The accounting equation can be stated as

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  1. The accounting equation can be stated as:

    a. A + L – SE = 0
    b. A – L + SE = 0
    c. -A + L – SE = 0
    d. A – L – SE = 0

1.25 points   

QUESTION 2

  1. XYZ Corporation receives $100,000 from investors for issuing
    them shares of its stock. XYZ’s journal entry to record this
    transaction include a:

    a. debit to Investments
    b. credit to Retained Earnings
    c. credit to Capital Stock
    d. credit to Revenue

1.25 points   

QUESTION 3

  1. Somerset Leasing received $12,000 for 24 months’ rent in
    advance. How should Somerset record this transaction?

    a. Prepaid Rent   12,000

    Rent Expense    12,000

    b. Cash    12,000

    Unearned rent revenue 12,000

    c. Rent expense    12,000

    Cash 12,000

    d. Unearned rent revenue   12,000

    Rent expense   12,000

1.25 points   

QUESTION 4

  1. Prepayments occur when:

    a. cash flow precedes expense recognition.
    b. sales are delayed pending credit approval.
    c. customers are unable to pay the full amount due when goods are
    delivered.
    d. manufactured goods await quality control inspection.

1.25 points   

QUESTION 5

  1. Davis Hardware Company uses a perpetual inventory system. How
    should Davis record the sale of merchandise, costing $620 and sold
    for $960 on account?

    a. Inventory   620

    Accounts receivable 620

    Sales 960

    Revenue from sales 960

    b. Accounts receivable 960

    Sales revenue 960

    Cost of goods sold 620

    Inventory 620

    c. Inventory      620

    Gain on sale    340

      Sales revenue 960

    d. Accounts receivable   960

    Sales revenue 620

       Gain on sale 340

1.25 points   

QUESTION 6

  1. An example of a contra account is:

    a. depreciation expense.
    b. accounts receivable.
    c. sales revenue.
    d. accumulated depreciation.

1.25 points   

QUESTION 7

  1. The balance in retained earnings at the end of the year is
    determined by retained earnings at the beginning of the year:

    a. plus revenues, minus liabilities.
    b. plus accruals, minus deferrals.
    c. plus net income, minus dividends.
    d. plus assets, minus liabilities.

1.25 points   

QUESTION 8

  1. The purpose of closing entries is to transfer:

    a. accounts receivable to retained earnings when an account is
    fully paid.
    b. balances in temporary accounts to a permanent account.
    c. inventory to cost of goods sold when merchandise is sold.
    d. assets and liabilities when operations are discontinued.

Answer

1)
Assets =
Liabilities + Equity
Asset –
Liabilities – Equity = 0
Therecore,
Correct Option: d . A-L-SE =0
2)
The journal
entry would be
Date Account Title Debit Credit
Cash $        1,00,000
Capital Stock $        1,00,000
Correct Option: c. Credit Capital Stock
3)
The journal
entry would be
Date Account Title Debit Credit
Cash $           
12,000
Unearned Revenue $           
12,000
Correct Option: b.
4) Correct Option: a.cash flow precedes expense recognition.
5) The journal
entry would be
Date Account Title Debit Credit
Account Receivables $                 
960
Sales Revenue $                 
960
Cost Of Goods Sold $                 
620
Inventory $                 
620
Correct Option : b
6) Correct Option:d.accumulated depreciation
7) Correct Option: c.plus net income, minus dividends.
8) Correct Option: b.balances in temporary accounts to a permanent
account.

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