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Accrual Basis, KPMM Adjusting Entry, Credit Return Entry

7. Under the accrual basis of accounting, which of the following statements is correct?

A. Cash must be paid before expense is recognized.
B. Since the depreciation expense is a non-cash item, it is not shown in the Income Statement.
C. The Cash Basis is preferred by GAAP since the Cash Basis is simpler than the Accrual Basis.
D. Expenses should match with revenue and adjusting entries are needed to bring the accounts up to date.

8. The KPMM Accounting firm purchased 10 laser toner cartridges for $60 each for a total of $600 on June 1 and recorded the purchase as an asset. On June 30, an inventory of the toner cartridges indicated only 2 on hand. The adjusting entry that should be made by the firm on June 30 is

A. Debit Office Supplies Expense, $600; Credit Office Supplies, $600.
B. Debit Office Supplies Expense, $480; Credit Office Supplies, $480.
C. Debit Office Supplies, $120; Credit Office Supplies Expense, $120.
D. Debit Office Supplies Expense, $120; Credit Office Supplies, $120.

9. A credit purchase of $2,000 is made on May 25, terms 2/10, net/30, on which a return of $250 is made on May 28. What amount is paid as payment in full on June 20?

A. $2,000
B. $1,750
C. $1,715
D. $1,700

10. During the year, Shane's Printing merchandise inventory decreased by $40,000. If the company's cost of goods sold for the year was $250,000, purchases must have been

A. $290,000
B. $170,000
C. $210,000
D. Unable to determine.

Solution Preview

Answers to multiple choice questions:

Question No 7 Correct answer (D) Expenses should match with revenue and adjusting entries are needed to bring the accounts up to date.

Question No 8 Correct ...

Solution Summary

The solution discusses discusses accural basis, KPMM adjusting entry and credit return entry. It provides a brief step-by-step explanation for each answer.

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