Accounting Crash Course Practice Questions
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1. A company that sells smartphones and other computer devices has collect-
ed $500,000 in cash and an additional $100,000 is due within the next 30 days
for sales that it has made. It has already shipped all the merchandise. Which
of the following show the correct journal entries for these activities?
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Re-
tained Earnings for $500,000, Credit Deferred Revenue for $100,000.
Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit
Retained Earnings for $600,000.
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Re-
tained Earnings for $600,000.
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Inven-
tory for $600,000.
Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit
Inventory for $600,000.: Debit cash for $500,000, Debit Accounts Receivable for
$100,000, Credit Retained Earnings for $600,000.
Debit raises cash and A/R, while the corresponding entry is credit that raises
retained earnings via revenue. All $600,000 is recognized as revenue because the
revenue was earned.
2. A company that sells smartphones prepays $20,000 to cover the next 12
months' worth of utilities. Which of the following shows the correct journal
entries for these activities?
Debit retained earnings for $20,000 and credit cash for $20,000.
Credit retained earnings for $20,000 and debit cash for $20,000.
Debit prepaid expenses for $20,000 and credit cash for $20,000.
Credit prepaid expenses for $20,000 and debit cash for $20,000.: Debit prepaid
expenses for $20,000 and credit cash for $20,000.
Prepaid expenses is an asset that is recognized on the balance sheet to reflect the
prepayment. Debiting increases the asset with a corresponding reduction (credit) in
the cash asset.
This first entry is incorrect because the expense is not recognized until the period in
which it is matched to the period in which it is being used (the matching principle).
As a result, there is no retained earnings impact until later.
3. *On June 30, 2020, a company that sells smartphones prepaid $50,000 to
cover the next 12 months' worth of utilities. 6 months later, the company
reports their annual results.
Assuming no adjustments have been made since the original journal entries,
1/3
Study online at https://quizlet.com/_d25bnf
1. A company that sells smartphones and other computer devices has collect-
ed $500,000 in cash and an additional $100,000 is due within the next 30 days
for sales that it has made. It has already shipped all the merchandise. Which
of the following show the correct journal entries for these activities?
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Re-
tained Earnings for $500,000, Credit Deferred Revenue for $100,000.
Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit
Retained Earnings for $600,000.
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Re-
tained Earnings for $600,000.
Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Inven-
tory for $600,000.
Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit
Inventory for $600,000.: Debit cash for $500,000, Debit Accounts Receivable for
$100,000, Credit Retained Earnings for $600,000.
Debit raises cash and A/R, while the corresponding entry is credit that raises
retained earnings via revenue. All $600,000 is recognized as revenue because the
revenue was earned.
2. A company that sells smartphones prepays $20,000 to cover the next 12
months' worth of utilities. Which of the following shows the correct journal
entries for these activities?
Debit retained earnings for $20,000 and credit cash for $20,000.
Credit retained earnings for $20,000 and debit cash for $20,000.
Debit prepaid expenses for $20,000 and credit cash for $20,000.
Credit prepaid expenses for $20,000 and debit cash for $20,000.: Debit prepaid
expenses for $20,000 and credit cash for $20,000.
Prepaid expenses is an asset that is recognized on the balance sheet to reflect the
prepayment. Debiting increases the asset with a corresponding reduction (credit) in
the cash asset.
This first entry is incorrect because the expense is not recognized until the period in
which it is matched to the period in which it is being used (the matching principle).
As a result, there is no retained earnings impact until later.
3. *On June 30, 2020, a company that sells smartphones prepaid $50,000 to
cover the next 12 months' worth of utilities. 6 months later, the company
reports their annual results.
Assuming no adjustments have been made since the original journal entries,
1/3
