Final Review Combined F

According to the accrual basis accounting system, expenses should be recognized when they are incurred, regardless of when the payment is made. In this case, the Corner Dress shop incurs $200 in advertising expenses during May, even though only $150 is paid during that month. Therefore, the correct answer is $200.

The correct answer is "interest" because interest refers to the amount of money that is charged for borrowing or lending money. It is the cost of borrowing money and is typically expressed as a percentage of the principal amount. The interest rate is determined by factors such as the borrower's creditworthiness, the length of time the money is borrowed for, and the prevailing market rates. Therefore, interest is the correct term to describe the cost of borrowing money.

Corporation is the correct answer because it is a form of business ownership that controls the majority of business resources in the United States. Corporations have the ability to raise large amounts of capital through the sale of stocks and bonds, allowing them to acquire significant resources. Additionally, corporations have a separate legal entity from their owners, which provides limited liability protection and allows for perpetual existence, further contributing to their control over business resources.

Authorized shares refer to the maximum number of shares of stock that a corporation is legally allowed to sell. These shares are determined and stated in the corporation's articles of incorporation. It is important to note that authorized shares do not necessarily represent the actual number of shares that have been issued or are outstanding. Instead, they serve as a limit or ceiling for the corporation's potential stock sales.

Cash is never affected by an adjusting entry because it represents the actual cash on hand or in the bank. Adjusting entries are made to update accounts for accrued expenses, prepaid expenses, accrued revenues, and unearned revenues. These entries are necessary to ensure that the financial statements accurately reflect the company's financial position. However, cash is not subject to these adjustments as it represents the actual cash transactions that have already occurred.

Sharing of profits is considered a disadvantage of the partnership form of business because it means that the partners have to divide the profits among themselves, reducing the individual share of each partner. This can be seen as a disadvantage compared to other forms of business where the owner retains all the profits. Additionally, the sharing of profits can also lead to conflicts and disagreements among the partners regarding the distribution of the profits.

Liabilities refer to the probable future sacrifices of economic benefits that arise from present obligations of a particular entity. These obligations can be in the form of debts, loans, or other responsibilities that the entity has to fulfill. Liabilities are an important element in accounting as they represent the company's obligations and can have a significant impact on its financial health and performance.

When Merinda takes $5,000 out of her personal savings account and deposits it into a business bank account, it increases the assets of her business by $5,000. This is because the money in the business bank account is now considered an asset of the business. At the same time, the owners' equity of the business also increases by $5,000. This is because Merinda contributed her personal savings to the business, which increases her ownership stake or equity in the business. Therefore, the accounting equation shows that $5,000 in assets equals $5,000 in owners' equity for her business.

If a bond is sold at par value for $1,000, it means that the bond is being sold for its face value. In this case, the bond will have to be redeemed for the same amount that it was sold for, which is $1,000. Therefore, $1,000 will have to be paid to redeem the bond on its maturity date.

When a bond sells for 102, it means that the bond is being sold at a price higher than its face value. A premium is the amount by which the bond's price exceeds its face value. Therefore, in this case, the bond is being sold at a premium.

The depreciation expense is calculated by subtracting the expected salvage value ($12,000) from the initial cost of the bus ($45,000 + $3,000 = $48,000) and dividing it by the useful life of the bus (5 years). Therefore, the depreciation expense per year under the straight-line method is ($48,000 - $12,000) / 5 = $7,200.

Treasury stock refers to the shares of a company's own stock that it has repurchased from the shareholders. When a company repurchases its own shares, those shares are no longer considered outstanding, which means they are no longer held by the public or available for trading. Therefore, treasury stock causes the number of shares outstanding to be less than the number of shares issued.

If the residual value of the asset is estimated to be $2,000 instead of $4,000, the difference in depreciation expense each year using the straight-line method would be $500. This is because the depreciation expense is calculated by subtracting the residual value from the initial cost of the asset and then dividing it by the useful life. So, with a residual value of $2,000, the annual depreciation expense would be $2,000 ($10,000 - $2,000) divided by 4 years, resulting in $500 per year.

An unqualified opinion is the opinion issued by the auditor when they conclude that the financial statements of a company are presented fairly and in accordance with the applicable accounting standards. This opinion is also referred to as a "clean" opinion because it implies that there are no material misstatements or issues found during the audit. It signifies that the auditor has full confidence in the accuracy and reliability of the financial statements, providing assurance to stakeholders and users of the financial information.

