Question

1) Although a proprietorship is not a separate legal entity, a partnership is True False 2) Purchasing supplies on credit increases assets while decreasing liabilities. True False 3)On October 15, Gallery Comp. received $12,500 as a down payment on a consuting contract. The amount was credited to Unearned Consulting Revenue By October 31, 10% of the contract was completed. Gallery Corp. needs to prepare an adjusting entry for $1.250. True False 4) Asset, liability and revenue accounts are not closed as longas a company continues in business." True False 5) After posting the entries to close si revenue accounts and expense accounts, the income Summary account of Wat Services has a $4.000 debit balance. This shows that Wail Services earned profit of $4,000 True False 6) Z-Mart had a gross profit of $340,000 based on sales of $700.000. Its cost of goods sold was $350,000. False 7) A journal entry with a debito cash of $980. a debitto Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment." True False 8) In a periodo inflation FIFO usually gives a lower taxable income and thus a tax advantage. True False 9. The cost of an inventory item includes its invoice price plus any added or incidental costs necessary to put it in a place and conditon for sale." True False 10) How would the accounting equation of Lenore Turner's consulting business be attected by the biling of a client for $2.000 for consultingwork completed? Accounts receivable $2.000 increase, liabilities, $2,000 decrease. Accounts receivable, $2,000 increase, liabilities, $2,000 increase Accounts receivable, $2,000 increase, cash, $2,000 increase Accounts receivable $2,000 increase, equity, $2,000 increase. Accounts receivable, $2,000 increase, cash, $2,000 decrease.

Answer 1

First 10 questions are being answered here.

1. FALSE

Both the sole proprietorship and partnership are not separate legal entities. Sole proprietor in case of sole proprietorship and partners in case of partnership are fully liable for the debts of the business.  

2. FALSE

Purchasing supplies on credit increases assets as well as liabilities. Assets are increased because supplies are coming in the business while liabilities are increased as a liability to pay is created in the form of accounts payable

3. TRUE

Following the matching concept, $1250 is earned revenue. So, in October end, an adjusting entry needs to be prepared.

4. FALSE

Only assets and liabilities accounts are not closed as long as company continues in business. Revenue accounts are closed in every accounting period.

5. FALSE

A debit balance of $4000 in income summary account shows a loss of $4000.

6. FALSE

With the given gross profit and sales, cost of goods sold is:

Gross Profit = Sales - Cost of goods sold

$340000 = $700000 - Cost of goods sold

Cost of goods sold = $700000 - $340000 = $360000

7.FALSE

Total amount = $1000

Discount = $20

Discount % = $20 / $1000 * 100 = 20%

So, discount was 20%.

8. FALSE

FIFO gives higher taxable income in inflation.

9. TRUE

10. Option (d) is correct

Billing increases accounts receivable and it also increase the equity.