ACCT20100 Lecture Notes - Lecture 10: Deferral, Retained Earnings, Promissory Note

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burgundyguinea-pig332

16 Aug 2016

School

Department

Accountancy

Course

ACCT20100

Professor

O' Tousa

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Document Summary

Income statement: reports the accountant"s primary measure of performance of a business, revenues less expenses during the accounting period. Revenues: earnings from the sale of goods or services to customers. They"re reported whether or not they have been paid for. If cash is received before the company delivers goods or services, the liability account unearned revenue is recorded. If cash if received after the company delivers goods or services, an asset accounts receivable is recorded. Expenses: amounts a company incurs in order to earn revenue. If cash is paid before the company receives goods or services, an asset account, prepaid expense is recorded. If cash is paid after the company receives goods or services, a liability payable is recorded. Statement of retained earnings: accumulated net earnings minus dividends paid owners, which represents the reinvestments in the core business. Balance sheet: reports the financial position of an accounting entity at a particular point in time.

Related Questions

NEED ANSWERS ASAP

Question 23

If a resource has been consumed but a bill hasnot been received at the end of the accountingperiod, then

		an expense should be recorded when the bill is received.
		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 isreceived.

3 points

Question 24

Prepaid expenses are

		paid and recorded in an asset account before they are used orconsumed.
		paid and recorded in an asset account after they are used orconsumed.
		incurred but not yet paid or recorded.
		incurred and already paid or recorded.

3 points

Question 25

If a business has received cash in advance of services performedand credits a liability account, the adjusting entry needed afterthe services are performed will be

		debit Unearned Service Revenue and credit Cash.
		debit Unearned Service Revenue and credit Service Revenue.
		debit Unearned Service Revenue and credit Prepaid Expense.
		debit Unearned Service Revenue and credit AccountsReceivable.

3 points

Question 26

The preparation of adjusting entries is

		straight forward because the accounts that need adjustment willbe out of balance.
		often an involved process requiring the skills of aprofessional.
		only required for accounts that do not have a normalbalance.
		optional when financial statements are prepared.

3 points

Question 27

On January 1 of the current year, Doolittle Company purchasedfurniture for $7,560. The company expects to use the furniture for3 years. The asset has no salvage value. The book value of thefurniture at December 31of this year is

		$0.
		$2,520.
		$5,040.
		$7,560.

3 points

Question 28

Husker Du Supplies Inc. purchased a 12-month insurance policy onMarch 1 of the current year for $1,800. At March 31, the adjustingjournal entry to record expiration of this asset will include a

		debit to Prepaid Insurance and a credit to Cash for $1,800.
		debit to Prepaid Insurance and a credit to Insurance Expense for$200.
		debit to Insurance Expense and a credit to Prepaid Insurance for$150.
		debit to Insurance Expense and a credit to Cash for $150.

(Learning Objective 1: Explain how accrual accounting differs from cash-basis accounting)âHough Consulting had the following selected transactions in July:

July 1 Prepaid insurance for July through September, $4,200.

2 Purchased office furniture for cash, $5,000.

3 Performed consulting services for a client on account, $3,500.

5 Paid advertising expense, $500.

10 Performed consulting services and received cash, $1,500.

20 Purchased a computer on account, $2,500.

25 Collected for July 3 service.

26 Paid account payable from July 20.

29 Paid salary expense, $1,800.

31 Adjusted for July insurance expense (see July 1).

31 Earned revenue of $1,000 that was collected in advance back in June.

31 Recorded July depreciation on fixed assets, $125.

LO USING EXCEL:

1. Show how each transaction would be handled (in terms of recognizing revenues and expenses) using the cash basis and the accrual basis.

2. Compute July income (loss) before tax under each accounting method

3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 3 and July 25 to explain.

sangriallama827

1.Which of the following transactions will affect the balance of? Owner, Capital?
A.
collection on account
B.
paid accounts payable
C.
paid rent expense for the month
D.
purchased land for cash

2..Which of the following appears on both the income statement and statement of? owner's equity? A. Net income B. ?Owner, Capital, ending balance C. Total revenues D. ?Owner, Withdrawals

3.A liability created when a business receives cash from customers in advance of providing services or delivering goods is called? a(n) ________.
A.
notes receivable
B.
unearned revenue
C.
accrued liability
D.
service revenue

ACCT20100 Lecture Notes - Lecture 10: Deferral, Retained Earnings, Promissory Note

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