An audit is a thorough examination of a company's financial records to ensure that they have been prepared in accordance with Generally Accepted Accounting Principles (GAAP). During an audit, an independent auditor reviews the company's financial statements, internal controls, and supporting documentation to provide assurance to stakeholders that the financial information is accurate and reliable. Therefore, the correct answer for the given question is "audit".

Under an accrual basis system of accounting, expenses are recognized when they are incurred, regardless of when they are paid. In this case, Baaker Auto Body Repair incurred the electricity expense in February, even though they paid for it in March. Therefore, Baaker will recognize $200 as an expense in February.

When a bond is sold below its par value, it means that it is sold at a price lower than its face value. The difference between the selling price and the face value is called the discount. The discount represents the amount by which the bond's price is discounted or reduced. This occurs when the bond's interest rate is lower than the prevailing market interest rate, making it less attractive to investors. As a result, the bond is sold at a discount to compensate for the lower interest payments.

The balance sheet is also known as the statement of financial condition and the statement of financial position. These terms are used interchangeably to refer to the same financial statement that provides a snapshot of a company's financial health at a specific point in time. It presents a summary of a company's assets, liabilities, and shareholders' equity, allowing stakeholders to assess its financial stability and performance.

Accrual accounting attempts to establish a relationship between revenues and expenses by matching them. Matching refers to the practice of recording revenues and the expenses associated with generating those revenues in the same accounting period. This ensures that the financial statements accurately reflect the financial performance of a company during a specific period of time. By matching revenues and expenses, accrual accounting provides a more accurate representation of a company's profitability and helps in making informed financial decisions.

JML will recognize $125 as "Additional paid-in capital" from the sale. This is calculated by subtracting the par value of the stock ($3) from the total amount paid for the shares ($275). In this case, $3 multiplied by 50 shares equals $150, so $275 - $150 = $125.

A partnership is a business structure where two or more individuals come together to carry out a business venture. Unlike a sole proprietorship, where there is only one owner, a partnership allows for multiple owners to share the responsibilities, profits, and losses of the business. In a partnership, each partner contributes resources and expertise to the business, and they all have a say in decision-making. Additionally, a partnership offers limited liability to its owners, meaning that their personal assets are protected in case of any business debts or liabilities.

The balance sheet is a financial statement that provides a snapshot of a company's financial condition at a specific point in time. It shows the company's assets, liabilities, and shareholders' equity, which together represent the present condition of the business. By analyzing the balance sheet, stakeholders can evaluate the company's liquidity, solvency, and overall financial health. It does not focus on past performance or predictive value, but rather provides a current assessment of the company's financial position.

When calculating the amount of depreciation expense for an asset, two items that will be estimated are the useful life and the residual value. The useful life refers to the expected period of time that the asset will be used by the company before it becomes obsolete or no longer useful. The residual value, on the other hand, represents the estimated value of the asset at the end of its useful life. These two factors are important in determining the depreciation expense, as they help in allocating the cost of the asset over its useful life.

In calculating the straight-line depreciation of an asset, estimating repairs and maintenance costs is not a step. The straight-line depreciation method focuses on estimating the useful life of the asset, determining its initial cost, and estimating its residual value. Repairs and maintenance costs are not directly related to the depreciation calculation, as they are expenses incurred to keep the asset in good working condition and do not affect its value over time.

The correct answer is "drawings". In the context of proprietorships and partnerships, the distributions made to the owners are referred to as drawings. This term is used to indicate that the owners are taking out funds from the business for personal use. It is different from dividends, which are typically associated with corporations. Sketches are unrelated to this concept, and net income refers to the overall profit earned by the business after deducting expenses.

The income statement is a financial statement that shows a company's revenues and expenses over a specific period of time. Revenues represent the income generated from the sale of goods or services, while expenses are the costs incurred in the process of generating that revenue. By subtracting expenses from revenues, we can calculate the net income or net loss of the company. Therefore, the correct answer is "revenues; expenses".

Expenses refer to the economic sacrifices that a business incurs in order to operate. These sacrifices can include costs for materials, labor, rent, utilities, and other necessary expenditures. By subtracting expenses from revenue, a business can determine its net income, which represents the amount of profit or loss generated. Owners' equity, on the other hand, refers to the residual interest in the assets of a business after deducting liabilities. Therefore, expenses are the correct answer as they represent the economic sacrifices made by a business.

The correct answer is $1,000 loss. This is because the truck was originally purchased for $15,000 but has accumulated depreciation of $11,000, meaning its current value is $4,000 ($15,000 - $11,000). If ADC sells the truck for $3,000, they will be selling it for less than its current value, resulting in a loss of $1,000 ($4,000 - $3,000).

