Business Accounting - Week 10

What are unearned revenues?

• Revenues that have been earned and received in cash

• Revenues that have been earned but not yet collected in cash

• Liabilities created when a customer pays in advance for products or services

  before the revenue is earned

• Recorded as an asset in the accounting records

An entertainment company sold music concert tickets in advance. How would the

amounts received from customers be accounted for?

• Revenues

• Prepaid expense

• Liabilities

• Not recorded in a journal

On November 15, the customer paid service fees in advance which cover the period November 16 to January 15. What is the correct journal entry for this business transaction?

• Debit Cash and credit service revenue

• Debit Cash and credit unearned service revenue

• Debit unearned service revenue and credit service revenue

• Debit service revenue and credit unearned service revenue

On August 15, A Co. paid $9,000 cash for legal services to be performed over 1 year.

On August 15, A Co. records:

• A credit to an expense for $9,000

• A debit to cash for $9,000

• A debit to a prepaid expense for $9,000

• A credit to a prepaid expense for $9,000

A company makes a $500 sale on account. It later collects the $500 in cash. Under the accrual method of accounting, revenue is recognised

• when the cash is collected

• when the sale is made

• when either the cash is received or the sale is made

• at a time that cannot be determined from the facts

An expense incurred in 20X1 is not paid until 20X2. Using the accrual basis of accounting, the expense should appear on

• the 20X1 income statement

• the 20X2 income statement

• neither the 20X1 nor the 20X2 income statement

• both the 20X1 and 20X2 income statements

A company using the accrual basis of accounting pays $15,000 for a television advertising campaign on 1 November 20X1. Commercials will run evenly in November, December and January. How much advertising expenses will be reported on an income statement prepared for the year ending 31 December 20X1 (assuming no other advertising campaign)?

• $0

• $5,000

• $10,000

• $15,000

What is the adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period?

• Debit Unpaid Salaries and credit Salaries Payable

• Debit Salaries Payable and credit Salaries Expense

• Debit Salaries Expense and credit Cash

• Debit Salaries Expense and credit Salaries Payable

Which of the following events will not cause a change in equity?

• A net profit of $10,000 made by the corporation

• A net loss of $10,000 made by the corporation

• $10,000 paid as dividends to the shareholders of the corporation

• An equipment purchased by the corporation for $10,000

What category does accumulated depreciation belong to?

• Asset

• Liability

• Revenue

• Expenses