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Exam 2: Accounting for Accruals and Deferrals

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Question 61

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Which of the following transactions does not involve an accrual?

A) Recording interest earned that will be received in the next period.
B) Recording operating expense incurred but not yet paid.
C) Recording salary expense incurred but not yet paid.
D) Recording the pre-payment of two years' worth of insurance.

E) A) and C)
F) A) and D)

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Question 62

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The temporary or nominal 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)?

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Retained Earnings
Explanation: Closing r...

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Question 63

Multiple Choice

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Prior to closing, XYZ Company's accounting records showed the following balances: After closing, XYZ's retained earnings balance would be

Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.

Which of the following financial statement elements is closed at the end of an accounting cycle?

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

Asset use transactions always involve the payment of cash.

Which of the following events would not require an end-of-year adjusting entry?

The following accounts and balances were drawn from the records of Hoover Company on December 31, 2013: $\begin{array} { l r l r } \text { Cash } & \$ 1,000 & \text { Accounts Receivable } & \$ 850 \\\text { Dividends } & 500 & \text { Common Stock } & 975 \\\text { Land } & 800 & \text { Revenue } & 800 \\\text { Accounts Payable } & 450 & \text { Expense } & 550\end{array}$ The amount of net income shown on the December 31, 2013 income statement would amount to:

Which of the following is an asset use transaction?

The matching concept refers to the "matching" of:

Norris Company experienced the following transactions during 2013, its first year in operation. 1) Issued $6,000 of common stock to stockholders. 2) Provided $2,300 of services on account. 3) Paid $1,600 cash for operating expenses. 4) Collected $1,900 of cash from accounts receivable. 5) Paid a $100 cash dividend to stockholders. The amount of net cash flow from operating activities shown on Norris Company's 2013 statement of cash flows is

The term "recognition" means to report an economic event in the financial statements.

Which of the following would cause net income on the accrual basis to be different than (either higher or lower than) "cash provided by operating activities" on the statement of cash flows?

The balance in a revenue account at the beginning of an accounting period will always be

Companies that use accrual accounting recognize revenues and expenses at the time that cash is paid or received.

Norris Company experienced the following transactions during 2013, its first year in operation. 1) Issued $6,000 of common stock to stockholders. 2) Provided $2,300 of services on account. 3) Paid $1,600 cash for operating expenses. 4) Collected $1,900 of cash from accounts receivable. 5) Paid a $100 cash dividend to stockholders. The total amount of assets shown on Norris Company's December 31, 2013 balance sheet is:

Tell whether each of the following events are asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE) transactions. _____1) Issued common stock to investors for $8,000 cash _____2) Paid one year's rent in advance _____3) Provided services to customers and received $35,000 cash _____4) Paid creditors $10,000 _____5) Received $3,000 of revenue in advance _____6) Provided services to customers on account, $12,000 _____7) Collected $2,000 from accounts receivable _____8) Recognized accrued salary expense of $2,000 _____9) Borrowed $6,000 from creditors _____10) Adjusted the records for supplies used of $800

Giambrone Corporation began business operations and experienced the following transactions during 2013: 1) Issued common stock for $15,000 cash. 2) Issued a $10,000, 6% 4-year note to the bank on February 1. 3) Provided services to customers for $40,000 cash. 4) Paid $19,000 for operating expenses. 5) Accrued interest expense on the note. 6) Paid a $2,000 dividend to shareholders. Required: Record the above transactions on a horizontal statements model to reflect their effect on Giambrone's financial statements.

Franklin Trash Removal Company received a cash advance of $9,000 on December 1, 2013 to provide services during the months of December, January, and February. The year-end adjustment to recognize the partial expiration of the contract will