Sparten, Inc., a plumbing contractor, received a check for $3,000 on June 30 for services to be performed in the following fiscal month. During the July accounting period, Sparten completed all but $500 of the job. What adjusting entry needs to be made at the end of July?
Answer(s): D
When the check was received on June 30, a liability was established for $3,000 because revenue could not be recognized until it was earned. During July, $2,500 of revenue was earned and should be recognized, along with a reduction (debit) to the Unearned Revenue account.
Extraordinary items are placed on the income statement:
Answer(s): A
Extraordinary items are always included net of tax after the net income from continuing operations. These items are unusual items for the company and occur infrequently.
What is the primary function of the Securities and Exchange Commission as it relates to a company's financial statements?
To ensure that a public company makes full and accurate disclosure in the company's registration statement of all pertinent information relating to a company's business, its securities, its financial position and earnings, and the underwriting arrangements.
Minority interest on the consolidated balance sheet is listed ________.
Answer(s): C
Minority interest represents the proportionate stake of minority shareholders in a company's majority- owned subsidiary that is consolidated. Minority interest is neither a liability nor equity but it is a financing component and, therefore, is presented between liabilities and shareholders' equity.
When prices are rising, which of the following inventory valuation methods produces a higher profit?
Answer(s): B
When prices are rising, FIFO will produce the highest profit because the first in (lowest cost) inventory is the first out. This leaves the most recently purchased inventory on hand and since it has the highest cost, ending inventory will have the greatest value which means that cost of goods sold will be the lowest and profits will be the highest (ending inventory = beginning inventory + net purchases - cost of goods sold).
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