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Exam 3: Accrual Accounting

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Question 41

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Failure to record accrued interest expense would result in which of the following?

A) Assets being overstated
B) Assets being understated
C) Liabilities being overstated
D) Liabilities being understated

E) None of the above
F) A) and B)

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Question 42

Multiple Choice

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When should a shipping company recognize revenue from its delivery service?

A) On the date the customer places a order.
B) On the date the customer's packages are delivered.
C) On the date the invoice is mailed to the customer.
D) On the date the customer's payment is received.

E) A) and D)
F) A) and C)

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Question 43

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Adjusting entries are recorded at the end of each accounting period so that net income is accurately reflected in the financial statements for the period.

Which of the following places the steps in preparing a worksheet in the correct order: 1 - Adjusted trial balance 4 - Income statement 2 - Adjustments 5 - Retained earnings 3 - Balance sheet 6 - Unadjusted trial balance

Failure to record dividends paid would result in which of the following?

The ____________________ principle attempts to associate the revenue of the period with all costs necessary to generate that revenue.

Carlock Systems received a 6-month, 12% note for $50,000 from a customer on November 1, 2013. The note is due on April 30, 2014. Assuming the company's accounting period ends on December 31, how much interest revenue should be recognized during 2013 and 2014? 2013 2014

Accumulated Depreciation

When an expense is incurred prior to the payment of cash for that expense, an adjustment that increases an expense account and increases a liability is prepared.

Some of the steps in the accounting cycle are listed below. Select the choice that places these steps in the correct order.

A company borrowed $500,000 on a one-year, 10% note on October 1, 2013, with interest and principal to be paid at maturity. How much interest should be reported on the income statement for the year ending December 31, 2014?

Match each statement to the item listed below a.Accrual basis accounting f.Depreciation b.Adjusted trial balance g.Matching principle c.Adjusting entries h.Revenue recognition principle d.Cash basis accounting i.Time period assumption e.Contra accounts j.Worksheet -Without these, some of the account balances will not be up-to-date at the time financial statements are prepared

On the worksheet, the retained earnings balance that gets transferred from the retained earnings statement section of the worksheet to the balance sheet section is the beginning retained earnings balance.

During December, Camp David, Inc. purchased $5,000 of supplies for use in its business. At the end of December, 20% of the supplies were still on hand, but only 70% had been paid. What amounts will appear on the company's balance sheet on December 31? Supplies on Hand Accounts Payable

Accrued revenue is recognized when cash is received.

Adjusting entries are prepared using the accrual basis of accounting for preparing financial statements.

Dividends, like expenses, are closed to the income summary account during the end-of-period closing process.

Why is the cash basis of accounting too limited for proper financial reporting?

Carnegie Jewelers accepted a 9-month, 9% note for $100,000 from a customer on July 1, 2013. The note is due on March 31, 2014. Assuming the company's accounting period ends on December 31, 2013, how much interest revenue should be recognized during 2013 and 2014? 2013 2014

A company that sells merchandise to customers should normally recognize