The correct answer is accrued expense because the utility bill was received on February 3 for electricity used during January. This means that the expense was incurred in January but not yet paid, so it should be recognized as an accrued expense.

The weakness of the accrual basis system is that it focuses on recording transactions when they occur, regardless of when the cash is received or paid. This can lead to a discrepancy between the reported income and the actual cash flow. The Statement of Cash Flows addresses this weakness by providing information on the actual cash inflows and outflows during a specific period. It reconciles the net income reported on the Income Statement with the cash generated or used by the business, providing a more accurate picture of the company's cash position.

The residual value of an asset is the estimated amount that it will be worth at the end of its useful life. In this case, the cash register was purchased for $2,500 and it is estimated to be worth $400 after five years. Therefore, the residual value of the cash register is $400.

When a company pays off a bond issue, it is considered a financing activity. This is because bonds are a form of long-term debt that the company has taken on to finance its operations. By paying off the bond, the company is reducing its debt and therefore engaging in a financing activity. Operating activities refer to the day-to-day activities of the company, investing activities involve the acquisition or sale of long-term assets, and continuing activities is not a recognized category in accounting.

If the machine was purchased for $40,000 and had a residual value of $5,000, the depreciable cost would be $40,000 - $5,000 = $35,000. Since the machine has a useful life of 5 years, the annual depreciation expense would be $35,000 / 5 = $7,000.

If the machine is sold on January 1, 2008, after 3 years of use, the accumulated depreciation would be 3 * $7,000 = $21,000.

Since the machine was sold for $15,000, the loss on the sale would be $15,000 - $21,000 = $4,000. Therefore, the correct answer is $4,000 loss.

The correct answer is $5,571. This can be calculated by subtracting the expected salvage value ($6,000) from the initial cost ($40,000), and then dividing the result by the number of years of use (7). This gives us an annual depreciation expense of $5,571.

The income statement is a financial report that shows the revenue earned and expenses incurred during a specific period, and calculates the net income by subtracting expenses from revenue. It provides an overview of a company's profitability and helps assess its financial performance. The statement of financial position (also known as the balance sheet) provides information about a company's assets, liabilities, and equity at a specific point in time. The statement of cash flows, on the other hand, shows the inflows and outflows of cash during a specific period.

In a sole proprietorship, there is only one owner, so there is only one capital account representing the owner's equity. On the other hand, in a partnership, there are multiple owners, and each owner has their own capital account. Therefore, a partnership has more than one capital account in its owners' equity section, which is the main difference between the owners' equity section of a sole proprietorship and a partnership.

When Tami and Sue each deposit $6,500 from their personal bank accounts into the business bank account, the accounting equation for the partnership would show $13,000 in assets (cash) on one side, and $13,000 in total owners' equity (capital) on the other side. This is because the money deposited becomes an asset of the partnership, and since they are equal partners, their individual capital contributions add up to the total owners' equity of $13,000.

The correct answer is $10,000. Double-declining-balance depreciation is a method where the asset is depreciated at a faster rate in the early years and then slows down over time. In the first year, the depreciation expense is calculated by taking the straight-line depreciation rate (1/10) and doubling it (2/10), and then applying it to the initial cost of the machine ($50,000). This gives us a depreciation expense of $10,000 for the first year.

A limited partner in a limited partnership is "limited" in terms of liability. This means that their personal assets are protected and they are not personally responsible for the debts and obligations of the partnership beyond their initial investment. They are not personally liable for any losses or legal actions taken against the partnership, which provides them with a level of protection and reduces their risk in the business.

Issued stock refers to the shares of stock that a corporation has already distributed to stockholders in exchange for cash or other assets. This means that these shares have been issued to investors and are currently held by them. The term "issued stock" differentiates these shares from authorized stock, which refers to the total number of shares that a corporation is legally allowed to issue, and treasury stock, which refers to shares that the corporation has repurchased from stockholders. Investment stock is not a commonly used term in this context.

When common stock does not have a par value, any amount received in excess of the stock's market value is classified as "Additional Paid-in Capital - Common". This means that the excess amount is recorded as additional capital contributed by shareholders. Since there is no par value, there is no need to separate this additional capital into a separate classification on the balance sheet. Therefore, the classification "Additional Paid-in Capital - Common" is not required in this case.

