Practice Exam 1

Question #1: Each Thursday, Steez Inc.’s employees are paid for that week’s work of creating epic merch. The wages are paid in cash and are recorded by the company. Although the last payday of March was on Thursday, March 30th, 2021, the employees worked the following day (the last day of March) and earned $3,200.

What adjusting entry should Steez Inc. make related to wages as of March 31st, 2021?

TransactionDebitCredit
Wages Expense3,200
     Wages Payable3,200

Question #2: On March 1st, a customer paid Steez Inc. $33,000 cash in advance for 3 months of fashion services that Steez Inc. would perform for the customer at a rate of $11,000 per month, with the service starting to be provided on March 1st. What is the entry that Steez Inc. makes to its accounting system on March 1st to record the receipt of advance payment?

A)

TransactionDebitCredit
Unearned Revenue11,000
     Cash11,000

B)

TransactionDebitCredit
Cash33,000
     Service Revenue33,000

C)

TransactionDebitCredit
Cash11,000
     Service Revenue11,000

D)

TransactionDebitCredit
Cash33,000
     Unearned Revenue33,000

D)

TransactionDebitCredit
Cash33,000
     Unearned Revenue33,000

Question #3: Based on the information from Question #2, what adjusting entry should Steez Inc. make prior to preparing financial statements on April 30th?

So far, Steez Inc. has made only the following two entries related to this advance payment:

  1. The March 1st entry to record the receipt of the $33,000 cash.
  2. The March 31st adjusting entry.
TransactionDebitCredit
Unearned Revenue11,000
     Service Revenue11,000
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