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 Manali Bankar

Introduction to Financial Accounting

Week 2

Homework #2

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 Revenues and Expenses
 Relic Spotter Case, Part 3
 Adjusting Entries
 Relic Spotter Case, Part 4
 Financial Statements and Closing Entries
 3M Company: Income Statement and Balance Sheet
 Homework
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Quiz: Homework #2

10 questions

QUIZ • 20 MIN

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1.Question 1
Which of these transactions would produce $10,000 of revenue in December? (check all
that apply)

BOC Realty leases space to a tenant for December and the tenant pays the $10,000 rent in cash
in December.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.

BOC Realty leases space to a tenant for December and January. The tenant pre-paid the
$20,000 rent for the two months in November.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.
BOC Realty leases space to a tenant for December and sends a bill for the $10,000 rent to be
paid in January.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.

BOC Bank is owed $10,000 of interest on a loan for December and receives the payment in
January.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.

BOC Bank receives a check for $10,000 in December for November's interest amount.

1 / 1 point

2.Question 2
Which of these transactions would produce $10,000 of expenses in December? (check all
that apply)

BOC pays $10,000 in cash dividends in December.

BOC hires a new COO in December to start work in January. The COO will be paid $10,000 per
month.

BOC pays its auditor $12,000 in December for all of the work the auditor performed during the
year.

BOC receives a $10,000 invoice from its lawyers for services performed in December. The bill is
due in January.

BOC pays its advertising agency $10,000 in December for ads that ran in December.

You didn't select all the correct answers

BOC receives $2,000 cash from a customer, of which $1,000 was for goods delivered now
and $1,000 was a deposit on custom goods that will be delivered next month.

Dr. Revenue 2,000

Cr. Cash 2,000

Dr. Cash 2,000

Cr. Revenue 1,000

Cr. Advances from Customers 1,000

Dr. Cash 2,000

Cr. Revenue 2,000

Dr. Cash 2,000

Cr. Inventory 2,000

Dr. Cash 2,000

Cr. Advances from Customers 2,000

Correct
We debit Cash to increase it. We credit Revenue for the $1,000 of goods delivered now. We
credit Advances from Customers (L) for $1,000 to create a liability for the obligation to deliver
goods in January.

1 / 1 point

4.Question 4
Which journal entry(s) reflects the following transaction?:

BOC received $10,000 of cash from a customer who took delivery of goods that originally
cost BOC $8,000 to acquire.
Dr. Cash 10,000

Cr. Revenue 10,000

Dr. Cost of Goods Sold 8,000

Cr. Inventory 8,000

Dr. Cash 10,000

Cr. Revenue 10,000

Dr. Accounts Payable 8,000

Cr. Inventory 8,000

Dr. Cash 10,000

Cr. Inventory 10,000

Dr. Cash 10,000

Cr. Inventory 8,000

Cr. Revenue 2,000

Dr. Cash 10,000

Cr. Revenue 10,000

Correct
We need two entries: (1) debit Cash and credit Revenue for the cash received for the delivery of
goods and (2) debit Cost of Goods Sold and credit Inventory for the original cost of the goods
delivered to the customer.

1 / 1 point

5.Question 5
How much annual depreciation expense would be recognized for a truck that originally
cost $30,000 and has an estimated useful life of 5 years with a $5,000 salvage value?
$6,000

$3,333

$10,000

$7,000

$5,000

Correct
Under straight-line depreciation, the annual expense would be:

(30,000 - 5,000) / 5 = 5,000.

1 / 1 point

6.Question 6
Which journal entry reflects the adjusting entry needed on December 31?:

It is December 31, the end of the fiscal year. During December, employees earned
$800,000 in salaries, but paychecks do not get issued until January 2.

No entry is needed.

Dr. Salary Expense 800,000

Cr. Cash 800,000

Dr. Cash 800,000

Cr. Salaries Payable 800,000

Dr. Salaries Payable 800,000

Dr. Salary Expense 800,000

Cr. Salaries Payable 800,000

Correct
We recognize (debit) Salary Expense based on the employees working for us and we credit the
liability Salaries Payable to record our obligation to pay them in January.

1 / 1 point

7.Question 7
Which journal entry reflects the adjusting entry needed on December 31?:

Last year, BOC purchased software for $10,000. The expected life of the software is 2
years and it has no expected salvage value. Now, it is December 31, the end of the fiscal
year. No other entries were recorded for this software during the year.

No entry needed.

Dr. Software Amortization Expense 5,000

Cr. PP&E 5,000

Dr. Software Amortization Expense 5,000

Cr. Cash 5,000

Dr. Software Amortization Expense 5,000

Cr. Software Revenue 5,000

Dr. Software Amortization Expense 5,000

Cr. Software 5,000

Correct
The journal entry for an Intangible Asset amortization is Dr. Software Amortization Expense and
Cr. Software. The amount is (10,000 - 0) / 2 = 5,000.

1 / 1 point

8.Question 8
Which journal entry reflects the adjusting entry needed on December 31?:

In November, BOC received a $5,000 cash deposit from a customer for custom-build
goods that will be delivered in January (BOC recorded an entry for this $5,000 in
November). Now, it is December 31, the end of the fiscal year.

Dr. Unearned Revenue 5,000

Cr. Revenue 5,000

No entry needed.

Dr. Advances from Customers 5,000

Cr. Revenue 5,000

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Unearned Revenue 5,000

Cr. Inventory 5,000

Incorrect
You did not choose an option.

0 / 1 point

9.Question 9
Which item would not appear on the Income Statement?

Gross Profit
Dividends

SG&A Expense

Operating Income

Pre-tax Income

Correct
Dividends do not show up on the Income Statement!

1 / 1 point

10.Question 10
Which of the following are temporary accounts? (check all that apply)

Dividends Payable

This should not be selected

Cost of Goods Sold

Correct
Appears on the Income Statement and, thus, is a temporary account.

Retained Earnings

This should not be selected

Sales Revenue

Correct
Appears on the Income Statement and, thus, is a temporary account.
Income Tax Expense

Correct
Appears on the Income Statement and, thus, is a temporary account.

0 / 1 point