Exam 3: Accrual Accounting Concepts

Working capital is calculated as .

Flyer Co.billed a client for flying lessons given in January.The payment was received in February.Under the accrual basis of accounting,when should Flyer Co.record the revenue?

If prepaid insurance expires over time,this asset account becomes a(n):

Identify the type of adjustment necessary (the type of item involved)and record the transaction for the event.Make sure to include the ending balances after adjustment.

Describe the end-of-the-period adjustment process.Why is it necessary?

Accrual accounting does not require that the accounting records be updated prior to preparing financial statements.

On June 1,Unidevo,Inc.purchased $1,700 worth of supplies on account.Prior to the purchase,the balance in the supplies account was $0.On December 31,the fiscal year-end for Unidevo,it is determined that $800 of supplies still remain.What is the balance in the supplies account after adjustment?

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Which of the following accounts would likely be included in a deferral adjusting entry?

Describe the differences between the cash and accrual bases of accounting.

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called:

The net income reported on the income statement for the current year was $310,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

On June 1,Unidevo,Inc.purchased $2,300 worth of supplies on account.Prior to the purchase,the balance in the supplies account was $350.On December 31,the fiscal year-end for Unidevo,it is determined that $500 of supplies still remain.What is the balance in the supplies account after adjustment?

Which asset is not depreciated as it usually does not lose its ability to provide service?

Unearned revenue is what type of an account?

Classify the following items as: a.accrued revenue (accrued asset) b.deferred revenue (unearned revenue) c.accrued expense (accrued liability) d.deferred expense (prepaid expense) (1)Three months' rent paid in advance (2)Rental income for six months received in advance (3)Jobs completed but not yet billed at month-end (4)Interest payable accrued on a note,but not yet paid (5)Telephone bill owed but not yet paid (6)A three-year premium paid on auto fleet insurance policy

Which of the following should be shown on a statement of cash flows under the financing activity section?

BlueInk Corporation's accumulated depreciation increased by $14,000,while patents decreased by $3,875 between consecutive balance sheet dates.There were no purchases or sales of depreciable or intangible assets during the year.In addition,the income statement showed a loss on sale of land of $1,950.Accounts receivable increased $6,320,inventory decreased $3,125,prepaid expenses decreased $720,and account payable increased $2,760.Reconcile a net income of $55,000 to net cash flow from operating activities.

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

On the statement of cash flows prepared by the indirect method,a $50,000 gain on the sale of investments would be: