Question

During March, the Meade Consulting Corporation provides $23,000 in consulting services of which $12,000 is collected immediately and $11,000 is on account. The effects of this transaction on Meade Consulting Corporation’s accounts are:

a. Cash increases by $12,000; Accounts Receivable increases by $11,000; Revenue increases by $23,000.

b. Cash increases by $12,000; Unearned Revenue increases by $11,000; Revenue increases by $23,000

c. Accounts Receivable increases by $11,000; Revenue increases by $12,000; Contributed capital increases by $1,000

d. Accounts Receivable increases by $12,000; Accounts Payable increases by $11,000; Revenue increases by $1,000

A company has an asset account, Prepaid Insurance, with a balance of $4,000 at the beginning of the month. The company used $500 of insurance during the month. Which of the following statements is true about the month-end financial statements?  The company will have Insurance Expense of ______ and a balance in Prepaid Insurance of ______.

a.  $500; $500.

b. $500; $3,500.

c. $3,500; $500

d. $3,500; $4,000

Answer 1

Question 1

Correct answer---------a. Cash increases by $12,000; Accounts Receivable increases by $11,000; Revenue increases by $23,000.

Revenue is earned by providing service so whole revenue will be recorded. Cash will be debited for $12000 which is for the amount of cash received and accounts receivable will be debited for $11000.

Question 2

Correct answer---------b. $500; $3,500.

.

Insurance expense will be debited and prepaid insurance will be credited for $500 because of the expiry of insurance for 1 month.

Prepaid insurance will decrease by $500 making its balance $3500.......(4000-500)