Exam 4: Accrual Accounting Concepts

McCloud Realty received a cheque for $21,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client.Unearned Revenue was credited for the full $21,000.Financial statements will be prepared on July 31.McCloud Realty should make the following adjusting entry on July 31:

An adjusting entry to a prepaid expense

Adjusting entries for accrued revenues will:

An accumulated depreciation account

In general, revenue recognition occurs

At the end of the current year, the required adjusting entry for depreciation on equipment was omitted.Which of the following statements is true regarding the current year's financial statements?

Under the accrual basis of accounting, expenses are only recognized when they are paid.

The adjustment for accrued salaries results from services being paid for after the services are performed.

If a three-month, 6% bank loan for $5,000 is signed on October 1, the interest expense for the month of October is $25.

Accounting divides the economic life of a business entity into time periods.

Adjusting entries never affect cash.

An accounting transaction never affects more than one accounting time period.

Revenue results when there is an increase in a liability or a decrease in an asset.

Accrued expenses are

Closing entries

Guardian Corp.sells $6,250 of goods on account in the current year and collects $3,250 of this.It incurs $4,200 in expenses on account during the current year and pays $2,600 of them.Guardian would report what amount of net income under the cash and accrual bases of accounting, respectively?

Adjusting entries can be classified as

An adjusted trial balance shows

An adjusted trial balance shows that

On September 1, Monmouth Microwaves Ltd.signed a 9%, five-month bank loan payable for $9,000.The amount of interest to be accrued at December 31, assuming adjusting entries have not been previously made, is