The excess of the rewards over the sacrifices for a given time period refers to the monetary reward of doing business. This can be referred to as net earnings, earnings, or net profit. All of these terms essentially mean the same thing and can be used interchangeably to describe the financial gain from conducting business activities.

The correct answer is that gross margin highlights the relationship between sales revenue and cost of goods sold. Gross margin is a key metric that indicates how efficiently a company is generating revenue from the sale of its products. It represents the amount of money left after subtracting the cost of producing those products from the total sales revenue. By analyzing the gross margin, investors and analysts can assess the profitability and pricing strategy of a company.

Revenue is the correct answer because it refers to the inflow of resources that a business receives when it delivers services to a customer. Revenue is generated from the sales of goods or services and is considered as an asset for the business. It represents the income earned by the business and contributes to its profitability.

Solvency ratios are used to assess a company's ability to meet its long-term debt obligations. These ratios provide insight into the company's financial stability and its capacity to repay its debts. By analyzing solvency ratios, investors and creditors can evaluate the risk associated with lending money to the company. This information helps them determine whether the company has enough assets and cash flow to cover its long-term liabilities, ensuring that it can honor its financial obligations in the future.

The par value of a bond refers to the amount that the issuer promises to repay the bondholder upon maturity. It is the face value or principal amount of the bond, which is typically set at the time of issuance. The par value is important because it determines the amount that the bondholder will receive when the bond reaches its maturity date. It is not influenced by factors such as market conditions or interest rates, unlike the bond's discount or premium. Interest, on the other hand, refers to the periodic payments made to bondholders as a form of compensation for lending money.

The correct answer is $4,800. Straight-line depreciation is calculated by taking the initial cost of the machine ($50,000) and subtracting the estimated salvage value ($2,000), then dividing the result by the useful life of the machine (10 years). In this case, the calculation would be: ($50,000 - $2,000) / 10 = $4,800. Therefore, The Tool Box will depreciate the machine by $4,800 each year.

The ownership interest in a company can be referred to as equity, net assets, or net worth. All of these terms are used interchangeably to represent the value of the company that belongs to the owners or shareholders.

The expense for the second year will be $10,000. This is because the double-declining-balance depreciation method is being used, which means that the asset is depreciated at twice the rate of straight-line depreciation. The initial cost of the truck is $40,000, and the depreciation rate is 1/6 (since the truck will be used for 6 years). In the first year, the depreciation expense would be $40,000 * (2/6) = $13,333. In the second year, the remaining book value of the truck is $40,000 - $13,333 = $26,667. Applying the same depreciation rate, the expense for the second year would be $26,667 * (2/6) = $8,889. However, since the double-declining-balance method does not consider the residual value of $6,000, the expense is adjusted to $8,889 + ($26,667 - $6,000) = $10,000.

The correct answer is $4,000. This is because the question states that Cold Storage will use straight-line depreciation to recognize the appropriate cost of the truck each income statement period. Straight-line depreciation evenly distributes the cost of the asset over its useful life. In this case, the truck was purchased for $24,000 and is estimated to have a value of $4,000 at the end of its useful life, which is five years. Therefore, the annual depreciation expense would be ($24,000 - $4,000) / 5 = $4,000.

The dividend per share will be $1.00. This can be calculated by dividing the total dividend of $10,000 by the number of shares outstanding, which is 10,000. $10,000 divided by 10,000 equals $1.00.

The correct answer is investing activities. In the statement of cash flows, investing activities refer to the buying and selling of long-term assets such as stocks and bonds of other companies. This includes the purchase and sale of equity securities and debt securities, as well as any income generated from these investments. It is important to distinguish investing activities from other categories such as operating activities, which involve the day-to-day operations of the company, financing activities, which involve the raising and repayment of capital, and continuing activities, which encompass both operating and financing activities.

The par value of a stock multiplied by the number of shares issued is classified as stock on the balance sheet. Any amount received in excess of the stock's par value is classified as additional paid-in capital or paid-in capital in excess of par. Both options A and B are correct because they refer to the same concept of the excess amount being classified as additional paid-in capital. Reinvested earnings, on the other hand, refer to profits that are retained and reinvested back into the company, which is not relevant to this question.

