Question 1

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 11ea8a75_4257_ac32_a2a1_3d6b3ad270e5_TB6701_00 11ea8a75_4257_ac33_a2a1_8f0e9e7881f0_TB6701_00

Question 2

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: 11ea8a75_4258_6f8a_a2a1_5d1750b04bf4_TB6701_00 11ea8a75_4258_6f8b_a2a1_31cc0d22f4cc_TB6701_00 11ea8a75_4258_969c_a2a1_bd694badb655_TB6701_00 11ea8a75_4258_969d_a2a1_db9043e90f02_TB6701_00

Question 3

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

Accepted Answer

Deferred revenue is a liability account that represents revenue that has been received in advance but has not yet been earned. Therefore, the cash is received first, and the revenue is earned later, making option A true.

Question 4

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 11ea8a75_4257_d344_a2a1_a7ea66cb6845_TB6701_00 11ea8a75_4257_fa55_a2a1_bd633103f8e1_TB6701_00 Book value of equipment = $10,800 - $1,080 = $9,720

Question 5

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 6

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) 11ea8a75_4259_8102_a2a1_b1f45157f944_TB6701_00

Question 7

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 8

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

Deferred revenue refers to the liability created when a business collects cash from its customers before completing a service or delivering a product. This is because the business owes the customer the product or service and has not yet earned the revenue. Choices A and B are not correct because accrued revenue and accrued expense refer to revenue or expenses earned or incurred but not yet recorded in the financial statements. Choice D is not correct because deferred expense refers to prepaying expenses for items or services that will be used or consumed in the future.

Question 9

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

11ea8a75_4259_cf23_a2a1_4741b85805c9_TB6701_00

Question 10

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) 11ea8a75_4257_36ff_a2a1_97bd24192938_TB6701_00

Question 11

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 12

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 11ea8a75_4257_5e10_a2a1_4363013e5379_TB6701_00 Depreciation Expense from January to 11ea8a75_4257_8521_a2a1_59c11a733b2f_TB6701_00

Question 13

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 14

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 11ea8a75_4258_2166_a2a1_39c2ad7b717a_TB6701_00 11ea8a75_4258_2167_a2a1_37110c337e63_TB6701_00 11ea8a75_4258_4878_a2a1_6db16aa19bf2_TB6701_00 11ea8a75_4258_4879_a2a1_85c572fabffe_TB6701_00

Question 15

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

Accepted Answer

Unearned revenue is money collected in advance for goods or services that have not yet been delivered. Therefore, it represents an obligation to provide goods or services in the future, making it a liability on the company's balance sheet.

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 has not yet earned the revenue, and therefore the cash collected from customers is not yet recognized as revenue on the income statement.

Question 17

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

The adjusting entry at the end of the period for deferred revenue involves moving the previously recorded liability to the Service Revenue account, resulting in an increase in revenue on the income statement.

Question 18

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 19

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
 11ea8a75_4258_bdae_a2a1_adb9711d5519_TB6701_00

Question 20

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...

Quiz 3: The Adjusting Process

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

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.

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.

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

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

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

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.

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.