ACCT 2100 Chap 2 Practice Quiz

ACCT 2100 Chap 2 Practice Quiz - ACCT 2100 Chap 2 Practice...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCT 2100 Chap 2 Practice Quiz CORRECT Krakenshield, Inc. experienced several events during its first year of operations as follows:  a. Issued stock in return for $40,000 cash  b. Borrowed $25,000 from a Bank to purchase a plot of land  c. Performed services for $60,000 on account  d. Paid salaries of $10,000  e. Collected $48,000 of the accounts receivable  f. Paid advertising bill of $16,500  g. Recorded $10,000 of accrued salaries at the end of the period  h. Paid a $5,000 cash dividend to owners. The amount of income that Krakenshield should report on its year ending Income Statement is: A) $18,500 B) $6,500 C) $23,500 D) $28,500 Feedback:  In the accrual basis of accounting, we recognize income when it is earned, i.e. when the work is performed,  not when the money changes hands. Likewise, we recognize expenses when the benefit is received or the  obligation arises, not when the money changes hands. Dividends are not an expense of operation, but are  paid through Retained Earnings.  LO: LO 1, 2, 3 CORRECT Using the same information given in #1 above, what would be the cash balance shown on  Krakenshield's year ending Balance Sheet? A) $56,500 B) $78,500 C) $66,500 D) None of the Above Feedback:  The activities that affect the cash balance of the company were the issuance of stock, the bank borrowing,  the purchase of the land, the collection of monies owed from services, the payment of salaries, the  payment of the advertising bill, and the payment of dividends. (40,000 + 25,000 – 25,000 – 10,000 + 48,000 –  16,500 – 5,000)$56,500. The actual provision of the services was on account, while the salaries owed at the  end of the year were not actually paid.  LO: LO 1, 2, 3 CORRECT The following events took place in 2009, the first year of operations for Ravenspear, Inc.:  a. Acquired $44,000 from the sale of common stock  b. Paid $24,000 in advance, on April 1 for a one year lease on office space  c. Purchased $16,400 in office supplies on account 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/05/2012 for the course ACCT 2100 taught by Professor Smith during the Spring '08 term at Kennesaw.

Page1 / 4

ACCT 2100 Chap 2 Practice Quiz - ACCT 2100 Chap 2 Practice...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online