Section_Problem_Set_3_solution

Section_Problem_Set_3_solution - AEM 221 Section#3*TA...

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AEM 221 Section #3 **TA ANSWER KEY!!!** Name: Section: Multiple Choice 1 . During 2007, Sigma Company earned service revenues amounting to $700,000, of which $630,000 was collected in cash; the balance will be collected in January 2008. The 2007 income statement of the company should report the following amount for service revenues A) $ 630,000. B) $ 700,000 . C) $ 70,000. D) $1,330,000. E) None of the above is correct. 2 . When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following is the effect on the equation A) cash decreases by $20,000 B) equipment increases by $60,000 C) liabilities increase by $40,000 D) total assets increase by $40,000 E) all of the above effects occur on the equation 3. Abrahams Corporation reported the following amounts at the end of the first year of operations, December 31, 20A: contributed capital $50,000; sales revenue $200,000; total assets $150,000; $10,000 dividends; and total liabilities $80,000. Retained earnings and total expenses would be A) retained earnings $20,000 and expenses $170,000 B) retained earnings $30,000 and expenses $160,000. C) retained earnings $70,000 and expenses $120,000. D) retained earnings $80,000 and expenses $110,000 E) None of the above. 4 . On January 1, 20B, the ledger of Global Corporation correctly showed supplies inventory of $500. During 20B, supplies purchases amounted to $1,200. A count (inventory) of supplies on hand at December 31, 20B, showed $600. The 20B income statement should report supplies expense amounting to A) $ 1,200. B) $ 1,100. C) $ 800. D) $ 600. E) None of the above is correct.
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5 . On January 1, 20D, Wilkins Company purchased a delivery truck that cost $50,000. Cash of $15,000 was paid, and the balance of $35,000 was payable on January 31, 20E. The truck has an estimated useful life of four years and no residual value. Considering only these facts, depreciation expense (assume straight line depreciation on the truck) for 20D, would be A) $12,500. B) $15,000. C) $ 3,750. D) $ 8,750. E) None of the above is correct. Problem 1. A . The following transactions took place in December, 2003 . For each transaction indicate the account titles that are affected and the type of account (ie. Asset, Liability, Shareholders Equity, Revenue or Expense) . If a revenue is to be recognized in December, indicate the amount. If no revenue is to be recognized, explain which of the revenue recognition criteria was not met. Transaction Accounts Affected and Type of Account Amount of Revenue Earned in December OR Revenue Criteria Not Met Dec 4 - Jason Co. sold merchandise for $4,000 cash. Jason Company paid $3,000 for the merchandise in October. Sales Rev. (Rev) COGS (EXP) Inventory (Asset) Cash (asset) $4,000 Dec 10 - Jason Co. sold merchandise to customers for $7,000, on account. Jason Co. paid $4,000 for the merchandise in October. Sales Rev (Rev) COGS (exp) Inventory (asset) Accounts Receivable (asset) $7,000 Dec 16 - Jason Co. received an order for $5,000 worth of merchandise at a cost of $3,000.
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