Exam 4: Income Measurement and Accrual Accounting

When a company recognizes the portion of supplies used during a year, the effect is to decrease net income.

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?

When using a work sheet:

Failure to record dividends paid would result in which of the following?

When an expense is incurred prior to the payment of cash for that expense, an adjustment that increases an expense account and decreases an asset is prepared.

On August 31, Farrell Corporation signed a one-year contract to provide services to Harris Company for $30,000.Harris will pay for the services on September 1.Using the accrual basis of accounting, when should Farrell Corporation recognize revenue?

Camp Consulting Services started business on January 1, 2015.Camp performed services for customers totaling $100,000 of which 40% remain uncollected at the end of December.Under the accrual basis, what amounts would appear on Camp Consulting's financial statements for 2015?

The amount of interest accrued is added to the note payable account and reported in the liabilities section of the balance sheet.

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for an insurance company?

Income summary does not appear on the income statement.

Which of the following statements does not present financial information based on the accrual basis of accounting?

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

The Dividend account is known as which of the following?

An accountant describes the effects of an economic event on an entity by recording the transaction and reporting the amount on the financial statements.What is this called?

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

Deacon Company purchased equipment last year for $30,000.The equipment has an estimated useful life of five years.What amount will appear on the income statement for depreciation expense for the month of March 2014?

A pool cleaning service signs a contract with a new customer on May 1.The pool is vacuumed and "shocked" for the customer on June 1, and the bill for the services is paid on July 1.Under the accrual basis, the business should recognize revenue on:

Matching can occur directly like cost of goods sold), indirectly like plant assets), or immediately when no future benefits from the cost are expected.

Tracy, Inc. -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 amount in the Subscriptions Sold in Advance account should be carried over from the adjusted trial balance of the 10-column work sheet to which of the following columns?