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Exam 3: Accrual Accounting

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Question 61

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Describe why the accrual basis of accounting is preferred for financial reporting over the cash basis.

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Cash basis accounting is not conducive t...

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Question 62

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Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold.During the month of December,a salesperson sold three cycles.The company pays commissions on the fifth day of the month following the sale.When is the recognized revenue?

A) The salesperson will recognize commission revenue earned in the amount of $2,400 in December.
B) The company will recognize commission expense in the amount of $2,400 in December.
C) The salesperson will recognize commission expense in the amount of $2,400 in January.
D) The salesperson will recognize revenue in the same month that the cycle dealer recognizes expense.

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Question 63

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Which of the following adjustments increases net income for the period?

A sporting goods chain purchased supplies at a cost of $11,000 during the year.At January 1,the beginning balance in the supplies account was $3,000.At December 31,supplies on hand are $800.How much is the supplies expense for the year?

On October 1,a company paid $9,000 rent in advance.The rent per month is $1,000.Assuming the company's accounting period ends on December 31,what will be reported on the financial statements?

Which of the following statements presents financial information NOT based on accrual accounting?

Once adjustments have been made,a(n)____________________ is prepared to ensure the accounting equation is still in balance and to facilitate preparation of the financial statements.

A(n)____________________ revenue must be recorded when revenue is earned in advance of receiving cash.

You are the CFO for Cabbage Patch Toys.The board of directors is meeting this afternoon.While reviewing your company's financial statements just minutes before the meeting you notice that no depreciation expense has been reported. A)Describe to the board the impact that omitting this adjustment has had on your financial statements. B)The board has asked you whether this mistake would impact its plan to declare a cash dividend during the meeting.Respond.

Carver Memorial Gardens purchased supplies for $14,500 during the year.At January 1,supplies on hand were $1,000.At December 31,supplies on hand are $3,500.How much is the supplies expense for the year?

The university satellite office operates five days per week with a daily payroll of $5,000.Employees are paid every Saturday for the workweek just completed (Monday through Friday) .The last day of the month is Wednesday,October 31.What is the effect of the correct adjustment at October 31?

Match each statement to the item listed below. -allows all of the account balances to be up-to-date at the time financial statements are prepared

Select the correct revenue recognition principle for each of the following. (Choices may be used more than once.) -consulting services

The six steps for preparing the worksheet are unadjusted trial balance,adjusting entries,adjusted trial balance,______________,retained earnings statement,and balance sheet.

For each transaction select the type of adjustment that would be required. (Choices may be used more than once.) -Revenue is earned for previously received advance cash collections.

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -Interest was earned but not yet collected.

A law firm purchased supplies at a cost of $20,000 during the current year.At January 1,the beginning balance in the supplies account was $1,300.For the year,supplies expense was $11,200.How much "supplies" is on hand as of December 31?

Which of the following would result from failure to record accrued interest expense?

An insurance company received advance payments of $12,000 from clients during the current year.At December 31,$10,000 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31,what will the balances be in the unearned insurance revenue and insurance revenue accounts?

Which of the following would result from failure to record amounts earned for services provided to customers but NOT yet paid?