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ACG 2024 CHAPTERS 1-4 EXAM 1 REVIEW RATED 100% CORRECT!!
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ACG 2024 CHAPTERS 1-4 EXAM 1 REVIEW RATED 100% CORRECT!!
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ACG 2024 CHAPTERS1-4 EXAM 1 REVIEW
RATED 100%
CORRECT!!
ACG
Evatee 9/2/24 ACG
,ACG 2024 CHAPTERS 1-4 EXAM 1 REVIEW
RATED 100% CORRECT!!
The revenue recognition principle dictates that revenue should be recognized
Answer - when the performance obligation is satisfied.
In Year 1, Costello Company performed work for a customer and billed the
customer $14,000. In Year 2, the customer pays Costello Company for the
services it rendered in Year 1. In Year 1, the company incurred $6,000 of wage
expense, but it did not pay the employees until Year 2. If Costello Company
uses the accrual-basis of accounting, then it will report Answer - revenue of
$14,000 and expense of $6,000 in Year 1.
The following is information is from Clarke Corporation's financial records for
the current fiscal year.
i. Cash received from customers, $150,000
ii. Revenue earned, $195,000
iii. Cash paid for wages, $85,000
iv. Wage expense incurred, $90,000
v. Cash paid during the current year for computers that will be used for 3 years,
$24,000
vi. Depreciation expense, $8,000
vii. Proceeds from issuing debt (e.g., borrowed money from a bank), $50,000
viii. Interest incurred on debt, $5,000
ix. Cash paid for supplies, $3,000
x. Supplies expense incurred, $2,000
, What is the company's net income for the current year using the cash-basis of
accounting? Answer - $38,000
The cash-basis of accounting recognizes revenues in the year cash is collected
from customers regardless of when the performance obligation is satisfied and
it recognizes expenses in the year they are paid regardless of when they are
incurred.
Net income using the cash-basis = Cash collected from customers - cash paid
for expenses incurred
Net income using the cash-basis = $150,000 - 85,000 - 24,000 - 3,000 = $38,000
adjusting entries Answer - are needed to ensure that the expense recognition
principle is followed
year-end adjusting entries for prepaid expenses Answer - decrease assets and
increase expenses
On September 1, Crestview Company purchased equipment for $25,000. The
equipment's estimated salvage value is $3,400. The machine will be
depreciated using straight-line depreciation and a four year life. If the company
prepares annual financial statements on December 31, the appropriate
adjusting journal entry to make on December 31 of the first year would be a
Answer - $1,800 debit to Depreciation Expense and a $1,800 credit to
Accumulated Depreciation.
Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (25,000
- 3,400)/4 = $5,400 per yearThe correct adjusting entry to record depreciation
for 4 months (i.e., September 1 through December 31) is $5,400 per year x
4/12 = $1,800.The year-end adjusting entry to record depreciation includes a
debit to Depreciation Expense and a credit to Accumulated Depreciation.
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