episode 08 exercise 02

Part 2

In general, transactions that affect income statement accounts also affect one or more balance sheet accounts. This is because expenses decrease net assets - when an expense is recorded, either an asset goes down or a liability goes up. Similarly, revenues increase net assets - when a revenue is recognized, an asset increases or a liability decreases.

In the following questions, identify the asset or liability account affected when the revenue or expense is recognized.

1.	In December 2000, CanGo paid rent for January through July 2001. Recognition of the January 2001 rent expense affects what balance sheet account?


2.	CanGo overlooked the invoice for rent for August through December 2001 until September 10, 2001, because it had fallen behind the desk of the accounts payable clerk. What balance sheet account was affected when the August rent expense was recognized on August 30th?


3.	CanGo has a "Leftovers" bin at its Web site listing the titles of books it wants to dispose of as fast as possible. These books are shipped immediately after being ordered. Which balance sheet account is affected when one of these books is ordered using CanGo's secure credit card facility?


4.	Two weeks ago, a customer ordered a bestseller that was out of stock, and paid for it by credit card. Yesterday, CanGo received a shipment of the books from the publisher, and CanGo shipped the book out today. What balance sheet account was affected when CanGo recognized revenue for this sale?


5.	CanGo shipped 100 copies of Accounting: The Language of Business to the central receiving department of a large state university library system. The university will pay for the books within thirty days. When CanGo records revenue for this sale, what balance sheet account will be affected?


6.	CanGo paid its year 2001 property and casualty insurance during December 2000. What balance sheet account (other than cash) was affected when CanGo made the payment?


7.	On March 31, 2001, CanGo made an adjusting entry to record insurance expense. What balance sheet account was affected?

page 5 of 13 | go to page: 1 2 3 4 5 6 7 8 9 10 11 12 13