6. What effect does “recognizing revenue at the end of the…


6. What effect does “recognizing revenue at the end of the accounting period for rent previously received in advance” have on the accounting equation for an insurance company?
a. Stockholders’ equity increases and liabilities increase. b. Assets increase and stockholders’ equity increases.
c. Assets decrease and liabilities decrease.
d. Liabilities decrease and stockholders’ equity increases.
7. The following transactions occurred during March, the first month of operations for Canyon Products, Inc.:
1. Issued 50,000 shares of capital stock in exchange for $600,000 cash
2. Purchased land for $400,000, using a $150,000 cash down payment and signing a note payable for the balance. 3. Made a $60,000 cash payment on the note payable from the purchase of land.
4. Purchased equipment on credit from Burton, Inc. for $63,000.
What is the balance in the Cash account at the end of March? a. $810,000
b. $210,000 c. $600,000 d. $390,000
8. During December, Horn Inc. purchased $800 of supplies for use in its business. At the end of December, 20% of the supplies were still on hand, but only 75% had been paid. What amounts will appear on the company’s balance sheet on December 31?
Supplies on Hand a. $800
b. $160 c. $640 d. $160
Accounts Payable $600
9. Which of the following accounts is increased by a credit entry? a. Interest Revenue
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Chapter 3-5
b. Salary Expense
c. Accounts Receivable d. Dividends
Monaco & Associates
Use the following five transactions for Monaco & Associates, Inc. to answer the question(s).
October 1 9
Bills are sent to clients for services provided in September in the amount of $800.
Dravo Co. delivers office furniture ($1,060) and office supplies ($160) to Monaco leaving an invoice for $1,220.
Payment is made to Dravo Co. for the furniture and office supplies delivered on October 9.
A bill for $430 for electricity for the month of September is received and will be paid on its due date in November.
Salaries of $850 are paid to employees.
10. See the transactions to Monaco & Associates.
The journal entry to record the October 31 transaction will include a credit to a. Salaries Expense
b. Salaries Payable
c. Prepaid Salaries
d. Cash
11. Which of the following statements is true?
a. Only the effects of internal transactions must be recognized and recorded in the entity’s accounting system.
b. An internal event is a transaction between an entity and its environment.
c. Not all recognizable events are supported by a standard source document.
d. Only the effects of external events must be recognized, measured, and recorded in an entity’s accounting system.
12. Windstar Corp. purchased supplies at a cost of $6,000 during the year. At December 31, supplies on hand are $1,400. Supplies expense for the year was $5,200. How much were supplies on hand at January 1?
a. $ 2,200 b. $ 11,200 c. $ 1,400 d. $ 600
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