated Depreciation - Equipment of $433

Accepted Answer

D) Straight-line depreciation = (Cost - Residual value) / Useful life
Straight-line depreciation for: 11ea8873_d450_4b79_bb89_6bb563ebdce1_TB5026_00 11ea8873_d450_4b7a_bb89_dbd1473bc7bb_TB5026_00 11ea8873_d450_4b7b_bb89_9ff248186e5c_TB5026_00 11ea8873_d450_4b7c_bb89_21981c1d5f29_TB5026_00

Quiz 3: The Adjusting Process

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

In the case of deferred revenue,the adjusting entry at the end of the period includes a credit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Unearned Revenue is classified as a(n) ________ account.

If a company receives cash before it does the work or delivers a product,no journal entry is needed until the revenue has been earned.

Deferred Revenue is a liability created when a business collects cash from customers in advance of completing a service or delivering a product.

Justice Company purchased a machine for $15,000 two years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

On July 1,Lamba Company paid rent of $15,000 for an equipment storage building from July 1 until December 31.Prepare the adjusting journal entry on July 31.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.