Exam 4: Income Measurement and Accrual Accounting

Accumulated Depreciation

Becca Corp. purchased supplies at a cost of $5,200 during 2014. At January 1, 2015, supplies on hand were $1,600. During the year, the company used $4,000 of supplies. Becca's accounting year ends on December 31. A What is the effect on the accounting equation of the adjusting entry that is prepared at December 31, 2015? B Under the accrual basis of accounting, how much is Supplies Expense for 2015? C How much should be reported on the December 31, 2015, balance sheet for Supplies? D What type of adjustment was made in part A?

Measurement in accounting requires choosing an attribute and a unit of measure. is the attribute used for many of the assets included in the financial statements.

All of the following describe a revenue except:

Under the accrual basis of accounting, at what point in time should a fast food restaurant recognize revenue? _________________________

Quirin Corp. purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on hand has a balance of $1,850 on March 1. Purchases of supplies during March amount to $1,500. Supplies on hand at March 31 amount to $1,020. REQUIRED: a Identify and analyze the necessary adjustment to be made on Quirin's books on March 31. b What will be the effect on net income for March if this adjustment is not made?

When initially recording the cost of land purchased, most companies use the current value.

Answer each of the following questions a-c with a separate short paragraph per question. a What is the difference between a real account and a nominal account? Give an example of each type of account. Why is this distinction important for the closing process? b What two purposes are served in making closing entries? c Why is the Dividends account closed directly to Retained Earnings rather than to the Income Summary account?

Refer to the consolidated statements of income for Scenic View Foods Corporation. REQUIRED: Identify three specific accounts of Scenic View Foods that might include expenses accrued as a result of adjustments. Discuss the 'effects' of these on the accounting equation. Ignore amounts.

The process of recording an item in the financial statements is called measurement.

Expenses originate from

Match the most probable matching method to the costs listed below -Commissions earned by sales people

Why is the cash basis of accounting too limited for proper financial reporting?

Match the most probable matching method to the costs listed below -Taxes owed on income earned during the current period

From the list of accounts below, determine whether the account would be a nominal account or a real account. -Sales Revenue

Select the correct revenue recognition principle for each of the following. -Interest

For each transaction select the letter of the type of adjustment that would be required. -Amounts earned, not received from customers are recorded

Martinez Produce sells fresh vegetables and fruits in Sutton County. The following unadjusted amounts were taken from the company's accounting records at December 31, 2015: Note Payable, 12%, 4-month, dated December 1, 2015, for $20,000 Note Receivable, 10%, 6-month, dated October 1, 2015, for $12,000 A Determine the effects on the accounting equation of any adjusting entries that would be necessary at December 31, 2015, for the notes. B Fill in the partial balance sheet below by showing the notes and the effects of any adjustments related to the notes.

Nathan Company's plant operates five days per week with a daily payroll of $50,000. Employees are paid every Tuesday for the prior week's work Monday through Friday. The last day of the month is Tuesday, April 30. What effect does the accrual at April 30 have on Nathan's net income?

On October 1, 2014, Winter Corp. buys a computer system for $270,000 in cash. Assume that the computer is expected to have a five-year life and an estimated salvage value of $30,000 at the end of that time. REQUIRED: 1. Show how the effect of the purchase of the computer on October 1, 2014 can be identified and analyzed. 2. Compute the depreciable cost of the computer. 3. Using the straight-line method, compute the monthly depreciation. 4. Identify and analyze the adjustment for depreciation at the end of October 2014. 5. Compute the computer's carrying value that will be shown on Winter's balance sheet prepared on December 31, 2014.