Answer all Four Parts Regarding Blue Co.

Question 1: On March 1, 2019, Blue Co. received an advance payment of $12,000 from a customer for three months of monthly service work to be performed from November 2019 through January 2020. The $12,000 was recorded to Unearned Service Revenue. If Blue does not make an ajusting journal entry on December 31, 2019, which of the following statements is correct?

A) Current liabilities will be overstated and current assets will be understated.

B) Current assets will be overstated and revenues will be overstated.

C) Current liabilities will be overstated and revenues will be understated.

D) Accounts receivables will correctly stated and revenues will be understated.

Question 2: For the year-ended December 31, 2019, Blue Co. reported maintenance expense of $20,000. In May 2020, the accounting department determined that 2019 maintenance expense was reported incorrectly and should have been reported as $40,000. What was the effect of this error on Blue's December 31, 2019 Retained Earnings balance (ignore the effect of taxes)?

A) The December 31, 2019 retained earnings balance was understated by $20,000.

B) The December 31, 2019 retained earnings balance was overstated by $20,000.

C) The December 31, 2019 retained earnings balance was overstated by $40,000.

D) The December 31, 2019 retained earnings balance was understated by $40,000.

Question 3: Blue Co. discontinued the operation of its XYZ Division and disposed of it. The disposition met the strategic shift criteria. Where should the gain or loss from the discontinued operation of the XYZ Division should be presented on Blue's income statement?

A) As an adjustment to the beginning balance of retained earnings.

B) Before from continuing operations.

C) After income from continuing operations.

D) As an adjustment to non-controlling interest.

Question 4: Blue Co. reported the following discontinued operations: Income from discontinued operations, less applicable income tax of $20,000: $40,000

What was the gross income from discontinued operations?

A) $60,000.

B) $40,000.

C) $20,000.

D) cannot be determined