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

A) Recognized depreciation expense on equipment.
B) Incurred operating expenses on account.
C) Paying interest on a note that was accrued in a prior year.
D) All of the above are correct.

E) A) and C)
F) None of the above

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Question 62

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Using the form below, record each of the following 2013 transactions for Morris Corporation: a) Nov. 1. Received cash from clients for services to be performed over the next six months, $6,000. b) Nov. 1. Paid $600 for a 12-month insurance policy. c) Dec. 31. Recorded expiration of two months of the insurance. d) Dec. 31. Earned $2,000 of the amount received from clients in November.

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Question 63

Multiple Choice

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Which of the following is an asset exchange transaction?

The total amount of assets shown on Norris Company's December 31, 2013 balance sheet is:

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

Adjusting entries never affect a business's cash account.

For each of the following transactions, indicate the type by entering AS for asset source transactions, AU for asset use transactions, AE for asset exchange transactions, and CE for claims exchange transactions. 1) ___ Purchased supplies on account. 2) ___ Recorded the accrual of $1,000 in salaries to be paid later. 3) ___ Issued common stock for $20,000 in cash. 4) ___ Earned revenue to be collected next year. 5) ___ Paid $2,000 in dividends to its stockholders. 6) ___ Received cash from customers in #4 above. 7) ___ Paid the salaries accrued in #2 above. 8) ___ Received $500 from a customer for services to be provided later.

Providing services to customers on account is an asset source transaction.

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

George Co. collected $1,000 cash from accounts receivable.

Which of the following accounts is not closed at the end of an accounting cycle?

Woodward Enterprises had the following events during 2013: The business issued $20,000 of common stock to its stockholders. The business purchased land for $12,000 cash. Services were provided to customers for $16,000 cash. Services were provided to customers for $5,000 on account. The company borrowed $16,000 from the bank. Operating expenses of $12,000 were incurred and paid in cash. Salary expense of $800 was accrued. A dividend of $4,000 was paid to the owners of Woodward Enterprises. Assuming the company began operations during 2013, the amount of retained earnings as of December 31, 2013 would be:

The bankruptcies of Enron and WorldCom both indicated the occurrence of major audit failures.

The effects of transactions occurring during 2013 and their related end-of-year adjustments have been recorded below using the accounting equation. Required: With your knowledge of transaction analysis using an accounting equation, a) Prepare an income statement for 2013, and b) Prepare a statement of cash flows for 2013.

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

The Ping Corporation was started on January 1, 2013, with the issuance of $20,000 of stock. During 2013, the company provided $30,000 of services on account and collected $18,000 of that amount. Ping incurred $23,000 of expenses, and paid $20,000 of that amount during 2013. On December 31, 2013, Ping paid investors a $800 cash dividend and accrued $2,000 of salary expense. Required: 1) What is the net income for year ending December 31, 2013? 2) Prepare Ping Corporation's Statement of Cash Flows for the year ended December 31, 2013. 3) What is the balance in Ping's retained earnings account after closing entries are made on December 31, 2013?

Adkins 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 ABC's statements?

If retained earnings decreased during the year, and no dividends were paid, which of the following must be true?

The matching concept refers to the "matching" of:

Jenkins Co. performed services for customers on account.