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Exam 2: Accounting for Accruals and Deferrals

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Question 21

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The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 2: $\begin{array} { l lll} \text { Cash } & \$ 4,000& \text { Accounts receivable } & \$3,400\\\text { Dividends} &2,000& \text { common stock } &3,900 \\\text { Land } &3,200 &\text { Revenue } &3,200 \\\text { Accounts payable } & 1,800 &\text { Expense } & 2,200\end{array}$ What is the amount of retained earnings that will be shown on the balance sheet at December 31, Year 2?

A) $5,900
B) $7,200
C) $3,900
D) $4,900

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

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Question 22

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Which of the following answer choices accurately reflects how the recording of accrued salary expense at the end of the year affects the financial statements of a business? A. $\quad\quad\quad\quad\quad+\quad\quad\quad\quad-\quad\quad\quad\quad\quad\quad+\quad\quad\quad\quad\quad-\quad\quad\quad\text{-QA}$ B. $\quad\quad -\quad\quad\quad\quad\quad\quad\quad-\quad\quad\quad\quad\quad\quad+\quad\quad\quad\quad\quad\quad-$ C. $\quad\quad\quad\quad\quad+\quad\quad\quad\quad-\quad\quad\quad\quad\quad\quad+\quad\quad\quad\quad\quad\quad-\quad$ D. $\quad\quad-\quad\quad\quad\quad\quad\quad\quad-\quad\quad\quad+\quad\quad\quad\quad\quad\quad\quad\quad\quad+\quad\quad\quad\text{-QA}$

A) Option A
B) Option B
C) Option C
D) Option D

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

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Question 23

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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 stockholders What is the net income that will be reported for Year 1?

After closing the accounts, all income statement accounts have non-zero balances.

Which of the following transactions does not involve an accrual?

Jason Company paid $7,200 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

In the closing process, the amounts in temporary accounts are moved to net income, a permanent account.

ABC Company ended Year 1 with the following account balances:Cash $600, Common Stock $400, and Retained Earnings $200.The following transactions occurred during Year 2:Issued common stock for $19,000 cash.ABC borrowed an additional $11,000 from Chris Bank.ABC earned $9,000 of revenue on account.ABC incurred $4,000 of operating expenses on account.Cash collections of accounts receivables were $6,000.ABC provided additional services to customers for $1,000 cash.ABC purchased land for $14,000.ABC used $3,000 in cash to make a partial payment on its accounts payable.ABC declared and paid a $200 dividend to the stockholdersOn December 31 ABC had accrued salaries of $4,000. -What is the amount of retained earnings that will be shown on the balance sheet prepared at the end of Year 2?

Cascade Corporation began business operations and experienced the following transactions during Year 1:Issued common stock for $20,000 cashProvided services to customers for $80,000 on accountIncurred $36,000 of operating expenses on accountCollected $46,000 cash from customersPaid $30,000 on accounts payableRequired:Record the above transactions on a horizontal statements model to reflect their effect on Cascade'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), or financing activities (FA). If a transaction is not reported on the statement of cash flows, leave that cell blank.

In Year 1, Dale Company incurred $4,000 of utility expense on account. Dale paid cash for these expenses in Year 2. Which of the following shows how paying cash for utility expense will affect Dale's accounting equation in Year 2? A. $(4,000) \quad\quad\quad\quad\quad\quad\quad\quad\quad (4,000)$ B. $\quad4,000 \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad(4,000)$ C. $\quad\quad\quad\quad\quad (4,000) \quad\quad \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \quad(4,000)$ D. $\quad (4,000) \quad\quad \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \quad\quad \quad\quad \quad(4,000)$

Which of the following describes the effects of a claims exchange transaction on a company's financial statements?

Tucker Company shows the following transactions for the accounting period ending December 31, Year 1: Sold books to customers for $68,000 on accountCollected $56,000 from customersIssued common stock for $16,000 cashPrepaid four months' rent for $8,800 on October 1, Year 1Purchased supplies for $21,000 cashPhysical count shows $6,500 of supplies remained on December 31, Year 1Recorded adjustment for prepaid rent used Show how the above transactions and year-end adjustments affect the accounting equation.(Note: There is no need to provide appropriate account titles for the Retained Earnings amounts in the last column of the table.)

For each of the following transactions, indicate the type by entering "AS" for asset source transaction, "AU" for asset use transaction, "AE" for asset exchange transaction, and "CE" for claims exchange transaction.Paid $10,000 for a plot of landRecorded the accrual of $1,000 in salaries to be paid the following weekIssued common stock for $20,000 in cashIncurred operating expense on accountPaid off its accounts payableEarned revenue to be collected at a future datePaid $2,000 in dividends to its stockholdersReceived cash from customers in number 6 abovePaid the salaries accrued in number 2 aboveBorrowed money from a local bank

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: $\begin{array} { l lll} \text { Cash } & \$ 4,000& \text { Accounts receivable } & \$3,400\\\text { Dividends} &2,000& \text { common stock } & 3,900 \\\text { Land } & 3,200 &\text { Revenue } &3,200 \\\text { Accounts payable } & 1,800 &\text { Expense } & 2,200\end{array}$ What is net income that will be shown on Carolina's Year 1 income statement?

Recognition of revenue may be accompanied by which of the following?

The following transactions apply to Kellogg Company.Issued common stock for $20,000 cashProvided services to customers for $38,000 on accountPurchased land for $15,000 cashIncurred $29,000 of operating expenses on accountCollected $35,000 cash from customers for services provided in event number 2Paid $27,000 on accounts payablePaid $2,000 dividends to stockholdersRequired:Identify the dollar amount effect on the statement of cash flows, if any, for each of the above transactions. Enter NA for items not affected.Indicate whether each transaction involves operating, investing, or financing activities. Leave the related cell blank for items that do not result in operating, investing, or financing cash flows.

Which of the following shows how a payment made to settle an accrued expense, such as the salaries payable, will affect a company's financial statements? A. $\quad - \quad\quad\quad - \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text{-FA}$ B. $\quad - \quad\quad\quad - \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$ C. $\quad - \quad\quad\quad - \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text{-QA}$ D. $\quad - \quad\quad\quad - \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text{-IA}$

Record each of the following events in the horizontal statements model. After each event, record the corresponding December 31 end-of-year adjustment that would be necessary.Paid $36,000 for a 1-year lease beginning April 1.Paid $3,000 to purchase supplies. At year end, $1,080 of supplies remained.Received a $48,000 cash advance for a 6-month contract beginning on September 1.

The matching concept most significantly influences which financial statement?

ABC Company ended Year 1 with the following account balances:Cash $600, Common Stock $400, and Retained Earnings $200.The following transactions occurred during Year 2:Issued common stock for $19,000 cash.ABC borrowed an additional $11,000 from Chris Bank.ABC earned $9,000 of revenue on account.ABC incurred $4,000 of operating expenses on account.Cash collections of accounts receivables were $6,000.ABC provided additional services to customers for $1,000 cash.ABC purchased land for $14,000.ABC used $3,000 in cash to make a partial payment on its accounts payable.ABC declared and paid a $200 dividend to the stockholdersOn December 31 ABC had accrued salaries of $4,000. -What is the net cash flow from operating activities shown on the statement of cash flows for the year ending December 31, Year 2?