Question

Multiple Choice (2 points each) Circle the best answer to each of the following questions. 1. When a company has performed services for a client but has not yet received payment, it: a. makes no entry until the cash is received. b. debits Accounts Receivable and credits Revenue. debits Accounts Payable and credits Revenue. d. debits Cash and credits Accounts Receivable. C. 2. Brewer Company's controller accidentally erased the 8/1/20 balance for the Cash account. However, she can see that the 8/31/20 Cash balance is $350,000, the company collected $900,000 cash during August 2020 and paid $1,000,000 cash during August 2020. What was the 8/1/20 Cash balance? $550,000 b. $350,000 $250,000 d. $450,000 a. a. 3. Which of the following statements is TRUE? If a company provides service and bills its client $20,000, the journal entry to record this transaction will cause Total Assets to increase. b. If a company collects a cash deposit of $20,000 for services not yet performed, the journal entry to record this transaction will cause Net Income to increase. If a company pays $20,000 for inventory previously purchased on account, the journal entry to record this payment will cause Total Liabilities to increase. d. None of the above. c. On September 1, Marina, Inc. purchased $500,000 worth of merchandise inventory on credit. On September 14, Marina paid $500,000 cash related to this purchase. 4. The journal entry to record the September 1 transaction will have the following effect on Marina's financial statements: a. Total Expenses will increase by $500,000. b. Total Liabilities will increase by $500,000. c. Total Assets will decrease by $500,000. d. Total Stockholders' Equity will decrease by $500,000. None of the above. e. a. 5. The journal entry to record the September 14 transaction will have the following effect on Marina's financial statements: Total Expenses will increase by $500,000. b. Total Liabilities will increase by $500,000. Total Assets will decrease by $500,000. d. Total Stockholders' Equity will decrease by $500,000. None of the above. c. e. 1

Answer 1

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Multiple Choice -

1. b. Debit Accounts Receivable and Credit Revenue.

Explanation -

When we sale goods on credit, we have to record the transaction as per accrual concept of accounting. Revenue pertains to the financial year needs to be recorded in the same financial year. Hence we have to record the transaction unless payment received for the same.

2. d. $450,000

Explanation -

If we have closing balance and also the transactions that happend on the month then we can find out the opening balance from reverse calculation.

We have to add those values that is deducted in the month and less those values that was added previously.

3. a. If the company provides service and bills its client $20,000, the journal entry to record this transaction will cause Total Assets to increase.

Explanation -

When we bill client then account receivable account will increase and that is the reason Total assets will go up.

4. b. Total Liabilities will increase by $500,000

Explanation -

When Marina Inc. Purchased Inventory on credit Accounts Payable and Assets account will increase. In the given option only Liabilities will increased is there hence other options are incorrect.

5. Total Assets will decrease by $500,000

Explanation -

When Marina Inc. makes the payment Cash account will be decreased and Liabilities will also be decrease hence in the available options other options does not match the transaction happend.

6. c. Accounts Receivable

Explanation -

Available options given in the aswers are credit balances and when the credited they will increase. Accounts Receivable has debit balance and when this account credited it will decreased.