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Exam 2: Understanding the Accounting Cycle

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Question 51

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A company may recognize a revenue or expense without a corresponding cash collection or payment in the same accounting period.

A) True
B) False

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Question 52

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Describe the difference between temporary and permanent accounts,and state which ones are closed.

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Temporary accounts (revenues,expenses an...

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Question 53

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Define the accounting cycle and list the stages of the cycle.

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.You do not need to enter amounts. -Ingstrom Co.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.

In uncertain circumstances,the conservatism principle guides accountants to

Which of the following statements is true in regard to accrual accounting?

Jantzen Company recorded employee salaries earned but not yet paid.Which of the following represents the effect of this transaction on the financial statements?

The temporary accounts are closed prior to the start of the next accounting cycle.In this closing process,the amounts in each of these accounts are transferred to what other account(s)?

Grant Hylton started a consulting business,Grant Consulting,on January 1,2016,and the business engaged in the following transactions during the year: 1.Issued $40,000 of common stock for cash 2.Provided services on account,$46,500 3.Incurred $37,500 of operating expense,but only paid $32,000 of this amount 4.Collected $39,000 of the revenue that was previously recorded on account 5.Paid a cash dividend of $4,000 to the stockholders Required: a)Show the effects of the above transactions on the accounting equation.Precede the amount with a minus sign if the transaction reduces that section of the equation.Enter 0 for items not affected. b)Prepare an income statement and statement of cash flows for 2016.Precede a cash outflow amount with a minus sign.

When is revenue recognized under accrual accounting?

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 statements?

For which of the following would net income on the accrual basis be different (either higher or lower) from "cash provided by operating activities" on the statement of cash flows?

Recognition of depreciation expense is an asset use transaction.

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. 1)____Paid $10,000 for a plot of land. 2)____Recorded the accrual of $1,000 in salaries to be paid the following week. 3)____Issued common stock for $20,000 in cash. 4)____Incurred operating expense on account. 5)____Paid off its accounts payable. 6)____Earned revenue to be collected at a future date. 7)____Paid $2,000 in dividends to its stockholders. 8)____Received cash from customers in #6 above. 9)____Paid the salaries accrued in #2 above. 10)___Borrowed money from a local bank.

Which of the following transactions does not involve an accrual?

Revenue on account amounted to $9,000.Cash collections of accounts receivable amounted to $8,100.Cash paid for expenses was $7,500.The amount of employee salaries accrued at the end of the year was $900.Cash flow from operating activities was

The purpose of the accrual basis of accounting is to:

Rushmore Company provided services for $45,000 cash during the 2016 accounting period.Rushmore incurred $36,000 expenses on account during 2016,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 2016,

Duluth Co.collected a $6,000 cash advance from a customer on November 1,2016 for work to be performed over a six-month period beginning on that date.If the year-end adjustment is properly recorded,what will be the effect of the adjusting entry on Duluth's 2016 financial statements?

Jenna Fisk started her business by issuing $8,000 of common stock on January 1,2016.Jenna performed $18,500 of service on account in 2016,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: a)What is the amount of total assets at the end of 2016? b)What is the amount of cash on hand at the end of 2016? c)What is net income for 2016? d)Prepare a balance sheet for December 31,2016.