Question

I) A company bills customers for services rendered on account. Which of the following is part of recording this transaction?

a) Decrese service revenue

b) Decrease cash ; c) Increase account receivable ; d) Increase Unearned revenue

II) Adjusting entries always impact the income statement and the cash account

True or False?

III) Denise's Donuts has 12 Employees who are paid $15 per houir. At December 31, 2016, each of Denise's Donuts's employees had worked 20 hours which had not been paid or recorded. prior to adjustments, the company's trial balance showed $171400 in the wages expenses account. If Denise's Donuts makes the appropriate adjusting entry, how much will be reported on the December 31,2016 income statement as wage expense?

a) $167,800

b) $ 175,000

c) $3,600

d)$173,992

IV) A company provides services to clients during the period that are neither paid for, nor billed ( Invoiced) to the clients. What must the company do?

a) Collect the cash owed from the customer in order to recognize the revenue

b) record the revenues as a liability at the end of the year

c) Accrue revenue by making an adjusting entry at the end of the period

d) All provided answers are true

V) when adjusting for depreciation, which of the following is one effect of the adjustment

a) Accumulated depreciation is decreased

b) The asset's book value declines

c) The cost of the equipment declines

d) The market value of the equipment declines

Answer 1

I) Services revenues can be arisen in two forms one in form of cash and another in credit.

if it is in credit then there will be increase in accounts receivable.

(c) Increase in accounts receivable is the correct answer.

II) At the year end every company passes the adjusting entries for a fair disclouse of financial statements.

adjusting journal entries are nothing but bringing the accounts upto date at the year end.

adjusitng entries will effect atleast one account of income statement but there will be no impact on cash.

So the statement is false, Adjusting entries only impact Income statament.

III) (b) $ 175,000

Wage expense for the remaining period = 12*15*20= $3600

Adjusting entry will be :

Wages expense A/c Dr 3600

To wages payable A/c 3600

Therefore at the year end wages expense will be = 171400+3600 = $175000.

IV) (c) Accrue revenue by making an adjusting entry at the end of period.

V) b) the assets book value declines