Reneta's CDs purchased a new cash register for $2,700 and plans to use it for three years before disposing of it for an estimated $300. The double-declining-balance method is a depreciation method that allows for a higher depreciation expense in the earlier years of an asset's life. In this case, the cash register has a total cost of $2,700 and a useful life of three years. To calculate the depreciation expense for the first year, we need to determine the depreciation rate. The formula for the double-declining-balance method is 2 x (1/Useful life). In this case, the depreciation rate is 2 x (1/3) = 2/3 or 0.67. The depreciation expense for the first year is the depreciation rate multiplied by the initial cost of the asset, which is $2,700 x 0.67 = $1,809. However, since the asset's estimated value at the end of its useful life is $300, the depreciation expense cannot exceed the remaining book value of the asset. Therefore, the depreciation expense for the first year will be $2,700 - $300 = $2,400.

The depreciation expense for the first year under the double-declining-balance method can be calculated by taking the initial cost of the bus ($45,000) and subtracting the expected salvage value ($12,000). This gives us a depreciable cost of $33,000.

Next, we calculate the depreciation rate by dividing 2 by the useful life of the asset (5 years). This gives us a depreciation rate of 40%.

Finally, we multiply the depreciable cost by the depreciation rate to find the depreciation expense for the first year.

$33,000 * 40% = $13,200

However, the double-declining-balance method allows for double the straight-line rate, so we multiply the depreciation expense by 2.

$13,200 * 2 = $26,400

Therefore, the correct answer is $19,200.

The correct answer is assets = liabilities + owners' equity. This equation represents the fundamental accounting equation, which states that the total assets of a company are equal to the sum of its liabilities and owners' equity. In other words, it shows that the sources of financing for the assets are the liabilities (debt) and owners' equity (investment by owners). This equation is used as the basis for preparing a balance sheet, which provides a snapshot of a company's financial position at a specific point in time.

Under accrual accounting, expenses are recognized when they are incurred, regardless of when they are actually paid. In this case, the Cold Storage Company paid $11,000 in wages for January, but it also owes an additional $2,500 for work done during January that has not yet been paid. Therefore, the total wage expense for January is the sum of the amount paid ($11,000) and the amount owed ($2,500), which equals $13,500.

The equation mentioned in the question, "revenues - expenses = net loss" and "revenues - expenses = net income," both represent the relationship among the accounting elements found on the income statement. The income statement calculates the net income or net loss by subtracting expenses from revenues. Therefore, both answer A and B are correct as they accurately represent this relationship.

The company's gross profit margin ratio can be calculated by subtracting the cost of goods sold from the net sales and dividing the result by the net sales. In this case, the gross profit is $750,950 - $330,418 = $420,532. Dividing this by the net sales of $750,950 gives a ratio of 0.56 or 56%.

Corporations are the form of business that transacts more business than the other business forms combined. This is because corporations have the ability to raise large amounts of capital through the sale of stocks and bonds, allowing them to expand and conduct business on a larger scale. Additionally, corporations offer limited liability protection to their shareholders, which attracts investors and encourages business growth. As a result, corporations have become the dominant form of business in terms of size and revenue generation.

If the auditor is unable to obtain sufficient evidence from the company to form an opinion on the financial statements, they will issue a disclaimer. This means that they are unable to express an opinion on the accuracy and fairness of the financial statements. It indicates a lack of assurance and highlights the limitations of the audit.

Under the straight-line method of depreciation, the cost of the asset is spread evenly over its useful life. In this case, the asset was acquired for $5,000 and will be used for four years before being sold for $500. To calculate the annual depreciation, we subtract the salvage value ($500) from the cost ($5,000) and divide it by the useful life (4 years). Therefore, the annual depreciation will be $1,125.

Outstanding shares refer to the total number of shares of a company's stock that are currently held by shareholders. These shares have been issued by the company and are in the hands of investors. Outstanding shares represent the ownership stake in the company and are used to calculate various financial metrics such as earnings per share and market capitalization. The term "outstanding" implies that these shares are actively traded and not held by the company itself (treasury stock) or available for issuance (authorized shares).

The total accumulated depreciation for the asset would be a difference between the straight-line and double-declining-balance methods. This is because the double-declining-balance method results in higher depreciation expenses in the earlier years of the asset's life, leading to a higher total accumulated depreciation compared to the straight-line method. The other options - accumulated depreciation in each year, net income in each year, and depreciation expense in each year - would all be differences between the two methods.

The annual depreciation expense of the grill using the straight-line method can be calculated by dividing the initial cost of the grill ($5,000) minus the estimated salvage value ($500) by the useful life of the grill (4 years). This gives us ($5,000 - $500) / 4 = $1,125. Therefore, the correct answer is $1,125.

