The Following Account Balances Are Taken from the December 31,2018,financial

question 24

Multiple Choice

The following account balances are taken from the December 31,2018,financial statements of ABZ Advertising Company.The company uses accrual basis accounting. $\begin{array}{lr}\text { Advertising Revenue } & 46,482 \\\text { Cash } & 41,516 \\\text { Accounts Receivable } & 7,296 \\\text { Interest Expense } & 2,299 \\\text { Accounts Payable } & 5,000 \\\text { Operating Expenses } & 37,460 \\\text { Deferred Revenue } & 1,178 \\\text { Equipment } & 18,048 \\\text { Income Tax Expense } & 2,326\end{array}$ The following activities occurred in 2019:
1.Performed advertising services on account,$55,000.
2.Received cash payments on account,$10,400.
3.Received deposits from customers for advertising services to be performed in 2020,$2,500.
4.Made payments to suppliers on account,$5,000.
5.Incurred $45,000 of operating expenses;$39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
Which of the following is the journal entry that will be used to record activity #4?

• A)Debit Operating Expense and credit Cash for $5,000.
• B)Debit Accounts Payable and credit Cash for $5,000.
• C)Debit Accounts Payable and credit Operating Expense for $5,000.
• D)Debit Cash and credit Accounts Payable for $5,000.

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Definitions:

Allowance

An amount of money given regularly for a specific purpose, often by a parent to a child or by an employer to an employee.

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The subjective tastes and choices of consumers, which guide their decision-making in selecting among alternatives.

Laspeyres Price Index

A measure of the change in the overall price of a specific set of goods and services over time, using the quantities of the goods and services purchased in the base period.

Consumption Bundle

A combination of goods and services that a consumer chooses to consume at a given time.