Question
1-On August 1, your company takes a $10,000 note that requires your firm to repay principal and accrued interest (8% per year) at the end
1-On August 1, your company takes a $10,000 note that requires your firm to repay principal and accrued interest (8% per year) at the end of 4 years. If your comapny uses the accrual basis, which entry should you record at the end of this year?
no entry is necessary
A/ debit Interest Expensefor $333; creditInterest Payable for $333
B/ debit Interest Expensefor $800; creditInterest Payablefor $800
C/ debit Interest Expensefor$800; credit Cash$800
D/ debit Interest Payable for $333; credit Interest Expense for $333
2-In its first year of operations, DEF Company earned $45,000 in revenues and received $37,000 of it in cash from their customers. The company incurred expenses of $25,500 but had not yet paid $5,250 of them at year end. DEF also prepaid $6,750 cash for expenses that would be incurred next year. Compute the first year's net income using theaccrual basis of accounting.
$10,000
$19,500
$11,500
$12,750
$4,750
3-On August 1, your company takes a $10,000 note that requires your firm to repay principal and accrued interest (8% per year) at the end of 4 years. If your comapny uses thecash basis, which entry should you record at the end of this year?
debit Interest Expensefor $800; creditInterest Payablefor $800
A/ no entry is necessary
B/ debit Interest Expensefor$800; credit Cash$800
C/ debit Interest Expensefor $333; creditInterest Payable for $333
D/ debit Interest Payable for $333; credit Interest Expense for $333
4-As of year end, your firm had completed $4,000 of work for a client, but had received only $1,500 in payment.The only thing you have recordedis a credit tothe Revenue account for the $1,500 received. If your firm uses the accrual basis, by what amount must the balance in theRevenue account be adjusted at year end?
$4,000
$0
$2,500
$1,500
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