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UNCC ACCT 2121 - Accounting 2121 Exam 2

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Acct 2121 BAP Exam 2 Review Page 1 of 8 Beta Alpha Psi Practice Questions Accounting 2121 Exam 2 Chapter 4 1. What Principle requires that revenue be recognized in the accounting period in which it is earned? 2. What Principle requires that expenses are matched with revenues and recognized in the period that revenues are earned and recognized? 3. What Assumption divides the economic life of a business into artificial time periods? 4. What type of accounting uses the revenue and expense recognition principles? 5. What is an accrued expense? Give at least one example: What adjusting entry would be required at the end of an accounting period to record the accrued expense? 6. What is an accrued revenue? Give at least one example: What adjusting entry would be required at the end of an accounting period to record the accrued revenue? 7. What is a prepaid expense? Give at least one example: What adjusting journal entry would be necessary to record the amount of the prepaid expense used up (consumed) at the end of an accounting period? 8. What is an unearned revenue? Give at least one example: What adjusting journal entry would be necessary to record the amount of the unearned revenue that has been earned at the end of an accounting period?Acct 2121 BAP Exam 2 Review Page 2 of 8 9. Match the following terms with their definitions: a. Accrual-basis accounting b. Accrued expenses c. Accrued revenues d. Adjusting entries e. Cash-basis accounting f. Depreciation g. Matching principle h. Prepaid expenses i. Revenue recognition principle j. Time period assumption k. Unearned revenues Cash received before a company earns revenues and recorded as a liability until earned. Expenses incurred but not yet paid in cash or recorded. The principle that dictates that companies match efforts (expenses) with accomplishments (revenues). An assumption that the economic life of a business can be divided into artificial time periods. Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company’s financial statements, rather than in the periods in which the company receives or pays cash. Revenues earned but not yet received in cash or recorded. The principle that companies recognize revenue in the accounting period in which it is earned. Entries made at the end of an accounting period to ensure that the revenue recognition and matching principles are followed. Accounting basis in which a company records revenue only when it receives cash, and an expense only when it pays out cash. The process of allocating the cost of an asset to expense over its useful life. Expenses paid in cash and recorded as assets before they are used or consumed. 10. We perform $5,000 of services for a customer as part of a larger job. Assuming no entries have been made and no cash has been collected, what adjusting entry should be made at the end of the period? (For each account indicate the type of account - A, L, SE, R, E) 11. In the previous month, we purchased a recurring TV ad for $10,000. It will run 20 times. Assume all of the correct entries were made in the previous month to reflect this transaction. During the current month, the ad ran 4 times. What entry (if any) should be recorded this month? (For each account indicate the type of account - A, L, SE, R, E)Acct 2121 BAP Exam 2 Review Page 3 of 8 12. We purchased an insurance policy this month that was for a full year coverage starting next month for $24,000. We paid cash at the time of purchase. What entry should be recorded to reflect this transaction? (For each account indicate the type of account - A, L, SE, R, E) 13. We sold $7,000 of gift cards last month. All the proper entries were made last month to record these sales. This month $3,000 of gift cards were redeemed for services provided. What entry (if any) should be recorded this month? (For each account indicate the type of account - A, L, SE, R, E) 14. Dogs Day Out, a dog grooming service, started business on September 1, 2020. The unadjusted trial balance at September 30 is as follows. DOGS DAY OUT (Unadjusted) Trial Balance September 30, 2020 Debit Credit Cash 12,500 Accounts Receivable 7,000 Prepaid Rent 6,000 Supplies 1,000 Office Equipment 30,000 Accumulated Depreciation Accounts Payable 3,300 Salaries Payable Utilities Payable Notes Payable 10,000 Interest Payable Unearned Service Revenue 5,500 Common Stock 22,000 Service Revenue 30,000 Depreciation Expense Insurance Expense 300 Interest Expense Rent Expense Salaries Expense 14,000 Supplies Expense Utilities Expense 70,800 70,800 Additionally, the chart of accounts for Dogs Day Out includes contains the following accounts: Accumulated Depreciation—Office Equipment, Interest Payable, Utilities Payable, Salaries Payable, Depreciation Expense, Interest Expense, Rent Expense, Utilities Expense, and Supplies Expense.Acct 2121 BAP Exam 2 Review Page 4 of 8 #14 (Continued) Other data: 1. Supplies on hand at September 30 total $480. 2. A utility bill for $150 has not been recorded and will not be paid until next month. 3. The prepaid rent covers September 2020 through February 2021. 4. $2,000 of unearned service revenue has been earned at the end of the month. 5. Salaries of $2,700 are accrued at September 30. 6. The office equipment has a 5-year life with salvage value of $0 and is being depreciated at $500 per month for 60 months. 7. Invoices representing $3,700 of services performed during the month have not been recorded as of September 30. 8. $70 interest on the Note Payable has accrued. a. Required: Prepare the adjusting journal entries needed at September 30, 2020. b. Required: Prepare the September 30, 2020, adjusted trial balance: Unadjusted Balance Unadjusted Balance Entry Adjusting Entry Adjusting Entry Adjusted Balance Adjusted Balance Account Debit Credit Debit Credit Debit Credit Cash 12,500 Accounts Receivable 7,000 Prepaid Rent 6,000 Supplies 1,000 Office Equipment 30,000 Accumulated Depreciation Accounts Payable 3,300 Salaries Payable Utilities Payable Notes Payable 10,000 Interest Payable Unearned


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