ACC120 Midterm Version A - Winter 2011 - Solution

ACC120 Midterm Version A - Winter 2011 - Solution -...

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Question 1 (6 marks) For the business situations listed below, select (circle your choice) the most appropriate of the two associated alternatives in which a business might recognize the revenue according to G.A.A.P. Explain why you think your choice is appropriate. Magazine subscription revenue: Most magazines sell subscriptions for future delivery of the magazines a) period in which the subscription is sold b) periods that the magazines are mailed to customers ( b Revenue is recognized when it is earned without regard to when cash payment for goods or services is received. Revenue would be recognized when the magazines are mailed to the customers . Sales on account: During October, a large metro furniture store advertised “No payments until 2012” a) period in which the furniture was sold b) period in which payments are received from customers (a) Revenue is recognized when it is earned without regard to when cash payment for goods or services is received. The sale would be recognized in the period when the furniture is sold to the customers
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Question 2 (18 marks) Jan. 31 Adjusting Entries Rent Expense 3,000 Prepaid Rent 3,000 (To record rent expired: $9,000/3 months = $3,000) 31 Depreciation Expense 500 Accumulated Depreciation – Newspaper Presses 500 (To record monthly depreciation: $120,000/20 years/12 months = $500) 31 Interest Expense 1,250 Interest Payable 1,250 (To accrue interest on notes payable: $150,000 x 10% x 1/12 = $1,250) 31 Unearned Subscription Revenue Subscription Revenue 45,00 0 45,000 (To record subscription revenue earned: $15 x 3,000 = $45,000) 31 Accounts Receivable 3,000 Subscription Revenue 3,000 (To accrue subscription revenue earned but not billed: $15 x 200 = $3,000) 31 Salaries Expense 3,600 Salaries Payable 3,600 (To record accrued salaries at January 31: $6,000/5days = $1200/day x 3 days = $3,600)
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Question 3 (9 marks) Date Description of Event that took place Nov 1 Wang invested 120000 Cash in the business Nov 8 Purchased land (70000) and Bldg (58600) for Cash (33600) and Note Payable (95000) Nov 15 Purchased Office Equipment on account Nov 21 Made a payment on account Nov 25 Paid $12000 on the Note Payable Nov 30 Bought a vehicle for $9400 – paid $1400 cash and signed a note for the balance
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Question 4 (18 marks) Journal and Ledger 8 marks General Journal J1 Date
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This note was uploaded on 02/24/2011 for the course ACCT 120 taught by Professor Arthurguha during the Spring '11 term at Seneca.

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ACC120 Midterm Version A - Winter 2011 - Solution -...

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