Question

12. During the month of February 2019, Gumbo Solutions, a tax-preparation service had the following transactions. Billed clients $270,000 for services performed on credit Received $30,000 from customers' accounts receivable Prepared tax returns for $2,000 to clients who paid up immediately Incurred office expenses of $40,000 but only paid $25,000 cash for these expenses Prepaid $6,000 for computer services to be used next month Paid assistant's wages $4,500 for the month. . .Electricity bill of $400 was received for the month of February but will be paid in March What was the company's accrual basis net income for the month? A) $266,500 B) $251,500 C) $269,000 D) $227,100 13. A business prepares a trial balance to: A) To detect transactions that were posted to the wrong journal B) To ensure that there is capital adequacy C) To help check completion of double entry recording of transactions and appropriate postings to the ledger D) To detect all accounting errors 14. Which of the following accounts has a normal credit balance? A) Rent revenue B) Prepaid insurance C) Depreciation expense D) Accounts receivable

Answer 1

12) Calculate accrued net income

Service revenue (270000+2000)	272000
Office expense	-40000
Wages expense	-4500
Electricity bill	-400
Accrued net income	227100

So answer is d) $227100

13) Trial balance is the statement which is prepared after journal entries and journal entries posted in ledger.. then ledger ending balances is taken for trial balance

So answer is c) To help check completion of double entry recording of transactions and appropriate posting to the ledger

14) All expense, losses and assets has debit normal balance while all revenue, gains and liabilities and equity has normal credit balance

So answer is a) Rent revenue