Module 2 Homework + Answers
Total Points: 40
1) Unearned revenues are reported as liabilities on the balance sheet. True or False
Answer: Unearned revenues are payments provided to a company before the goods or services are provided. Unearned revenues are liabilities reported on the balance sheet. 2) Colby Corporation has provided the following information: Operating revenues were $199,700.
Operating expenses were $111,000.
Interest expense was $9,200.
Gain from sale of plant and equipment was $3,300.
Dividend payments to Colby's stockholders were $7,700.
Income tax expense was $36,000.
How much was Colby's net income?
Answer: Net income = $46,800 = $199,700 - $111,000 - $9,200 + $3,300 - $36,000 3) During 2010, Sigma Company earned service revenues amounting to $700,000, of which $630,000 was collected in cash; the balance will be collected in January 2011. What amount should the 2010 income statement report for service revenues? A. $630,000
Answer: $700,000 of service revenue was earned during 2010; therefore that amount should be recorded on the income statement. 4) Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?
A. Option A
B. Option B
C. Option C
D. Option D
Answer: Expenses are recorded (with a debit entry) when incurred. When they have been incurred and not paid, the interest payable account needs to be increased with a credit entry. 5) Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing $8,700 were used to make pizzas during July. Which of the following statements is false with respect to the use of the ingredients? A. Cost of goods sold was debited for $8,700.
B. Operating expenses increased $8,700.
C. Operating income decreased $8,700.
D. Supplies inventory was debited for $8,700.
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