Baker, Inc. will be utilized in all questions in this quiz. Baker prepares financial statements at the end of every month; thus Baker's Accounting Cycle is one month long.

1.On June 1, 2017 Baker received an advance payment of $24,000 from a customer. The payment was for six months of services Baker would perform for the customer at the rate of $4,000 per month. Baker started providing the service on June 1, 2017.

On June 1, 2017 Baker made the following entry to record the receipt of the advance payment:

Dr.Cr.

Cash24,000

Unearned Revenue 24,000

At the end of June, and at the end of July, Baker made the correct adjusting entries related to this advance payment.

Select the August 31, 2017 adjusting entry Baker should make related to this advance payment:

Account NameDebitCredit

A.Unearned Revenue12,000

Service Revenue12,000

B.Service Revenue4,000

Unearned Revenue4,000

C.Unearned Revenue4,000

Service Revenue4,000

D.Service Revenue12,000

Unearned Revenue 12,000

E. None of the above

Quiz: Solid Footing Chapter 8Pg 2

2. If Baker did not make the August 31 adjusting entry related to the advance payment in question 1:

AThe errors on the Income Statement for August would be:

items understated: none

items overstated: Service Revenue, Net Income

The errors on the August 31 Balance Sheet would be:

items understated: Unearned Revenue, Total Liabilities

items overstated: Retained Earnings, Total Equity

BThe errors on the Income Statement for August would be:

items understated: Service Revenue, Net Income

items overstated: none

The errors on the August 31 Balance Sheet would be:

items understated: Retained Earnings, Total Equity

items overstated: Unearned Revenue, Total Liabilities

CThe errors on the Income Statement for August would be:

item understated: Service Revenue

item overstated: Net Income

The errors on the August 31 Balance Sheet would be:

items understated: Retained Earnings, Total Liabilities

items overstated: Total Equity, Unearned Revenue

3.On July 31, 2017 Baker completed a $1,500 service job for a customer. The customer did not pay cash for the job when it was completed the customer will pay for the job on August 15, 2017. It was late in the day when the job was completed and Bakers accounting department did not have time to invoice the customer for the $1,500 completed job.

Select the adjusting entry Baker should make as of July 31, 2017 related to the unbilled service job:

Account NameDebitCredit

A.Service Revenue1,500

Accounts Receivable1,500

B.Unearned Revenue 1,500

Service Revenue1,500

C.Accounts Receivable1,500

Service Revenue1,500

D. No adjusting entry is required

E. None of the above

Quiz: Solid Footing Chapter 8Pg 3

4. If Baker did not make the July 31 adjusting entry related to the unbilled service job in question 3:

AThe errors on the Income Statement for July would be:

items understated: none

items overstated: Service Revenue, Net Income

The errors on the July 31 Balance Sheet would be:

items understated: none

items overstated: Accounts Receivable, Total Assets, Retained Earnings, Total Equity, Total

Liabilities and Equity

BThe errors on the Income Statement for July would be:

item understated: Service Revenue

item overstated: Net Income

The errors on the July 31 Balance Sheet would be:

items understated: Retained Earnings, Total Equity, Total Liabilities and Equity

items overstated: Accounts Receivable, Total Assets

CThe errors on the Income Statement for July would be:

items understated: Service Revenue, Net Income

items overstated: none

The errors on the July 31 Balance Sheet would be:

items understated: Accounts Receivable, Total Assets, Retained Earnings, Total Equity, Total

Liabilities and Equity

items overstated: none

DThere would not be any errors, as no adjusting entry is required.