Terminology
Probably future benefit controlled by a business owner as a result of past transactions or events.
What is an Asset?
What is the correct adjusting journal entry at the end of the period for inventory shrinkage for a company using a perpetual inventory system?
What is
Dr. Cost of Goods Sold xx
Cr. Inventory xx
When merchandise is purchased for resale, this temporary account is debited.
What is Purchases?
When merchandise is purchased for resale, this asset account is debited.
What is Inventory?
A company forgets to record accrued wages at year-end. What is the effect on liabilities?
What is understated?
The company will continue to exist for the forseeable future.
What is Going Concern assumption?
On April 1, 2025, Your Mom Properties, LLC received $57,600 in exchange for rental of the second floor of a building from April 1, 2025 to March 31, 2026. What is the balance in the prepaid rent account on December 31, 2025.
What is $14,400?
Under a periodic system, this account is used to record merchandise purchased during the period instead of debiting Inventory.
What is Purchases?
Under a perpetual system, when merchandise is sold, this expense account is immediately debited for the cost of the merchandise.
What is Cost of Goods Sold?
A company forgets to record depreciation expense at year-end. What is the effect on assets?
What is overstated?
Papa John's allocated the cost of a pizza oven ratably over 7 years instead of the year of purchase
What is Expense Recognition (Matching) Principle
(prepare the AJE for 12/31/26)
DOUBLE JEOPARDY
On March 1st, 2026, Joy purchased a 4-year insurance policy with the total premium being $1,200.
At the time of purchase, Joy paid the entire premium in cash, and debited Prepaid Insurance for $1,200. Insurance coverage began on March 1st.
What is a:
Dr. Insurance Expense $250
Cr. Prepaid Insurance $250
A company has beginning inventory of $8,000 and net purchases of $32,000. Its ending inventory is $10,000. Calculate COGS.
What is $30,000?
A company sells inventory that originally cost $600. Give the journal entry that records the cost side of the sale.
What is Debit COGS $600; Credit Inventory $600?
A company forgets to record revenue that has been earned but not yet received. What is the effect on assets and stockholders’ equity?
What are assets understated and stockholders’ equity understated?
Due to inflation, what results in the highest gross profit, income tax and net income?
What is First-in First-Out (FIFO)?
(prepare AJE for 12/31/26)
On December 1, 2026, Joy agreed to provide a daily delivery of coffee for 60 days to a new restaurant for a fixed fee of $5,000, with 50% of the fee earned halfway through the contract. The terms of the contract called for Joy to provide the coffee from December 1st to January 29. The restaurant agreed to pay Joy on January 29, 2027 when the contract is complete. At December 31, Joy is halfway through the contract.
What is a:
Dr. Accounts Receivable 2500
Cr. Service Revenue 2500
Under a periodic system, when a company sells merchandise for $2,000 cash, how many journal entries are made at the time of the sale?
What is one? (Debit Cash $2,000; Credit Sales Revenue $2,000.)
The Inventory account shows $24,000, but a physical count shows only $22,500. Give the adjusting entry for the shrinkage.
What is Debit COGS $1,500; Credit Inventory $1,500?
A company forgets to adjust unearned revenue for services that have now been performed. What is the effect on liabilities and stockholders’ equity?
What are liabilities overstated and stockholders’ equity understated?
Finds the COGS by subtracting the ending inventory from the CGAS.
What is periodic inventory?
(prepare the AJE for 12/31/26)
Equipment that cost $162,000 was purchased on July 1 of the current year. Joy uses the straight-line method of depreciation and expects the equipment to be useful for 10 years. Joy expects the equipment to have a salvage value of $12,000
Dr. Depreciation Expense - Equipment 7,500
Cr. Accumulated Depreciation - Equipment 7,500
Beginning Inventory = $15,000, Purchases = $60,000, Purchase Returns = $4,000, Purchase Discounts = $1,000, Freight-In = $3,000, and Ending Inventory = $18,000. Calculate COGS.
What is $55,000?
A company buys $5,000 of merchandise on account and pays $300 freight under FOB shipping point. What amount is added to Inventory?
What is $5,300?
DOUBLE JEOPARDY
A company forgets to record the portion of prepaid insurance that has expired. What is the effect on assets, liabilities, and stockholders’ equity?
What are assets overstated, liabilities no effect, and stockholders’ equity overstated?