Question

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Multiple Choice Identify the choice that best completes the statement or answers the question 1. Under accrual basis accounting when should revenue be recorded as earned? a. Revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer. b. Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer. c. Revenue is recorded in the accounting records when the goods are sold to a customer and reported on the income statement when the cash payment is received from the customer. Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer. 17.000 2. Star Lord Industries purchased a spaceship on January 1, 2012 for $177,000. As of January 1, 2019. depreciation of $136,000 had been recorded on this asset. Depreciation expense for 2019 is $17,000. After the adjustments are recorded and posted at December 31, 2019, what are the balances for the Equipment and Accumulated Depreciation? 2012 5177000 Equipment Accumulated Depreciation 2014 type a. $24,000 2 DC $17,000 b. $24,000 $136.000 c. $177,000 $153,000 d. $177,000 $17,000 3. Assets resulting from revenues that have been earned but for which no cash has yet been received results in an): a. Deferred Revenue b. Deferred Cash Receipt C, Accrued Revenue a. No Financial Statement Effect 4. What effect does "recognizing the use of insurance throughout the year that was previously purchased" have on the accounting equation for Star Lord Industries? La Assets decrease and Stockholders' Equity decreases. b. Assets increase and Liabilities increases. 39215 c. Stockholders' Equity decreases and Liabilities increase. d. Assets decrease and Liabilities decrease. Rocket received advanced payments from partners during 2018 of $500,000. Rocket had a sluggish year of thievery due to being a Guardian of the Galaxy and at December 31, 2018, S111.775 worth of services had not been completed. After the adjustments are recorded and posted at December 31, 2018, the balances in the Unearned Service Revenue and Service Revenue accounts will be: Service Revenue 75 Unearned Service Revenue a. $500,000 b. $111,775 c. $111,775 d $500,000 $500,000 $388,225 $111,775

Answer 1

_{1. d . Revenue is recorded as earned when goods are sold and delivered to the customer.}

_{​​​​​2. c. Equipment balance doesn't change i.e, $177000. Depreciation for the year 2019 $17000 is added to accumulated depreciation balance $136000 resulting in accumulated depreciation balance as $153000.}

_{3. c. Accrued revenue is the revenue that has been earned but not yet received. Accrued revenue is an asset In the balance sheet.}

_{4. a. 'Recognizing the use of insurance through out the year that was previously purchased' means recognizing the insurance expense from prepaid insurance account. Thus, prepaid insurance account decreases i.e asset decreases and insurance expense recognized in income statement i.e decrease in earnings which effect the stockholders equity.}

_{5. c. At the time of receiving advance, total amount of $500000 recognized as unearned service revenue because amount received for the work not done. At the end of the December 2018, $111775 amount worth work not done. So , the balance in unearned service revenue to be $111775 and $388225 amount is to be transferred to service revenue.}

_{6. b. Interest on note for 6 months on $35000 @9% is $1575. At the end of the accounting year, only 4 months completed , so we have to recognize only $1050 ($1575X4/6) in 2018 and remaining $ 525 in 2019. We don't recognize the total interest because 2 months interest is not earned.}

_{7. d. The rent paid in advance by drax parlor is a liability for the company. Rent per month $6330 . So rent revenue for 3 months is $18990 to be reported in income statement. The remaining $10782 is to be reported as unearned rental income}

_{8. c. The amount shown in the balance sheet is closing inventory balance on 31 December 2018 i.e $4750 under current assets.}

_{9. b. Depreciation for every year is $46275 ($925500/20).}

_{10. c.}

_{Cost of equipment. $925500}

_{​​​less: accumulated depreciation on 1 jan 2019. $185100}

_{​​​​​​net book value as on 1 jan 2019. $740400}

_{less: depreciation for the year 2019. $46275}

_{net book value as on 31 December 2019. $694125}

_{​​​​​}