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Exam 2: Accounting for Accruals and Deferrals

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Question 71

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Which of the following is an asset exchange transaction?

A) Issued common stock.
B) Accrued salary expense at the end of the accounting period.
C) Collected cash on accounts receivable.
D) Recognized revenue earned on a contract where the cash had been collected at an earlier date.

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

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Question 72

Multiple Choice

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Warren Enterprises had the following events during Year 1: The business issued $23,000 of common stock to its stockholders.The business purchased land for $15,000 cash.Services were provided to customers for $19,000 cash.Services were provided to customers for $8,000 on account.The company borrowed $19,000 from the bank.Operating expenses of $15,000 were incurred and paid in cash.Salary expense of $1,100 was accrued.A dividend of $7,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, What is the amount of retained earnings as of December 31, Year 1?

A) $3,900
B) $3,700
C) $13,900
D) $27,000

E) All of the above
F) A) and B)

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Question 73

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Stannous Company earns $10,000 of revenue on account in Year 1. Cash collections of receivables amount to $3,500 in Year 1 with the remainder being collected in Year 2. Which of the following shows how the collection of cash will affect the company's accounting equation in Year 1? A. $\quad3,500 \quad-3,500$ B. $\quad3,500 \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad-3,500$ C. $\quad10,000 \quad10,000\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad-4,000$ D. $\quad\quad\quad\quad\quad10,000 \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad-10,000$

Nelson Company experienced the following transactions during Year 1, its first year in operation.Issued $12,000 of common stock to stockholdersProvided $4,600 of services on accountPaid $3,200 cash for operating expensesCollected $3,800 of cash from accounts receivablePaid a $200 cash dividend to stockholdersWhat is the total amount of assets shown on the balance sheet prepared as of December 31, Year 1?

Why are adjusting entries necessary in an accrual accounting system? What are some common examples?

Addison Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on Addison's financial statements?

Allen Company received $12,000 cash from Gerry Corporation for cleaning services that Allen agrees to perform over a one-year period beginning on June 1, Year 1. How would the adjustment on December 31, Year 1 to recognize the portion of the revenue that Allen earned during Year 1 affect Allen Company's financial statements?

An increase in an expense may be accompanied by a decrease in a liability.

Warren Enterprises had the following events during Year 1:The business issued $40,000 of common stock to its stockholders.The business purchased land for $24,000 cash.Services were provided to customers for $32,000 cash.Services were provided to customers for $10,000 on account.The company borrowed $32,000 from the bank.Operating expenses of $24,000 were incurred and paid in cash.Salary expense of $1,600 was accrued.A dividend of $8,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, what is the amount of retained earnings as of December 31, Year 1?

Jenna Fisk started her business by issuing $8,000 of common stock on January 1, Year 1. Jenna performed $18,500 of service on account in Year 1, and she collected $16,200 of this amount by year end. She paid operating expenses of $14,900 and paid a $600 dividend to the stockholders.Required:What is the amount of total assets at the end of Year 1?What is the amount of cash on hand at the end of Year 1?What is net income for Year 1?Prepare a balance sheet for December 31, Year 1.

Which of the following events would not require an end-of-year adjusting entry?

Nelson Company experienced the following transactions during Year 1, its first year in operation.Issued $7,000 of common stock to stockholdersProvided $3,300 of services on accountPaid $1,850 cash for operating expensesCollected $2,400 of cash from accounts receivablePaid a $150 cash dividend to stockholdersWhat is the net income that will be reported for Year 1?

The effects of transactions occurring during Year 1 and their related end-of-year adjustments have been recorded below using the accounting equation. Required:Prepare an income statement for Year 1.Prepare a statement of cash flows for Year 1.

Rushmore Company provided services for $45,000 cash during Year 1. Rushmore incurred $36,000 expenses on account during Year 1, and by the end of the year, $9,000 of that amount had been paid with cash. Assuming that these are the only accounting events that affected Rushmore during Year 1, which of the following statements is true?

Ash Company experienced a business event that affected its financial statements as indicated below. Which of the following events could have caused these effects on the company's financial statements?

Classify each of the following transactions for the purpose of the statement of cash flow as operating activities (OA), investing activities (IA), financing activities (FA), or not reported on the statement of cash flows (NA).Sold land.Made adjusting entry to recognize interest revenue on investments.Borrowed funds from the bank.Paid rent in advance for the next six months.Paid cash to settle accrued salary expense.Purchased supplies on account.Collected accounts receivable.

Wyatt Company paid $57,000 in January of Year 2 for salaries that had been earned by employees in December of Year 1. Indicate whether each of the following statements about financial statement effects of the January of Year 2 event is true or false.The income statement for Year 2 is not affected because the salaries expense had been recognized at the end of December in Year 1.Cash flows from operating activities decreased on the Year 2 statement of cash flows.Payment of the salaries in Year 2 increased a liability.The Year 2 statement of changes in stockholders' equity would not be affected because the salaries expense had been recognized at the end of December in Year 1.Both assets and stockholders' equity decreased in Year 2 as a result of this transaction.

Nelson Company experienced the following transactions during Year 1, its first year in operation.Issued $8,000 of common stock to stockholdersProvided $4,300 of services on accountPaid $2,100 cash for operating expensesCollected $2,900 of cash from accounts receivablePaid a $200 cash dividend to stockholdersWhat is the of net cash flow from operating activities shown on the Year 1 statement of cash flows?

Which of the following statements about the balance in a revenue account at the beginning of an accounting period is true?

Mize Company provided $45,500 of services on account, and collected $38,000 from customers during the year. The company also incurred $37,000 of expenses on account, and paid $32,400 against its payables. Which of the following statements about the result of these events is true?