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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

Homework #2
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1.Question 1
Which of these transactions would produce $10,000 of revenue in December? (check all
that apply)

BOC signed a contract to deliver $10,000 of goods to a customer in January.

BOC delivered $10,000 of goods in December to a customer that paid a $10,000 cash deposit in
November.

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

BOC delivered $10,000 of goods in December to customers that ordered them and have 30 days
to pay for them.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.
BOC collected a $10,000 deposit in December for goods it will ship in January.

BOC collected $10,000 of cash in December from customers who received goods in November.

This should not be selected

0 / 1 point

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

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

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

Correct
These are period costs. We expense these costs when incurred; i.e., when the people work for
us. This choice involves $10,000 of cost for work provided in December.

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

You didn't select all the correct answers

3.Question 3
Which journal entry reflects the following transaction?:
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. Advances from Customers 2,000

Dr. Cash 2,000

Cr. Inventory 2,000

Dr. Cash 2,000

Cr. Revenue 1,000

Cr. Advances from Customers 1,000

Dr. Cash 2,000

Cr. Revenue 2,000

Incorrect
This entry is missing a Cr to Revenue.

0 / 1 point

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

BOC received $5,000 of cash from a customer who took delivery of goods that originally
cost BOC $4,000 to acquire.

Dr. Cash 5,000

Cr. Inventory 5,000

Cr. Revenue 5,000

Dr. Accounts Payable 4,000

Cr. Inventory 4,000

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Cost of Goods Sold 4,000

Cr. Inventory 4,000

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Cash 5,000

Cr. Inventory 4,000

Cr. Revenue 1,000

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 quarterly depreciation expense would be recognized for a building that
originally cost $100,000 and has an estimated useful life of 10 years with a $20,000
salvage value?

$2,500
$8,000

$2,000

$10,000

$1,000

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

(Original Cost - Salvage Value) / Useful Life.

But the question asks for quarterly!

0 / 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.

Dr. Salaries Payable 800,000

Cr. Cash 800,000

No entry is needed.

Dr. Salary Expense 800,000

Cr. Salaries Payable 800,000

Dr. Salary Expense 800,000

Cr. Cash 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.

Dr. Software Amortization Expense 5,000

Cr. Software 5,000

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

Incorrect
The Cr to Cash is incorrect.

0 / 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.

No entry needed.

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Unearned Revenue 5,000

Cr. Revenue 5,000

Dr. Unearned Revenue 5,000

Cr. Inventory 5,000

Dr. Advances from Customers 5,000

Cr. Revenue 5,000

Correct
Assuming the $5,000 was properly recorded in November (Dr. Cash, Cr. Unearned Revenue), no
entry is needed now. BOC has still not earned the revenue; it won't until it delivers the goods.

1 / 1 point

9.Question 9
Which item would not appear on a Balance Sheet?

Retained Earnings

Prepaid expenses
Interest Payable

Accounts Receivable

Gross Profit

Incorrect
On the Balance Sheet.

0 / 1 point

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

Retained Earnings

This should not be selected

Dividends Payable

Cost of Goods Sold

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

Income Tax Expense

Sales Revenue

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

0 / 1 point