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A company pays $7,200 for 12 months of insurance coverage beginning that day. It debits Insurance Expense and credits Cash for $7,200. Immediately after the entry, before any coverage has expired, which diagnosis is correct?
A company omits a December 31 adjustment for $3,000 of interest earned but not yet received. What are the effects of the omission?
Which December 31 adjusting entry records the insurance used during the year?
On December 31, an adjusting entry is required for the November customer advance. Which description best characterizes that adjustment?
The company should record $1,500 of interest earned but not yet received. If Harbor Point omits that adjustment, which balances are understated?
For the reported year, Harbor Point reports total revenues of $111,500, total expenses of $83,600, and Dividends of $5,000. What is the net increase in Retained Earnings for the reported year?
Ironpine Services began the year with Retained Earnings of $42,000. Its adjusted trial balance reports revenue of $156,000, expenses of $118,000, and Dividends of $9,000. It also reports a $6,000 unrealized holding gain in other comprehensive income. What Retained Earnings should Ironpine report at year-end?
A company performs $8,000 of services on account but omits the transaction from both the journal and ledger. Which statement describes the immediate effect?
A staff accountant is researching whether a five-year contract for the right to use an identified warehouse falls within lease accounting guidance. Which search result should the accountant inspect first to determine whether that Topic is in scope?
A nongovernmental US company is researching how to classify a cash payment in its US GAAP statement of cash flows. Which source should the staff use as the authoritative starting point?
Kalamink Data Services received $48,000 in advance for twelve months of service. At year-end, it had provided three months of service and still owed nine months. Management proposes reporting all $48,000 as current-year revenue and no contract liability. A lender is deciding whether Kalamink can take on another loan. Which evaluation best addresses the usefulness of management's proposal?
Kestrel Devices reports property and equipment, net, of $186 million this year and $240 million last year. The note states that the balance is reported after accumulated depreciation. An analyst claims, “The $54 million decrease proves Kestrel sold 22.5% of its property and equipment this year.” Which evaluation of the analyst's claim is best supported?
A company reports a warranty estimate produced by a neutral method and supportable inputs. The estimate falls within a reasonably possible range, but management removes the note describing the method and uncertainty because it wants the amount to appear exact. Which evaluation is best?
What gross profit and operating income should Cobalt Prairie report?
Which conclusion is supported by the supplied statement data?
Do the two store closures qualify as a discontinued operation?
Which process correctly moves from operating income to income from continuing operations?
A company reports Administrative expense of $85,000, Interest expense of $18,000, Net sales of $760,000, Selling expense of $120,000, and Cost of goods sold of $430,000. What operating income should it report?
An income statement includes net sales of $800,000, cost of goods sold of $500,000, selling expense of $80,000, administrative expense of $60,000, interest expense of $20,000, and a $10,000 gain on unused land. What are operating income and income before tax?
Silverline Components reports operating income of $480,000, interest expense of $50,000, and a $20,000 loss on the sale of unused land. Its income-tax expense attributable to continuing operations is $102,500, and the company has no discontinued operation. What is income from continuing operations?
Juniper Bay Components reports the following amounts, all in thousands of United States dollars:
| Subtotal | 2025 | 2026 |
|---|---|---|
| Net sales | $8,000 | $8,000 |
| Gross profit | 3,200 | 2,800 |
| Operating income | 800 | 1,000 |
| Net income | 900 | 1,300 |
The 2026 statement includes a $500 gain on the sale of unused land below operating income. Which conclusion is best supported by the income-statement subtotals?
Which disposal most clearly represents a strategic shift with a major effect on a company's operations and financial results?
North Channel Foods commits to a plan to sell a division that qualifies as a discontinued operation. On the date the division is classified as held for sale, its disposal group's carrying amount is $510,000, fair value is $455,000, and estimated cost to sell is $15,000. What loss should North Channel recognize from the initial held-for-sale measurement?
A customer met the collectibility criterion when a valid contract began. The seller later transferred the promised equipment and obtained an unconditional receivable. Afterward, the customer's credit quality deteriorated significantly. Which response is best?
