Exam (elaborations)
ACG 2024 CHAPTERS 1-4 EXAM 1 REVIEW RATED 100% CORRECT!!
- Course
- Institution
ACG 2024 CHAPTERS 1-4 EXAM 1 REVIEW RATED 100% CORRECT!!
[Show more]
Seller
Follow
EvaTee
Reviews received
Content preview
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.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller EvaTee. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for CA$26.44. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
76449 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now