Quiz #2

Question 1

The concept of matching tells accountants that we must report ___________ in the same period as the related _____________.

Answer 1

expenses; revenues

Question 2

Consider: Olivet, Inc. has the following transactions during the month of May:

a) May 1st: Prepaid three months of rent for $6,000, covering May through July.
b) May 5th: Collected $56,000 payment in advance for work to be performed. $20,000 is performed in May and the rest in June.
c) May 18th: Performed $7,500 of services, receiving $1,800 now & billing client for remainder.
d) May 25th: Received $800 from client billed on May 18th.
e) May 30th: Received utility bill for May of $4,000; will pay in June.

What amount of Net Income would Olivet record for May under cash basis accounting?

Answer 2

($6,000) + $56,000 + $1,800 + $800 = $52,600

Question 3

Consider: Olivet, Inc. has the following transactions during the month of May:

a) May 1st: Prepaid three months of rent for $6,000, covering May through July.
b) May 5th: Collected $56,000 payment in advance for work to be performed. $20,000 is performed in May and the rest in June.
c) May 18th: Performed $7,500 of services, receiving $1,800 now & billing client for remainder.
d) May 25th: Received $800 from client billed on May 18th.
e) May 30th: Received utility bill for May of $4,000; will pay in June.

What amount of Net Income would Olivet record for May under accrual basis accounting?

Answer 3

($2,000) + $20,000 + $7,500 + ($4,000) = $21,500

Question 4

During period-end adjustments, new accountant Bud Stevens forgot to adjust Prepaid Insurance for the amount used in the last month. Which of the following outcomes would result when the financial statements are prepared?

Answer 4

Assets are overstated, expenses are understated

Question 5

What account does not typically appear on the Balance Sheet?

Answer 5

Dividends

Question 6

Permanent accounts have which of the following characteristics?

a. They show up on the income statement.
b. They are closed during the closing process.
c. They show up on the balance sheet.
d. They include revenue and expenses.

Answer 6

They show up on the balance sheet.

Question 7

Lodi, Inc.’s adjusted trial balance shows the following account balances at 12/31/2018:
Retained Earnings = $5,000
Revenues = $6,000
Expenses = $3,200
Land = $2,700
Dividends = $500

What balance of Retained Earnings should appear on Lodi’s 12/31/2018 Balance Sheet?

Answer 7

$5,000 + $6,000 - $3,200 - $500 = $7,300