Harbor Events contracts to provide a conference room, catered meals, and event coordination. The contract also requires an internal scheduling setup activity that does not transfer a good or service to the customer. Before deciding which promises are distinct, which promises are candidates for performance obligations?
Blue Heron Works will receive $320,000 for a systems-conversion project plus a $40,000 bonus for finishing by the contractual deadline. It has completed many nearly identical contracts, controls the work that determines the deadline, and has consistently met comparable deadlines. Current facts indicate that including the bonus is not likely to cause a significant revenue reversal. A staff accountant records a $320,000 transaction price because “all variable consideration must be excluded until the uncertainty is resolved.” Which correction to the recorded transaction price is correct?
Northwind Media has a customer contract with three performance obligations. The transaction price has already been allocated as follows: a functional stock-photo-library license, $120,000; a launch workshop, $30,000; and twelve months of curated monthly image updates, $60,000. On October 1, Northwind gives the customer access to the library, which the customer can use immediately without the future updates, and completes the workshop. Northwind then delivers the updates evenly over the next twelve months. How much revenue should Northwind recognize through December 31?
Pictured Rocks Construction is building a facility on land owned and controlled by its customer. The $900,000 contract is one performance obligation. At the prior year-end, an independent engineer certified 10% completion and the company recognized the resulting revenue. At the current year-end, the engineer certifies that the facility is 40% complete cumulatively. How much revenue should the company recognize in the current year?
A company has satisfied a performance obligation and recognized $50,000 of revenue. The contract does not permit billing until the company completes a separate milestone next month. Which balance should the company report for the $50,000 earned amount at the current reporting date?
How should Lake Superior begin the revenue analysis?
How many performance obligations are present?
How should Lake Superior allocate the $180,000 transaction price?
After the original contract, Lake Superior enters a separate $72,000 renewal for 12 months of monitoring beginning November 1. The renewal qualifies as a contract, and the monitoring service transfers evenly over time. By December 31, Lake Superior has billed $24,000 and collected $18,000. What should Lake Superior report for the renewal?
A $450,000 advertising contract contains two performance obligations. Printed materials have a $300,000 standalone selling price, and campaign management has a $200,000 standalone selling price. No evidence supports assigning the discount to only one obligation. A staff accountant allocates $300,000 to the printed materials and $150,000 to campaign management. Which evaluation is correct?
Three distinct services have standalone selling prices of $200,000, $100,000, and $100,000. They are sold together for $360,000, and the discount does not relate specifically to one service. Which proposed allocation contains an error?
Tern Harbor Media receives a $48,000 customer advance and initially credits a contract liability. By year-end, it has provided $18,000 of the promised service. Which year-end entry and ending balance are correct?
Unearned Revenue began at $6,000. The company received $24,000 of new customer advances and earned $19,000 of the combined obligations. A staff accountant proposes debiting Unearned Revenue for the $24,000 cash receipt to arrive at an $11,000 ending liability. Which evaluation is correct?
On December 1, a company receives $12,000 for six months of service beginning that day and credits the full receipt to Service Revenue. One month of service has been provided by December 31. Which adjusting entry is required?
On the same day, a seller signs two agreements with one customer. The agreements were negotiated together as one commercial package, and the price in the second agreement depends on performance under the first. How should the seller begin the ASC 606 analysis?
Grand Island Engineering has one $240,000 contract and will receive an additional $80,000 if it meets one specified efficiency threshold. Based on experience with this customer's process and the current design, management concludes that meeting the threshold is the single outcome that best predicts the consideration to which Grand Island will be entitled. The bonus also passes the constraint. A staff accountant probability-weights the bonus at 70% and proposes a $296,000 transaction price. Which correction is best?
Superior Components reports $620,000 of income from continuing operations after tax. A disposed component qualifies as a discontinued operation. It had an $80,000 pretax operating loss and a $35,000 pretax disposal gain. The income-tax benefit attributable to the discontinued component is $15,000. Which presentation is correct?
An adjusted trial balance reports Rent Expense of $12,000, Dividends of $4,000, Revenue of $92,000, Depreciation Expense of $5,000, and Salaries Expense of $51,000. What net income should the company report?