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Revenue Recognition Chapter 3

Which of the following is a requirement for revenue recognition under accrual accounting?

  1. The customer has paid for the goods or services
  2. The customer has signed a contract ordering goods are services
  3. Delivery of the goods or services has been scheduled
  4. The price of the goods or services is fixed
  5. All of the above requirements

Determining Net Income From Transactions Chapter 3

An electronics store had the following transactions in February:

  1. Sold $90,000 of goods to customers, receiving $65,000 in cash and the remainder on account. The inventory had an original cost of $36,000.
  2. Purchased $16,000 of inventory, paid $12,000 in cash and the rest remained on account.
  3. Paid $2,000 for wages that were owed to employees from January.
  4. Received a customer order and payment of $9,000 for an audio system to be delivered and installed in March
  5. By February 28, accrued wages were $14,000.

What would Net Income (on an accrual basis) for the month of February would be?

$40,000

Determining Net Income From Journal Entries Chapter 3

The following journal entries were recorded by a company during the month of September. What was net income for the month?

Journal Entry 1
Cash 4,000
Accounts Receivable 3,000
Sales 7,000
Journal Entry 2
Cash 2,000
Accounts Receivable 2,000
Journal Entry 3
Inventory 6,000
Accounts Payable 6,000
Journal Entry 4
Accounts Payable 2,800
Cash 2,800
Journal Entry 5
Cost of Goods Sold 3,200
Inventory 3,200
Journal Entry 6
Operating Expenses 2,400
Accounts Payable 2,400

Determine Net Income for September

1,400

Calculating Operating Income Chapter 3

A company began operations at the start of Year 1.

During the year, it had cash sales of $50,000 and credit sales of $450,000. The company collected $420,000 in cash from the credit sales. The company purchased inventory costing $250,000 and paid $18,000 in dividends. The company incurred the following expenses:

Cost of goods sold 210,000 Rent expense 6,000
Salary expense 80,000 Depreciation expense 4,000
Interest expense 5,000 Income tax expense 57,000

Using this information, answer the following questions.

  1. What would Operating Income on the Dec. 31, Year 1 Income Statement be reported as?
  2. As of Dec. 31, Year 1, determine the ending balance in the Accounts Receivable
  3. Determine Ending Retained Earnings as of December 31, Year 1
  1. Operating Income - 200,000
  2. Ending Accounts Receivable - 30,000
  3. Ending Retained Earnings - 120,000

Revenue and Expense Recognition Chapter 3

Columbia, Inc. had the following transaction in February:

  1. Columbia sold inventory for $7,200. $3,500 was received in cash and the remainder was on account. The inventory cost was $4,000.
  2. Columbia purchased new inventory costing $6,000. $3,000 was paid in cash and the remainder was on account.
  3. Columbia paid $1,200 for February wages and an additional $400 for wages incurred in the last week of January. $300 of wages incurred in the last week of February will be paid March 5.
  4. Columbia received $1,000 from customers at deposits on orders to be delivered March 9.
  5. Columbia collected $800 on accounts receivable.

Columbia should report how much revenue in February?

  1. $7,200
  2. $5,300
  3. $8,000
  4. $9,000
  5. None of the above

Columbia should report how much expense in February?

  1. $11,200
  2. $5,900
  3. $5,500
  4. $5,200
  5. None of the above