10 multiple choice questions for Business about ( Accrual Accounting)1) You operate a lawn care business. On May 1, 20×4, one of your customers paid you $631 for lawn care for the summer of 20×4. What is the effect of this transaction on the accounting equation?
Select one:
a. Liabilities increase by $631 and shareholders equity increases by $631
b. There is no effect on the accounting equation
c. Assets increase by $631 and shareholders equity increases by $631
d. Assets increase by $631 and liabilities increases by $631
ans: d
2) Karr Corporation received cash of $6284 on August 1, 20×8 for one year’s rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 20×8 adjusting entry is:
Select one:
a. Debit Rent Revenue and credit Unearned Rent, $2618
b. Debit Cash and credit Unearned Rent, $3666
c. Debit Unearned Rent and credit Rent Revenue, $2618
d. Debit Rent Revenue and credit Unearned Rent, $3666
ans:D
3) BC Incorporated is in the process of closing their books at year-end. The following information is reported on the income statement:
Salary Expense
$27
Interest Expense
$15
Revenue
$919
Rent Expense
$32
Which of the following are correct closing entries:
Select one:
a. A credit to retained earnings of $961
b. A debit to retained earnings of $ 919
c. A debit to retained earnings of $845
d. A credit to retained earnings of $ 845
ans: d
not specified
