[Valylynn]

I need some help on an open-book quiz. I have tried these problems and looked them up in several different places. I just still don't feel like I have the right answer:

1. When the balance of an unearned revenue account decreases during an accounting period:
A. accrual-basis revenues exceed cash collections from customers
B. accrual-basis expenses exceed cash collections from customers
C. accrual-basis revenues are less than cash collections from customers
D. accrual-basis net income is less than cash-basis net income

I think it's A, because if unearned revenues go down it's because you earned that revenue

2. The employees of Neat Clothes work Mon-Fri. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends Jan 3. Neat clothes is now preparing financial statements for Dec 31.

We have to make the adjusting entry. I think its Dr. Salaries Expense, Cr. Salaries Payable for $22,400.

3. Talks-A-Lot, sells cell phones and expects that 10% of phones sold will be returned for repair under their warranty program. The avg repair costs $75 per phone. For 2010, they sold 750 cell phones and repaired 30 of them as of Dec 31, 2010. What amount of warranty liability should be recorded on Dec 31?
A. $2,250
B. $3,375
C. $5,625
D. None, all expected returns from warranties have been received

I'm thinking D, because the 30 they repaired is less than 75 (.10 * 750)

Thanks!

[rehmanvohra]

Answer 1 is correct
Answer 2 $19,200 will be accrued: $32,000/5 x 3
Answer 3 depends on the warranty period. However, you need to provide for 45 x $75 = $3,375 based on prudence principle.

[morgaine300]

Open-book doesn't mean you should be getting help from accounting experts. A good rule of thumb is that if an instructor at your school would not help you with a quiz, then we should not be helping you with it.