1. On December 15 of the current year, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in the following year. Which accounting principle would require Myers Legal Services to record the legal fees revenue in the following year and not the year the cash was received? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Revenue recognition principle. 2. If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: A. Assets overstated and equity understated. B. Assets and equity both understated. C. Assets overstated, net profit understated, and equity overstated. D. Assets, net profit, and equity understated. E. Assets, net profit, and equity overstated. 3. A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale? A $140. B. $160. C. $210. $380. E. $590. D 4. On June 30 of the current calendar year, Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 for Apricot would include: A A debit to an expense for $5,625. B. A debit to a prepaid expense for $5.625. C. A debit to an expense for $1.875. D. A debit to a prepaid expense for $1.875. E. A credit to a liability for $1,875. 5. A company used straight-line depreciation for an item of equipment that cost $12,000, had a residual value of $2,000, and had a five-year useful life. After depreciating the asset for three complete years, the residual value was reduced to $1,200 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life: A. $1,000 B. $1,800 C. $1,467. D. $1,600. E $2.160. 6. J. Awn, the proprietor of Awn Services, withdrew $8,700 from the business during the current year. The entry to close the withdrawals account at the end of the year is: A. Debit J. Awn. Withdrawals $8,700; credit Cash, $8,700 B. Debit J. Awn, Capital $8,700; credit J. Awn, Withdrawals $8,700 C. Debit J. Awn Withdrawals $8,700; credit J. Awn, Capital $8,700 D. Debit J. Awn, Capital $8,700, credit Salary Expense $8,700 E. Debit Income Summary $8,700; credit J. Awn, Capital $8,700 7. A trial balance taken at year-end showed total credits exceed total debits by $4.950. This discrepancy could have been caused by: A. An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash. B. A net profit of $4,950. C. The balance of $49,500 in Accounts Payable being entered in the trial balance as $4.950. D. The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550. E. An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable. 8. Using the following year-end information for Breanna Boutique, calculate the current ratio and acid-test ratio for the boutique: Cash.. Short-term investment.. Accounts Receivable. Inventory. Prepaid expenses. Account payable.. Other current payables. $ 52,000 12,000 54,000 325,000 17,500 106,500 25,000 A. B. C. D E. 1.8 and 1 1.97 and 1.52 2.73 and 1.52 3.50 and 0.90 None of these