Method Of Accounting Chapter 3

Debit unearned rent revenue 1800, credit rent revenue 1800

Debit cash 900, credit rent revenue 900

Debit unearned rent revenue 900, credit rent revenue 900

Debit rent revenue 900, credit unearned rent revenue 900

Debit supplies expense 1,100

Credit supplies 400

Debit supplies 400

Debit supplies 1,100

Assets and expenses are understated; net income is understated

Net income is overstated and liabilities are understated

Assets, net income, and stockholders' equity are overstated

Assets are overstated; stockholders' equity and net income are understated

Debit interest receivable, credit interest revenue

Debit interest payable, credit interest expense

Debit interest expense, credit cash

Debit interest expense, credit interest payable

Liabilities are overstated, and owners' equity is understated

Assets are understated, and net income is understated

Net income is understated, stockholders equity is overstated

Revenues are understated, and net income is overstated

The expense recognition principle directs accountants to identify and measure all expenses incurred and deduct them from revenues earned during the same period

Accrual accounting produces better information than cash-basis accounting

A fiscal year ends on some date other than Dec 31

Adjusting entries are required for a business that uses cash basis

Revenue

Asset

Liability

Expense

Accrued expense

Prepaid expense

Depreciation expense

Cash expense

Service revenue has a debit balance

Accumulated depreciation has a credit balance

Salary expense has a debit balance

All of the above are correct

Debit Management Fee Revenue, credit retained earnings

Management Fee Revenue does not need to be closed

Debit retained earnings, credit management fee revenue

Debit management fee revenue, credit service revenue

Dividend

Interest revenue

Accumulated depreciation

Depreciation expense

Improves the current ratio and hurts the debt ratio

Hurts the current ratio and improves the debt ratio

Improves both

Hurts both

When the cash is collected

When the sale is made

Either when the cash is received or the sale is made

At a time that cannot be determined from the facts

The 2010 income statement

The 2011 income statement

Neither the 2010 nor 2011 income statement

Both statements

0

5,000

10,000

15,000