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Exam 3: Accrual Accounting

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Question 91

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What type of accounting recognizes revenues and expenses in the same accounting period that cash receipts and payments occur?

A) cash basis of accounting
B) accrual basis of accounting
C) adjusting method of accounting
D) finance method of accounting

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Question 92

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A local tennis club sells season memberships for $1,000 each.During January,50 season memberships were sold.As of March 31,only $25,000 of season membership fees had been collected from customers.The tennis season runs for six months starting April 1.Which of the following is an amount reported on the balance sheet dated March 31?

A) unearned tennis membership revenue of $25,000
B) unearned tennis membership revenue of $50,000
C) accounts receivable of $50,000
D) tennis membership revenue of $25,000

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Question 93

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The following unadjusted amounts were taken from the accounting records of an insurance company at December 31,Year 1: $\begin{array}{llr} \text { Insurance collected in advance } &\$120,000\\ \text { Office supplies} &1,200\\\end{array}$ A) Prepare any necessary adjusting entries at December 31. Year 1, for both of the following transactions: 1. The insurance premiums collected over the period December 1, Year 1, through May 31. 2014. 2. At the end of the year, an inventory revealed that $\$ 250$ of the office supplies remained on hand. B) What is the effect of omitting each of these adjustments an the curent year's aet income? What is the combined result of omiting both of these adjustments?

An informal schedule called a(n)________________ is helpful for organizing and preparing the information necessary to perform the end-of-period steps in the accounting cycle.

Under the ____________________ basis of accounting,revenues are recognized when earned and expenses when incurred.

A company forgot to record four adjustments during 2013.Which of the following omissions of adjustments will understate net income?

Match the most probable matching method to the costs listed. (Choices may be used more than once.) -storage facility used for storing inventory goods

Closing entries are necessary to assure that the company's net income for an accounting period is accurately determined.

California Condos California Condos uses the accrual basis of accounting, and had the following account balances on its financial statements at December 31, Year 1. $\begin{array}{lr}\text { Rent revenue } & \$ 340,000 \\\text { Accounts receivable } & 89,200 \\\text { Utilities payable } & 12,000 \\\text { Rent expense } & 22,000 \\\text { Unearned revenue } & 17,000\\\text { Depreciation expense } & 12,000 \\\text { Salaries expense } & 45,000 \\\text { Salaries payable } & 4,000 \\\text { Retained earnings, January 1 } & 60,000 \\\text { Dividends } & 2,500 \\\text { Interest revenue } & 10,000\end{array}$ -Refer to California Condos.On January 1,there was a zero balance in the salaries payable account.How much cash did the company pay for salaries during the year?

A calendar year company paid $24,000 on October 1,Year 1 to purchase two years of insurance coverage for its retail shop.The prepayment was initially recorded as an asset. A) What adjusting journal entry is necessary at December 31, Year 1 ? B) How much will be reported on the balance sheet at December 31, Year 1, for prepaid insurance? C) How much will be reported on the income statement for the year ended December 31 , Year 1, for insurance expense? D) If the adjustment in part A is not recorded by what amount will net income be overstated or understated at December 31, Year 1 ? E) What adjusting journal entry is necessary at December 31, Year 2? F) How much will be reported on the balance sheet at December 31, Year 2, for prepaid insurance? G) How much will be reported on the income statement for the year ended December 31 , Year 2, for insurance expense?

The ____________________ principle requires that expenses be recorded and reported in the same period as the revenue that it helped to generate.

From the list of accounts, determine whether the account is a temporary or permanent account. (Choices may be used more than once.) -unearned revenue

The ____________ basis of accounting recognizes revenue when it is received regardless of when the revenue is earned.

The ____________________ principle determines when revenue is recorded and reported.

Which of the following financial statements is NOT facilitated by the worksheet?

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -Two years insurance premium was paid in advance.

The ____________________ basis of accounting requires that revenues be recorded in the period they are earned rather than in the period they are received.

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

Cabana Club The company's consolidated statement of income is provided below: -Refer to Cabana Club.The company reported $210,000,000 and $120,000,000 of accrued interest payable in the liability section of its balance sheet at December 31,Year 2 and Year 1,respectively.How much cash did it pay during Year 2 for interest?

Match Incorporated recorded salary expense of $120,000.However,additional salaries of $9,000 had been earned but not paid or recorded at December 31.After the adjustments are recorded and posted at December 31,what will be the balances in the salaries expense and salaries payable accounts?