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Exam 4: Income Measurement and Accrual Accounting

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Question 81

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Malco Tile Shop purchased insurance coverage for two years on July 1, 2015, for its retail shop for $3,600. Malco recorded the prepayment as an asset. Malco prepares its adjusting entries at year end December 31. A. What is the effect on the accounting equation of the adjusting journal entry necessary at December 31, 2015? B How much will be reported on the balance sheet at December 31, 2015 for prepaid insurance? C How much will be reported on the income statement for the year ended December 31, 2015, for insurance expense? D If the adjustment in part A is not recorded, by what amount will net income be over or understated at December 31, 2015? E How much will be reported on the statement of cash flows for the year ended December 31, 2015? In which activity? operating, investing, financing F Identify the effects on accounts adjusted at December 31, 2016. G How much will be reported on the balance sheet at December 31, 2016 for prepaid insurance? H How much will be reported on the income statement for the year ended December 31, 2016, for insurance expense? I How much will be reported on the statement of cash flows for the year ended December 31, 2016? In which activity? operating, investing, financing

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A.
B Prepaid Insurance = $2,700
C Insu...

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Question 82

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Income statement accounts are also known as which of the following?

A) Nominal accounts
B) Real accounts
C) Closing accounts
D) Both a and c

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Question 83

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The amount of cash that could be received by selling an asset currently is called historical cost.

Stanfield Equipment sells new tractors and pays each salesperson a commission of $1,000 for each tractor sold. During the month of August, a salesperson, Jason, sold 3 new tractors. Stanfield pays Jason on the 10th day of the month following the sale. Jason operates on the cash basis; the tractor dealer operates on the accrual basis. Which of the following statements is true?

Every company prepares only four adjustments--one for each of the four types of adjustments.

Tracy, Inc. Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: -Refer to the trial balance for Tracy, Inc. Employees are owed $750 for services since the last payday in July, to be paid the first week in August. The amount to be reported in the July income statement for salaries expense is:

The balance in the account, Rent Collected in Advance, is reported as an asset on the balance sheet of the landlord.

Failure to record depreciation expense for the period results in which of the following?

On December 1, 2015, Twilight Corporation paid $8,000 rent in advance. The rent per month is $1,000. If Twilight's accounting period ends on December 31, 2015, what will be reported on the financial statements?

Tracy, Inc. Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: -Refer to the trial balance of Tracy, Inc. On July 1, Tracy paid four months in advance for insurance. Which of the following is included in the adjusting entry at July 31?

Select the correct revenue recognition principle for each of the following. -Subscription to a magazine

When cash is paid before an expense is incurred, an accrual is necessary.

Carter, Inc. paid salaries expense of $292,000 during 2015. However, additional salaries of $14,000 had been earned by employees, but not paid or recorded at December 31, 2015 by Carter. A What is the effect on the accounting equation of the adjusting entry necessary at December 31, 2015? B Under which basis, cash, accrual, or both, would the adjustment in part A be prepared? Explain. C Under the accrual basis of accounting, what is the total amount of salaries expense for the year ended December 31, 2015? D Under the accrual basis of accounting, what is the total amount of salaries payable to be reported at December 31, 2015? E Under the cash basis of accounting, what is the total amount of salaries expense for the year ending December 31, 2015? F Under the cash basis of accounting, what is the total amount of salaries payable at December 31, 2015?

When are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

Lucky Company purchased a truck at a cost of $12,000 in 2010. As of January 1, 2015, depreciation of $10,000 had been recorded on this asset. Depreciation expense for 2015 is $2,000. After the adjustments are recorded and posted at December 31, 2015, what is the carrying value of the truck?

What does the phrase, "Revenue is recognized at the point of sale" mean?

Statements prepared monthly, quarterly, or at other intervals less than a year in duration are called _____________________.

A decline in purchasing power is evidenced by all of the following except:

Union Company purchased a delivery van at a cost of $30,000 cash on January 1, 2014. The van has an estimated useful life of 6 years and a $6,000 estimated residual value. A. What is the effect on the accounting equation of the purchase of the van? B. How much depreciation expense should be reported for 2015? C. What is the total amount of accumulated depreciation at December 31, 2015?

The one asset account that never requires adjustment at the end of the period is---------.