Quiz 2 Mini Calculation Drill
Grab your calculator and work through each problem before revealing the solution!
1 A company earns $24,000 of revenue during September but collects only $16,000 from those services. How much September revenue is reported under accrual accounting? Tap to reveal
Revenue is recognized when earned, regardless of cash collections.
The remaining $8,000 is accounts receivable.
2 A company earns $45,000 in revenue and incurs $28,000 of expenses. It collects $30,000 in cash from customers and pays $19,000 in cash for those expenses. What is net income under accrual accounting? Tap to reveal
$45,000 revenues - $28,000 expenses = $17,000 net income.
Net income is not determined simply by subtracting cash payments from cash receipts.
3 A company receives $12,000 for four months of services, October through January, provided equally each month. How much revenue has it earned by December 31? Tap to reveal
$12,000 / 4 months = $3,000 per month.
Three months have been completed:
$3,000 × 3 = $9,000 earned.
The remaining $3,000 is unearned revenue.
4 A company pays $18,000 for a 12-month insurance policy on October 1. The full amount was initially recorded as prepaid insurance. What is the December 31 adjusting entry? Tap to reveal
$18,000 / 12 = $1,500 per month.
October through December = 3 months.
$1,500 × 3 = $4,500 expired.
Debit insurance expense $4,500.
Credit prepaid insurance $4,500.
Remaining prepaid insurance: $13,500.
5 Before adjustment, supplies has a debit balance of $6,200. A physical count shows $1,750 remaining. What amount of supplies expense must be recorded? Tap to reveal
$6,200 before adjustment - $1,750 remaining = $4,450 used.
Debit supplies expense $4,450.
Credit supplies $4,450.
6 Equipment costs $48,000, has an estimated residual value of $6,000, and has a useful life of seven years. Using straight-line depreciation, what is annual depreciation expense? Tap to reveal
(Cost - residual value) / useful life
($48,000 - $6,000) / 7 = $6,000 per year.
Depreciation increases expense and accumulated depreciation.
7 Equipment costs $50,000. Accumulated depreciation before adjustment is $14,000. Current-period depreciation is $4,000. What is the equipment's net book value after adjustment? Tap to reveal
Updated accumulated depreciation:
$14,000 + $4,000 = $18,000.
Net book value:
$50,000 - $18,000 = $32,000.
8 A company reports $72,000 in revenue, $49,500 in expenses, and $6,000 in dividends. Beginning retained earnings is $15,000. What is ending retained earnings after closing? Tap to reveal
Net income:
$72,000 - $49,500 = $22,500.
Ending retained earnings:
$15,000 + $22,500 - $6,000 = $31,500.
Closing transfers the effects of revenues, expenses, and dividends to retained earnings.