1.A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customer all signed a contract agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed.

The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012.

In which month should the furniture company recognize the direct expenses associated with the sale of the 8 sofas?

a.December 2011

b.January 2012

c.February 2012

d.March 2012

1.In August, an airline using accrual accounting received cash from a round trip ticket sold to a customer for $1,200. The ticket allows the customer to fly down from Denver to Hawaii in September and from Hawaii back to Denver in October.

When should the airline recognize revenue?

a.August only

b.September and October only

c.October only

d.August, September, and October

1.In January of year 1, a company began doing business as a corporation in order to sell technology related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash.

In February 2011, the company paid its employee salaries totaling $5,000.

What will be the total impact of the salaries paid on the company's balance sheet other than a decrease in cash of $5,000?

a.Paid in capital will decrease $5,000

b.Retained earnings will decrease $5,000

c.Salaries payable will increase $6,000

d.Accounts payable will decrease $5,000