Question 1 During 2010, Yoder Enterprises generated revenues of $60,000. The com
ID: 2379616 • Letter: Q
Question
Question 1
During 2010, Yoder Enterprises generated revenues of $60,000. The company's expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000.
Yoder's income from operations is
$60,000.
$12,000.
$18,000.
$30,000
Question 2
Rusthe Company showed the following balances at the end of its first year:
Cash $7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Denton, Capital 1,400
Denton, Drawing 700
Revenues 21,000
Expenses 17,500
What did Rusthe Company show as total credits on its trial balance?
$30,800
$29,400
$30,100
$28,700
James Corporation purchased a one-year insurance policy in January 2010 for $48,000. The insurance policy is in effect from May 2010 through April 2011. If the company neglects to make the proper year-end adjustment for the expired insurance
Net income and assets will be overstated by $16,000.
Net income and assets will be understated by $16,000.
Net income and assets will be understated by $32,000.
Net income and assets will be overstated by $32,000
Stahl Consulting started the year with total assets of $20,000 and total liabilities of $5,000. During the year, the business recorded $16,000 in catering revenues and $8,000 in expenses. Stahl made an additional investment of $3,000 and withdrew cash of $5,000 during the year. The owner's equity at the end of the year was
$2,000.
$8,000.
$21,000.
$18,000
If a company determines cost of goods sold each time a sale occurs, it
uses a periodic inventory system.
uses a combination of the perpetual and periodic inventory systems.
uses a perpetual inventory system.
must have a computer accounting system
Explanation / Answer
Question 1
During 2010, Yoder Enterprises generated revenues of $60,000. The company's expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000.
Yoder's income from operations is
$60,000.
$12,000.
$18,000.
$30,000
ANSWER: 18,000 (Sales minus COGS minus operating expenses)
Question 2
Rusthe Company showed the following balances at the end of its first year:
Cash $7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Denton, Capital 1,400
Denton, Drawing 700
Revenues 21,000
Expenses 17,500
What did Rusthe Company show as total credits on its trial balance?
$30,800
$29,400
$30,100
$28,700
ANSWER: 29,400 --- AP, NP, Denton, capital, and revenue
James Corporation purchased a one-year insurance policy in January 2010 for $48,000. The insurance policy is in effect from May 2010 through April 2011. If the company neglects to make the proper year-end adjustment for the expired insurance
Net income and assets will be overstated by $16,000.
Net income and assets will be understated by $16,000.
Net income and assets will be understated by $32,000.
Net income and assets will be overstated by $32,000
ANSWER: Net income and assets will be overstated by $32,000
Eight months’ worth of insurance (48,000*8/12) would have expired, and no debit was made to insurance expense or credit to prepaid insurance, so expense was understated, which means net income was overstated, and also the assets were overstated.
Stahl Consulting started the year with total assets of $20,000 and total liabilities of $5,000. During the year, the business recorded $16,000 in catering revenues and $8,000 in expenses. Stahl made an additional investment of $3,000 and withdrew cash of $5,000 during the year. The owner's equity at the end of the year was
$2,000.
$8,000.
$21,000.
$18,000
ANSWER: $21,000
Beginning was 15,000 (20,0000 – 5000), then add 8,000 net income (16,000-8,000), then add 3,000 additional investment and subtract 5,000 withdrawal.
If a company determines cost of goods sold each time a sale occurs, it
uses a periodic inventory system.
uses a combination of the perpetual and periodic inventory systems.
uses a perpetual inventory system.
must have a computer accounting system
ANSWER: uses a perpetual inventory system.
COGS is determined at the end of the period when using periodic
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