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Exam 3: The Income Statement

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Question 121

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Pandey Inc.had the following activities during the month: A.Borrowed $7,000,000 cash,signing a promissory note. B.Bought a building for $800,000,paying $200,000 in cash and signing a promissory note for $600,000. C.Rented equipment at a cost of $10,000 per month and issued a check covering six months' rent. D.Provided $104,000 of services and billed customers. E.Purchased $30,000 of supplies on account. F.Received a utility bill for the current period in the amount of $1,200. G.Raised sales prices on 200 units from $400 per unit to $440 per unit. H.Received a 50% deposit from a customer on a $20,000 order to be filled next month. Required: Analyze each of the activities (A)through (H)above with the goal of indicating their effects on the basic accounting equation by completing the table below.Indicate the accounts and amounts involved.Include a plus (+)or minus (−)sign before each number to show its effect on the accounting equation.If the activity should not to be recorded as a transaction,enter the word "None" in the first column for that activity. $\begin{array} { | l | l | l | l | l | l | l | } \hline & { \text { Assets } } && { \text { Liabilities } } &&{ \text { Stockholders' Equity } } \\\hline & \text { Account(s) } & \text { Amount } & \text { Account(s) } & \text { Amount } & \text { Account(s) } & \text { Amount } \\\hline \text { A } & & & & & & \\\hline \text { B } & & & & & & \\\hline \text { C } & & & & & & \\\hline \text { D } & & & & & & \\\hline \text { E } & & & & & & \\\hline \text { F } & & & & & & \\\hline \text { G } & & & & & & \\\hline \text { H } & & & & & & \\\hline\end{array}$

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Question 122

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A company received a bill of $2,110 for utilities used in the current month.The journal entry to record this event:

A) will include a debit to Accounts Receivable for $2,110.
B) will include a credit to Accounts Payable for $2,110.
C) will include a credit to Utilities Expense.
D) is not required;no journal entry should be prepared until the utilities bill is paid.

E) B) and C)
F) A) and D)

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Question 123

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Arthur Industries entered into the following transactions during the month of June. A.Purchased supplies for $8,000 cash. B.Paid $7,168 for salaries and wages for the month of June. C.Paid $768 in advance for July rent. D.Provided $19,200 in services on account. E.Paid $1,280 on accounts payable. F.Received $336 from customers as deposits for future services. G.Received a bill for $2,400 from the plumber who repaired a broken pipe in the restrooms,but will not pay the bill until July. H.Purchased equipment for cash of $1,248. Required: Prepare journal entries to record the transactions identified among activities (A)through (H).

When revenues exceed expenses in a period,stockholders' equity will increase.

On the last day of the month,a company receives $24,000 of cash from customers.Of that amount,$3,000 was for services performed and $21,000 represented payments on account.The journal entry to record the $24,000 cash receipt would include a debit to:

When cash is received in advance of a performance obligation being satisfied,a(n) ________ called ________ is recorded.

If more than one performance obligation exists,the total contract price:

On January 31,your company prepays rent of $13,250 for February and March.Which of the following describes the effects of this transaction on your company's accounting equation?

In April,the Surf and Sand Hotel books and accepts a cash payment for $25,600 for vacation services to be provided during in July.The journal entry recorded in April will include a debit to:

Geo Inc.had the following account balances on January 1,Year 2: $\begin{array}{lr}\text { Accounts Payable } & \$ 689 \\\text { Accounts Receivable } & 1,000 \\\text { Cash } & 15,000 \\\text { Common Stock } & 10,000 \\\text { Equipment } & 500 \\\text { Notes Payable } & 3,000 \\\text { Retained Earnings } & 2,911 \\\text { Salaries and Wages Expense } & 0 \\\text { Supplies } & 100\end{array}$ During January,Year 2,Geo entered into the following transactions: A.Paid $689 on account for utilities that were used during December Year 1. B.Purchased $423 of supplies for cash. C.Signed a rental agreement for office space and paid $3,500 in advance for six months of rent beginning February 1,Year 2. D.Purchased $15,000 of new equipment,signing a promissory note. E.Provided $26,000 of services.$17,000 was received in cash and $9,000 was provided on credit. F.Paid workers $8,300 for work done in January. Required: Prepare journal entries for each of the following January activities,and post results to the relevant T-accounts.Compute the ending balance of each T-account.Beginning balances have been entered.(If no entry is required for a transaction/event,select "No Journal Entry Required" in the first account field. )

West Corporation issued a $100 gift card.What journal entry will West Corporation record?

An increase in revenue always:

Under the five-step revenue recognition model,a contract can be written,verbal,or implied.