What is the normal balance of sales returns and allowances, accumulated depreciation, and unearned revenue respectively?

QUESTION : Multiple Choice (15 marks)

Assume all companies have a December 31st year end and follow IFRS, unless otherwise indicated.

Ava ltd. is a gym and began its operation on January 1, 2017.

The following information is provided for years 2017 and 2018:

Collected $500,000 cash in 2017 from members for membership fees. 80% of these membership fees were used in 2017, the reminders were used in 2018 Collected $700,000 cash in 2018 from members for membership fees. 70% of these membership fees were used in 2018, the reminders will be used in 2019

⦁ Unearned revenue at the end of 2017 was
⦁ $400,000
⦁ $100,000
⦁ $490,000
⦁ $210,000

⦁ Revenue recognized in 2017 was
⦁ $400,000
⦁ $100,000
⦁ $490,000
⦁ $210,000

⦁ Unearned revenue at the end of 2018 was
⦁ $100,000
⦁ $310,000
⦁ $210,000
⦁ $490,000

⦁ Revenue recognized in 2018 was
⦁ $400,000
⦁ $700,000
⦁ $490,000
⦁ $590,000

⦁ Monty Ltd. reported net income of $575,000 for the year ended December 31, 2020. During the year, the company also declared and paid dividends of $25,000 on the company’s preferred shares and $125,000 on the company’s common shares.

At the beginning of the year, Monty Ltd. had 125,000 common shares outstanding. On April 1st the company issued 50,000 new common shares. The weighted average number of common shares outstanding equals
⦁ 162,500
⦁ 150,000
⦁ 137,500
⦁ 175,000

⦁ The basic earnings per share (EPS) of Monty Ltd. (see #8 above) is closest to
⦁ $3.38
⦁ $4.40
⦁ $3.29
⦁ $3.14

⦁ Failure to make an adjustment at the end of the financial year to record depreciation expense would cause which of the following:
⦁ An understatement of assets, net income, and stockholders ‘equity
⦁ An overstatement of assets, net income, and stockholders’ equity
⦁ An overstatement of assets and an understatement of net income
⦁ No effect on assets, liabilities, net income and stockholders’ equity

⦁ Which of the following accounts is closed at the end of a fiscal period?
⦁ Supplies expense
⦁ Prepaid Insurance
⦁ Supplies
⦁ Accumulated Depreciation

⦁ Using accrual basis accounting, revenues are recorded and reported only
⦁ When they are earned, whether or not cash is received
⦁ When they are earned and received at the same time
⦁ If they are received before they are earned
⦁ If they are received after they are earned

⦁ What is the normal balance of sales returns and allowances, accumulated depreciation, and unearned revenue respectively?

⦁ Debit, debit, debit
⦁ Debit, credit, credit
⦁ Credit, debit, debit
⦁ Credit, credit, credit

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