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Exam 3: Accrual Accounting

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Question 41

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Measurement of the economic effects on an entity involves each of the following except

A) Quantification of effects
B) Identification of the attribute to be measured
C) Selection of an appropriate unit of measure
D) Recording the economic effects in the financial statements

E) A) and B)
F) B) and C)

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Question 42

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Assets become expenses when?

A) Purchased for cash or on credit.
B) Asset is delivered.
C) They are paid for in cash.
D) Their economic benefits expire.

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

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Question 43

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Some of the steps in the accounting cycle are listed below.Select the choice that places these steps in the correct order. 1. Close the accounts. 2. Post transactions to ac counts in the ledger 3. Journalize daily transactions. 4. Record and post adjustments. 5. Prepare financial statements.

The ____________________ basis of accounting requires that revenues be recorded in the period they are earned rather than in the period they are received.

California Condos California Condos uses the accrual basis of accounting,and had the following account balances on its financial statements at December 31,2013. $\begin{array}{ll} \text { Rent Revenue } &\$ 340,000 \\ \text { Accounts Receivable } &89,200 \\ \text { Utilities Payable } &12,000 \\ \text { Rent Expense } &22,000 \\ \text { Unearned Revenue } &17,000 \\ \text { Depreciation Expense } &12,000 \\ \text { Salaries Expense } &45,000 \\ \text { Salaries Payable } &4,000 \\ \text { Retained Eanings, January 1 } &60,000 \\ \text { Dividends } &2,500 \\ \text { Interest Revenue } &10,000\end{array}$ - Refer to California Condos.On January 1,there was a $0 balance in the salaries payable account.How much cash did the company pay for salaries during the year?

The ____________________ principle requires that expenses be recorded and reported in the same period as the revenue that it helped to generate.

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.

A company that sells merchandise to customers should normally recognize

The following unadjusted amounts were taken from a company's accounting records at December 31,2013: Note Payable,6%,4-month,dated December 1,2013,for $500,000 Note Receivable,12%,6-month,dated October 1,2013,for $400,000 A) Prepare any adjusting entries necessary at December 31,2013 , for the notes. B) Fill in the partial balance sheet below by showingthe notes and the effects of any adjustments related to the notes $\begin{array}{|l|l|l|}\hline &\text { Current Assets} & \text { Current Liabilities} \\\hline \\\hline \\\hline \\\hline \\\hline \\\hline \end{array}$

A company forgot to record four adjustments during 2013.Which one of the following omissions of adjustments will understate assets?

The Dividend account is known as which of the following?

The worksheet facilitates preparation of the income statement,retained earnings statement and balance sheet but not the cash flow statement.

When are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

Which one of the following is the last step in the accounting cycle?

Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold.During the month of December,a salesperson sold 3 cycles.The company pays commissions on the 5th day of the month following the sale.Which of the following statements is true?

When is revenue from the sale of merchandise normally recognized?

Expenses should be matched against revenue

A particular company had $2,400 of supplies on hand at January 1.During the year,supplies with a cost of $4,000 were purchased.At December 31,the actual supplies on hand amounted to $2,000.After the adjustments are recorded and posted at December 31,what are the ending balances in the Supplies and Supplies Expense accounts?

What is the significance of the timing in which cash is paid or received as it relates to the adjusting process?

The amount of interest accrued is added to the note payable account and reported in the liabilities section of the balance sheet.