Question

18. A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing the

a. income statement

b. balance sheet

c. statement of cash flows

d.. statement of retained earnings

19. The assets section of the balance sheet normally presents assets in

a. alphabetical order

b. the order of largest to smallest dollar amounts

c. the order in which they will be converted into cash or used in operations

            d. the order of smallest to largest dollar amounts

20. Using accrual accounting, expenses are recorded and reported only

a. when they are incurred, whether or not cash is paid

b. when they are incurred and paid at the same time

c. if they are paid before they are incurred

d. if they are paid after they are incurred

21. Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction. Here are the transactions for S. Jones, CPA. The following accounts are used: Cash, Accounts receivable, Prepaid rent, Supplies, Computer, Accounts payable, Notes payable, S Jones, capital, Wages expense, Miscellaneous expense

    1.     S. Jones, CPA invested $50,000 on 1/1/19.

    2.     Hires an employee to be paid $400 per week, starting next week.

    3.     Paid two years’ rent in advance, $7,200 on 1/5/19.

    4.     Paid the worker’s weekly wage of $400 on 1/8/19.

    5.     Recorded service revenue earned and received for the week, $1,500 on 1/10/19.

    6.     Recorded service revenue earned but not received to date, $4,000 on 1/11/19.

    7.     Purchased $1,200 of supplies on account on 1/13/19.

    8.     Purchased a computer on account for $1,800 on 1/15/19.

    9.     Paid for the supplies purchased on 1/13/19.

   10.    Received a loan from the bank for $15,000 on 1/15/19.

Answer 1

Q18)

Answer:a. income statement

Explanation:

Income statement	To know profit/loss for the specific period
Balance sheet	To know financial position of the specific period
Statement of cash flows	To know Cash inflows and Cash outflows
Statement of retained earnings	To know represent the amount of net income or profit left in the company after dividends are paid

Q19)

Answer: c. the order in which they will be converted into cash or used in operations

Q20)

Answer:a. when they are incurred, whether or not cash is paid

Explanation:

Accrual basis	Expenses are recorded and reported only when they are incurred, whether or not cash is paid
Cash basis	Expenses are recorded and reported only when cash is paid

Q21:

Journal Entries:

Date	Account title and Explanation	Debit	Credit
1/1/19	Cash	$50,000
	S.Jones, Capital		$50,000
	[To record investment by the owner]
1/5/19	Prepaid rent	$7,200
	Cash		$7,200
	[To record paid rent in advance]
1/8/19	Wages expense	$400
	Cash		$400
	[To record payment of wages]
1/10/19	Cash	$1,500
	Service revenue		$1,500
	[To record cash collected for services]
1/11/19	Accounts receivable	$4,000
	Service revenue		$4,000
	[To record services performed on account]
1/13/19	Supplies	$1,200
	Cash		$1,200
	[To record purchase of supplies on account]
1/15/19	Computer	$1,800
	Accounts payable		$1,800
	[To record purchase of computer on account]
	Accounts payable	$1,200
	Cash		$1,200
	[To record piad for accounts payable]
1/15/19	Cash	$15,000
	Notes payable		$15,000
	[To record loan from bank]