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 Manali Bankar

Introduction to Financial Accounting

Week 2

Homework #2

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 Revenues and Expenses
 Relic Spotter Case, Part 3
 Adjusting Entries
 Relic Spotter Case, Part 4
 Financial Statements and Closing Entries
 3M Company: Income Statement and Balance Sheet
 Homework
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Quiz: Homework #2

10 questions

QUIZ • 20 MIN

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1.Question 1
Which of these transactions would produce $10,000 of revenue in December? (check all
that apply)

BOC delivered $10,000 of goods in December to a customer that paid a $10,000 cash deposit in
November.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.

BOC collected a $10,000 deposit in December for goods it will ship in January.

BOC signed a contract to deliver $10,000 of goods to a customer in January.

BOC collected $10,000 of cash in December from customers who received goods in November.
BOC delivered $10,000 of goods in December to customers that ordered them and have 30 days
to pay for them.

Correct
The two revenue recognition criteria are earned and realized. Both criteria are satisfied in
December.

1 / 1 point

2.Question 2
Which of these transactions would produce $10,000 of expenses in December? (check all
that apply)

BOC signs a contract in December to buy $10,000 of copper.

BOC sells batteries costing $10,000 in December for $12,000 cash.

Correct
These are product costs, which will become expenses when the batteries are sold. The $10,000
cost of the batteries becomes Cost of Goods Sold expense in December.

BOC sells batteries costing $8,000 in December for $10,000 cash.

BOC uses copper to make batteries at a total cost of $10,000 in December.

BOC buys $10,000 of copper in December.

1 / 1 point

3.Question 3
Which journal entry reflects the following transaction?:

BOC receives a $2,000 cash deposit from a customer for custom goods that will be
delivered next year.

Dr. Advances from Customers 2,000

Cr. Cash 2,000

Dr. Cash 2,000

Cr. Inventory 2,000

Dr. Cash 2,000

Cr. Advances from Customers 2,000

Dr. Cash 2,000

Cr. Revenue 2,000

Dr. Deposits 2,000

Cr. Future Revenue 2,000

Incorrect
Both parts of the entry are incorrect!

0 / 1 point

4.Question 4
Which journal entry(s) reflects the following transaction?:

BOC received $5,000 of cash from a customer who took delivery of goods that originally
cost BOC $4,000 to acquire.

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Cash 5,000

Cr. Inventory 5,000

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Cost of Goods Sold 4,000

Cr. Inventory 4,000

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Accounts Payable 4,000

Cr. Inventory 4,000

Dr. Cash 5,000

Cr. Inventory 4,000

Cr. Revenue 1,000

Incorrect
Missing the inventory part of the transaction.

0 / 1 point

5.Question 5
How much quarterly depreciation expense would be recognized for a building that
originally cost $100,000 and has an estimated useful life of 10 years with a $20,000
salvage value?

$1,000

$2,000

$8,000

$10,000

$2,500
Correct
Under straight-line depreciation, the annual expense would be:

(100,000 - 20,000) / 10 = 8,000.

But the question asks for quarterly, so the answer is 8,000 / 4 = 2,000.

1 / 1 point

6.Question 6
Which journal entry reflects the adjusting entry needed on December 31?:

In November, BOC prepaid $30,000 of rent for December, January, and February (and it
was recorded properly). Now, it is December 31, the end of the fiscal year.

No entry needed.

Dr. Rent Expense 30,000

Cr. Cash 30,000

Dr. Rent Expense 10,000

Cr. Cash 10,000

Dr. Rent Expense 30,000

Cr. Prepaid Rent 30,000

Dr. Rent Expense 10,000

Cr. Prepaid Rent 10,000

Correct
We recognize Rent Expense for the month of December ($10,000 = $30,000 / 3) and credit
Prepaid Rent to reduce it by $10,000 (its original balance was $30,000).

1 / 1 point

7.Question 7
Which journal entry reflects the adjusting entry needed on December 31?:
Last year, BOC purchased a building for $1,000,000. The expected life of the building is 20
years and its expected salvage value is $200,000. Now, it is December 31, the end of the
fiscal year. No other entries were recorded for this building during the year.

No entry needed. The building was not purchased this year.

Dr. Depreciation Expense 50,000

Cr. Building 50,000

Dr. Depreciation Expense 40,000

Cr. Accumulated Depreciation 40,000

Dr. Depreciation Expense 50,000

Cr. Accumulated Depreciation 50,000

Dr. Depreciation Expense 40,000

Cr. Building 40,000

Correct
The journal entry for depreciation is Dr. Depreciation Expense and Cr. Accumulated
Depreciation. The amount is (1,000,000 - 200,000) / 20 = 40,000.

1 / 1 point

8.Question 8
Which journal entry reflects the adjusting entry needed on December 31?:

In November, BOC received a $5,000 cash deposit from a customer for custom-build
goods that will be delivered in January (BOC recorded an entry for this $5,000 in
November). Now, it is December 31, the end of the fiscal year.

Dr. Cash 5,000

Cr. Revenue 5,000

Dr. Advances from Customers 5,000

Cr. Revenue 5,000

No entry needed.

Dr. Unearned Revenue 5,000

Cr. Inventory 5,000

Dr. Unearned Revenue 5,000

Cr. Revenue 5,000

Incorrect
Assuming the $5,000 was properly recorded in November (Dr. Cash, Cr. Unearned Revenue), no
entry is needed now. BOC has still not earned the revenue; it won't until it delivers the goods.

0 / 1 point

9.Question 9
Which item would not appear on the Income Statement?

SG&A Expense

Operating Income

Pre-tax Income

Gross Profit

Dividends

Incorrect
On the Income Statement.
0 / 1 point

10.Question 10
Which of the following are temporary accounts? (check all that apply)

Dividends Payable

Cost of Goods Sold

Correct
Appears on the Income Statement and, thus, is a temporary account.

Income Tax Expense

Correct
Appears on the Income Statement and, thus, is a temporary account.

Retained Earnings

Sales Revenue

Correct
Appears on the Income Statement and, thus, is a temporary account.

1 / 1 point