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Exam 4: Income Measurement and Accrual Accounting

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Question 81

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Harvest Catering is a local catering service.Conceptually, when should Harvest recognize revenue from its catering service?

A) At the date the customer places the order
B) At the date the meals are served
C) At the date the invoice is mailed to the customer
D) At the date the customer's payment is received

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Question 82

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Fox Auto sold merchandise to a customer for $3,000 on credit on March 10.The customer paid Fox Auto the amount due on March 31.Under the accrual basis of accounting, which of the following statements is true?

A) Fox Auto will recognize the revenue on March 31.
B) The March 10th transaction increases revenue, but has no effect on assets because cash has not been received.
C) Revenue is recognized after the cost of the merchandise sold has been paid by Fox Auto.
D) The March 31st transaction has no effect on total assets under the accrual basis.

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Question 83

Multiple Choice

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Mendes Company sells merchandise to customers.Mendes should normally recognize

Accumulated Depreciation

Claxton Corp.purchased equipment at a cost of $320,000 in January, 2010.As of January 1, 2014, depreciation of $160,000 had been recorded on this asset.Depreciation expense for 2014 is $40,000.After the adjustments are recorded and posted at December 31, 2014, what are the balances for the Equipment and Accumulated Depreciation?

An asset is always involved when revenue is recognized.

Three months before year-end, Billings Company signed a $100,000, 12%, 6-month note.Principal and interest will be paid at maturity.No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures.

Starlight Associates, Inc.recorded salary expense of $100,000 in 2015.However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2015.After the adjustments are recorded and posted at December 31, 2015, the balances in the Salaries Expense and Salaries Payable accounts will be:

is the allocation of the cost of a tangible, long-term asset over its useful life.

When revenue is earned before the receipt of cash, an adjustment that increases a receivable and decreases a liability account is recorded.

Closing entries serve two important purposes: 1) to return the balances in all temporary or nominal accounts to zero to start the next accounting period and 2) to transfer the net income or net loss) and the dividends of the period to the Retained Earnings account.

An) results when cash is paid before the related amount is reported on the income statement.

Under the accrual basis of accounting, at what point in time should a fast food restaurant recognize revenue? _________________________

Which of the following statements is true concerning assets?

All financial statements are prepared using the accrual basis of accounting.

As a general rule, revenue is recognized at the point of sale.Which one of the following situations illustrates this rule?

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

During December, Filmore Inc.purchased $800 of supplies for use in its business.At the end of December, 20% of the supplies were still on hand, but only 75% had been paid.What amounts will appear on the company's balance sheet on December 31?

A cost can be an asset or expense depending on whether the future economic benefits have expired or not.

Which account is always carried over from the unadjusted trial balance columns of a work sheet to the balance sheet columns of the work sheet without any adjustment?