Question : 61.Tuna Co. purchased a building in 2015 for $650,000 and : 1237601

 

 

61.Tuna Co. purchased a building in 2015 for $650,000 and debited an asset called “Buildings” for the entire amount. The company never depreciated the building although it had a useful life of 15 years. At the end of 2015, this action will cause:   

A. Net income to be understated.

 

B. Net income to be overstated.

 

C. Net income will not be affected.

 

D. Total assets will be understated.

 

 

 

 

62.On June 1, Norma Company signed a 12-month lease for warehouse space. The lease requires monthly rent of $550, with 4 months paid in advance. Norma Company records the payment by debiting Prepaid Rent $2,200 and crediting Cash $2,200. At the end of June, what should be the balance of Norma’s Prepaid Rent account?   

A. $0

 

B. $2,200

 

C. $1,650

 

D. $550

$550 × 3 = $1,650

 

 

 

63.Paddle, Inc. purchased equipment for $14,760 on February 1, 2015. The equipment has a useful life of 3 years. How much depreciation expense should Paddle recognize on its income statement for 2015?   

A. $4,510

 

B. $410

 

C. $4,920

 

D. $14,760

$14,760/36 = $410; $410 × 11 = $4,510

 

 

 

64.Unearned revenue may also be called:   

A. Net income.

 

B. Deferred revenue.

 

C. Unexpired revenue.

 

D. Services rendered.

 

 

 

 

65.Unearned revenue is:   

A. An asset.

 

B. Income.

 

C. A liability.

 

D. An expense.

 

 

 

 

66.The balance of an unearned revenue account:   

A. Appears in the balance sheet as a component of owners’ equity.

 

B. Appears in the income statement along with other revenue accounts.

 

C. Appears in a separate section of the income statement for revenue not yet earned.

 

D. Appears in the liability section of the balance sheet.

 

 

 

 

67.In which of the following situations would Daystar Company record unearned revenue in May?   

A. In April, Daystar Company received payment from a customer for services that are performed in May.

 

B. Daystar Company completes a job for a customer in May; payment will be received in June.

 

C. Daystar Company is paid on May 25 for work done in the first two weeks of May.

 

D. Daystar Company receives payment in May for work to be performed in June and July.

 

 

 

 

68.Unearned revenue appears:   

A. As income on the income statement.

 

B. As an asset on the balance sheet.

 

C. As a liability on the balance sheet.

 

D. As a part of the retained earnings.

 

 

 

 

69.Videobusters, Inc. offered books of video rental coupons to its patrons at $40 per book. Each book contained a certain number of coupons for video rentals. During the current period 500 books were sold for $20,000, and this amount was credited to Unearned Rental Revenue. At the end of the period, it was determined that $15,000 worth of coupons had been used by customers to rent videos. The appropriate adjusting entry at the end of the period would be:   

A. Debit Rental Revenue $5,000 and credit Unearned Rental Revenue $5,000.

 

B. Debit Rental Revenue $15,000 and credit Unearned Rental Revenue $15,000.

 

C. Debit Unearned Rental Revenue $5,000 and credit Rental Revenue $5,000.

 

D. Debit Unearned Rental Revenue $15,000 and credit Rental Revenue $15,000.

 

 

 

 

Hoffman, Inc. adjusts its books each month but closes its books at the end of the year. The trial balance at March 31 before adjustments is as follows: 

 

70.Refer to the information above. According to service contracts, $4,810 of the Unearned Service Revenue has been earned in March. The amount of Service Revenue Earned to be reported in the March income statement is:   

A. $16,510.

 

B. $21,320.

 

C. $11,700.

 

D. $20,410.

$16,510 + $4,810 = $21,320