FINANCIAL ACCOUNTING

Quiz N5

1.An example of an explicit transaction is

A) accruing interest payable at the end of the fiscal year.

B) recognizing depreciation expense.

C) cash disbursement for the payment of 3 months' rent in advance.

D) accruing wages payable at month end.

E) recognizing rent expense by reducing prepaid rent.

2.An example of an adjusting entry is

A) cash collections from credit customers.

B) payment of the principal and interest on a note.

C) recognizing rent expense by reducing Prepaid Rent.

D) declaring a cash dividend.

E) buying inventory on open account.

3.Auto Detailing, Inc. had the following transactions on August 1:

a. The company sold $2,100 of inventory costing $1,400. The customer will not be billed until September. As of August 31, no entries have been made with respect to the inventory that has been sold or the sale.

b. The company received a $2,000 payment from a customer for services to be performed during August and September. On August 1, the entire $2,000 was placed in the Unearned Revenue account. As of August 31, 40% of the work had been completed.

c. The company paid $7,200 for 4 months' rent in advance. The entire amount was placed into Prepaid Rent.

d. The company sold equipment costing $2,400 for $5,400 to a customer in return for a 3-month note. The sale was properly recorded on August 1. Auto Detailing, Inc. is charging 12% interest on the note. The customer will pay the note and all interest after 3 months.

Prepare the appropriate journal entries for Auto Detailing, Inc. as of August 31, for each of the above transactions.

4.Prepare a classified balance sheet dated December 31, 2012 given the following account balances of Helder Company.

Long-term Note Payable $ 11,000

Accounts Receivable 4,400

Accounts Payable 6,300

Additional Paid-in Capital 12,500

Prepaid Insurance 900

Wages Payable 2,600

Accumulated Depreciation, Equipment 9,100

Capital Stock 3,700

Inventory 8,200

Interest Payable 3,700

Retained Earnings 24,000

Equipment 55,200

Cash 4,200