Since the double-declining-balance depreciation method is being used, the depreciation expense each year will be higher in the earlier years and decrease over time. The annual depreciation expense can be calculated by dividing the initial cost of the asset ($40,000) by the useful life (5 years) and then multiplying it by 2. For the first year, the depreciation expense would be $16,000 (40,000/5 * 2). For the second year, it would be $9,600 (24,000/5 * 2). Therefore, by January 1, 2007, the accumulated depreciation would be $25,600 (16,000 + 9,600). Since the asset is sold for $26,000, there is a gain of $400 ($26,000 - $25,600). However, since the residual value is estimated to be $5,000, there is an additional gain of $6,000 ($5,000 - $0) due to the difference between the selling price and the residual value. Therefore, the total gain is $11,600 ($400 + $6,000).

Under a cash basis system of accounting, expenses are recognized when they are paid. Since Sanford and Son's Auto Repair pays for the supplies in March, the expense of $200 will be recognized in March only.

Financial statement analysis involves examining the different items and amounts in financial statements to understand their relationships and implications. It is a process of evaluating the financial health and performance of a company by analyzing its financial statements, such as the balance sheet, income statement, and cash flow statement. This analysis helps in assessing the company's profitability, liquidity, solvency, and efficiency. It is a crucial tool for investors, creditors, and managers to make informed decisions and understand the overall financial position of a company.

Tran-Can Products will realize a $200 gain if they sell the equipment for $1,200. This is because the current accumulated depreciation of $4,000 is subtracted from the original purchase price of $5,000, resulting in a net book value of $1,000. Since the equipment is sold for $1,200, Tran-Can Products will make a profit of $200.

Paid-in capital refers to the amount of money that shareholders invest in a corporation in exchange for shares of stock. It represents the initial capital contribution made by shareholders to the company and is recorded in the stockholders' equity section of the balance sheet. Retained earnings, on the other hand, represent the accumulated profits of the corporation that have not been distributed to shareholders as dividends. Dividends are the payments made to shareholders as a distribution of profits. Reinvested earnings are the retained earnings that are reinvested back into the business for future growth and expansion.

The partnership form of business enterprise has the advantage of ease of formation. This means that it is relatively simple and straightforward to establish a partnership compared to other forms of business entities. Partnerships do not require complex legal procedures or extensive documentation, making it a convenient option for individuals looking to start a business together. This ease of formation allows partners to quickly establish their business and begin operations without significant delays or bureaucratic hurdles.

The answer suggests that smart financial statement users are not overly concerned about gains or losses associated with the disposal of depreciable assets. This implies that they understand that gains and losses from asset sales are a normal part of business operations and do not necessarily indicate the overall financial health of the company. They are able to look beyond these gains and losses and consider other factors when evaluating a company's financial performance.

The ratio that is computed by taking total assets and dividing them by total liabilities is called the debt ratio. This ratio helps to assess the financial leverage of a company and indicates the proportion of a company's assets that are financed by debt. A higher debt ratio indicates a higher level of debt relative to assets, which may imply higher financial risk for the company. Conversely, a lower debt ratio indicates a lower level of debt and potentially a stronger financial position.

In this scenario, Mr. and Mrs. Jacobi pay Johnny Elam in advance for mowing their lawn in July while they are on vacation. Since the payment is made in June but the service will be provided in July, it is considered a deferred expense. This means that the expense is recognized in a different period than when the payment is made.

The correct answer is $2,000 loss. This is because the oven is being sold for $10,000, which is $2,000 less than its current book value of $12,000. Therefore, Denton's Family Diner will incur a loss of $2,000 from the sale of the oven.

In this scenario, Mr. and Mrs. Jacobi pay Johnny Elam in advance for lawn mowing services that will be provided in July while they are on vacation. Since the payment is received in June but the service will be provided in the future, this is considered as deferred revenue. Deferred revenue refers to the recognition of revenue for services or goods that have not yet been delivered or provided. In this case, the revenue is deferred until July when the lawn mowing services are actually performed.

If Snowstorm Transit Company has been using the straight-line depreciation method, the annual depreciation expense would be calculated as ($40,000 - $5,000) / 5 = $7,000. Since the machine was sold on January 1, 2007, it was used for 2 years. Therefore, the accumulated depreciation would be $7,000 * 2 = $14,000.

The book value of the machine on January 1, 2007, would be $40,000 - $14,000 = $26,000.

Since the machine was sold for $30,000, Snowstorm Transit Company would have a gain of $30,000 - $26,000 = $4,000. Therefore, the correct answer is $4,000 gain.