• Multiple choice (5 pts each) (highlight or clearly mark your answer)

1.Land is purchased by a business for $100,000. The company pays for the land by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is net effect of this transaction on the business's accounting equation?

a. Assets increase by $100,000; liabilities increase by $80,000.

b. Assets increase by $100,000; expenses increase by $20,000; liabilities increase by $80,000.

c. Assets increase by $80,000; liabilities increase by $80,000.

d. Assets increase by $100,000; liabilities increase by $100,000.

2. Which of the following is a collection of all the accounts, the changes in those accounts, and their balances?

a. source document

b. journal

c. ledger

d. trial balance

3. An expense that has been incurred but not yet paid is called a(n):

a. accrued revenue.

b. prepaid expense.

c. unearned revenue.

d. accrued expense.

4. The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash is called the:

a. production time.

b. operating cycle.

c. accounting cycle.

d. sales time.

5. Which of the following accounts are included in an income statement?

a. Land, Salaries Payable

b. Owner's Name, Capital, Owner's Contribution

c. Furniture, Cash

d. Service Revenue, Utilities Expense

Which of the following is an example of an intangible asset?

a. Equipment

b. Plant

c. Property

d. Copyright

• Problems (10 pts each) (please show your work for partial credit)

1.The balances of select accounts of Sandra Company as at December 31, 2015 are given below:

	Debit	Credit
Building	$120,000
Cash	5,000
Office Supplies	700
Furniture	3,000
Prepaid Insurance	450
Accumulated DepreciationFurniture		$1,000
Land	35,000
Accumulated DepreciationBuilding		4,800
Accounts Receivable	2,500

The insurance has been prepaid for the next half year. What are the total current assets that would be shown on the balance sheet?

2. Viva Inc. had bought machine X for $15,500 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight line depreciation method, calculate the current book value of the machine.

3. Henry Tax Planning Service bought production equipment for $9,600 on January 1, 2015. It has an estimated useful life of 5 years and zero residual value. Henry uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2015, the book value of this equipment shown on Henry's balance sheet will be:

4. Real Weight Losers, a diet magazine, collected $480,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. Provide the adjusting entry needed on June Assume the magazine initially records a liability for the subscription revenue.

On July 1, Alpha Company prepaid rent for a small equipment storage area. They paid $20,000 to rent the area for the period of July 1 through the end of the year. Provide the journal entry needed on July 1 when the payment is made. Assume the prepaid expense is initially recorded as an asset.

Luminous Electrical Repair performed services costing $8,000 on January 24 and invoiced the customer. Luminous received the $8,000 on January 31. Provide the journal entry on January 31 when the cash was received.

On January 1, 2015, the Accounts Receivable of Linda Company had a debit balance of $20,000. During January, the company provided services for $600,000 on account. The company collected $250,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at the end of January?