Module 3 Graded Quiz

 

1.An Illinois consulting firm had accounts receivable of $70,000 on December 31, 2015. During year 2016, the consulting firm collected $30,000 in fees from its clients. On December 31, 2016, it had accounts receivable of $100,000. On an accrual basis, what was the consulting firm’s revenue for the year 2016?

 

2.People magazine sells annual subscriptions. The magazine subscription fees are collected in advance and had a balance of $ 5,000,000 on December 31, 2015. The magazine received $3,500,000 in cash from subscribers in year 2016. Also, magazine subscription revenue reached $6,000,000 in the same year. How much should People magazine report as the balance for magazine subscriptions collected in advance (i.e., unearned revenue) in its December 31, 2016 balance sheet?

 

3.Champaign LLC paid $15,000 to renew its insurance policy for five years on March 1, 2016, the effective start date of the policy. What amounts should be reported for prepaid insurance and insurance expenses in Champaign LLC ‘s financial statements for the month ending on March 31, 2016?

 

 

4.On December 31, 2016, Divers LLC provided diving instructions to 30 customers who will be paying $1,000 each in January 2017. What should Divers LLC record in its 2016 balance sheet for this transaction?

 

5.GE borrows $3,000,000 at 10% annual interest rate from Chase bank on March 31, 2016. Annual interest is payable on March 31 for the next five years. How much should GE record as interest payable on December 31, 2016?

 

6.A firm rented a basement space to a retail shop for $900 per month. The retail shop did not pay the rent for November and December 2016 and plans to make a payment for these two months on January 25, 2017. How much accounts receivable should the firm record in its December 31, 2016 balance sheet?

 

7.Illini Supermarket pays $6,000 for a 2-year insurance policy on June 30, 2016. Insurance coverage begins on July 1, 2016. How much should the company record as prepaid insurance on its December 31, 2016 balance sheet?

 

8.A retail store collects 6 months’ rent in advance in the amount of $18,000 on October 1, 2016. How much unearned revenue should the retail store record in its balance sheet on December 31, 2016 as a result of this transaction?

 

9.Which accounting principle dictates using accounting rules that will result in less revenues/assets, or higher liability when choosing among acceptable accounting rules?

 

10.Changing accounting principles every year violates the __________principle.

 

11.Just Like Fred Astaire, Inc. provides dance lessons to customers. On November 11th, Just Like Fred Astaire, Inc. provided $9,020 worth of services to customers, all of whom paid in cash. On November 16th, $3,137 in cash was collected from customers for services performed in October. On November 29th, an additional $5,914 worth of services were provided on account to customers, for which cash payment will not be collected until December. Using accrual-basis accounting, how much revenue should Just Like Fred Astaire, Inc. recognize in November?

 

12.Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue?