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Exam 2: Accounting for Accruals

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Question 41

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Which of the following correctly describes how accounts payable will appear on the financial statements?

A) Expense on the income statement
B) Revenue on the income statement
C) Liability on the balance sheet
D) Asset on the balance sheet

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

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Question 42

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Angstrom Company provided $2,600 of services for a customer who paid $1,000 cash immediately and promised to pay an additional $1,600 one month later.

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This event increases revenue, net incom...

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Question 43

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Which of the following is not one of the common elements that are typically present when fraud occurs?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Carson Company accrued $100 of interest expense.

Jackson Company paid $500 cash for salary expenses. Which of the following accurately reflects how this event affects the company's horizontal financial statements model?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Nguyen Company borrowed $50,000 cash from Metropolitan Bank.

The Maryland Corporation was started on January 1, Year 1, with the issuance of $50,000 of stock. During Year 1, the company provided $75,000 of services on account and collected $68,000 of that amount. Maryland incurred $63,000 of expenses, and paid $50,000 of that amount during Year 1. On December 31, Year 1, Maryland paid investors a $2,000 cash dividend and accrued $4,000 of salary expense. Required:1)Determine the net income for year ended December 31, Year 1.2)Prepare Maryland Corporation's Statement of Cash Flows for the year ended December 31, Year 1.3)Determine the balance in Maryland's Retained Earnings account as of December 31, Year 1.

Garrison Company acquired $23,000 by issuing common stock. Which of the following accurately reflects how this event affects the company's horizontal financial statements model?

Sales on account decrease the balance in accounts receivable.

Which of the following is frequently used to describe the expenses that are matched in the same accounting period in which they are incurred?

The following account balances were drawn from the Year 1 financial statements of Grayson Company: What is the balance of the Common Stock account?

Chico 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 the elements of Chico's financial statements?

Amber Company recognized accrued salary expense. Which of the following financial statements are affected by this accounting event?

During Year 3, Fancy Foods Incorporated earned $54,000 of revenue on account. The beginning balance in accounts receivable was $5,000, and the ending balance was $10,000. Also, Fancy Foods Incorporated started the year with a beginning balance in accounts payable of $5,000. Fancy Foods' ending balance in account payable was $4,000. The company incurred $12,000 of operating expenses on account. Determine the amount of cash paid to settle accounts payable.

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

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

Mary Company collected cash from an account receivable. Which of the following financial statements are affected by this accounting event?

If a company provides services to clients but has not yet collected any cash, how should that transaction be classified?

What effect does providing services on account have on the statement of cash flows? What effect does it have on the balance sheet?

Indicate whether each of the following statements about corporate governance is true or false.a)The Financial Accounting Standards Board issues a code of ethical behavior by which public accountants must abide.b)The Sarbanes Oxley Act created the Public Company Accounting Oversight Board (PCAOB).c)Because of the Sarbanes Oxley Act, audit firms are not permitted to provide many nonaudit services to audit clients.d)The fraud triangle identifies opportunity, pressure, and rationalization as the three elements that are typically present when fraud is committed.e)An executive found guilty of falsely certifying a company's financial statements faces up to a $100,000 fine and five years in prison.