Exam 3: Accrual Accounting

A company borrowed $100,000 from Better Bank on November 1, 2013. The terms of the loan (note)is 6% interest due in 4 months.

A company employs 10 workers in its manufacturing facility. Each employee is paid $10 per hour and works 8 hours per day, Monday through Friday. Employees are paid every Wednesday for the previous Monday through Friday workweek. The last payday was Wednesday, October 28.

For each transaction select the type of adjustment that would be required. (Choices may be used more than once.) a.Deferred (prepaid)expense b.Deferred (unearned)revenue c.Accrued expense d.Accrued revenue -Depreciation on a building is recorded

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

If the Income Summary account has a credit balance just prior to closing it to retained earnings, the company must have incurred a net income for the year.

Adjustments are recorded for all transactions involving outside entities.

Which of the following entries properly closes a temporary account?

A tool company purchased equipment at a cost of $100,000 in January, 2004. As of January 1, 2013, depreciation of $45,000 had been recorded on this asset. Depreciation expense for 2013 is $5,000. After the adjustments are recorded and posted at December 31, 2013, what are the balances for the Depreciation Expense and Accumulated Depreciation? Depreciation Expense Accumulated Depreciation

Expenses should be matched against revenue

What are adjusting entries and what is their purpose?

-The following are selected data from a large company's financial statements: Identify the steps in the accounting cycle that must have been completed prior to determining these amounts.

Match each statement to the item listed below a.Accrual basis accounting f.Depreciation b.Adjusted trial balance g.Matching principle c.Adjusting entries h.Revenue recognition principle d.Cash basis accounting i.Time period assumption e.Contra accounts j.Worksheet -States that revenues and expenses are recorded in the time period received or paid

Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold. During the month of December, a salesperson sold 3 cycles. The company pays commissions on the 5th day of the month following the sale. Which of the following statements is true?

A sporting goods chain purchased supplies at a cost of $11,000 during the year. At January 1, the beginning balance in the supplies account was $3,000. At December 31, supplies on hand are $800. Determine supplies expense for the year.

Match each statement to the item listed below a.Accrual basis accounting f.Depreciation b.Adjusted trial balance g.Matching principle c.Adjusting entries h.Revenue recognition principle d.Cash basis accounting i.Time period assumption e.Contra accounts j.Worksheet -States that revenues should be recorded in the period in which it is earned

Failure to record depreciation expense for the period results in which of the following?

The difference between accrual-based revenue and accrual-based expenses in the period the activity occurred is called ____________________.

The worksheet facilitates preparation of the income statement, retained earnings statement and balance sheet but not the cash flow statement.

Income statement accounts are also known as which of the following?

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) a.a deferred (prepaid)expense b.a deferred (unearned)revenue c.an accrued expense d.an accrued revenue -Cash was collected from customers for services to be performed next year