Exam 2: Accounting for Accruals and Deferrals

The accounting principle that guides accountants, when faced with a recognition dilemma, to choose the alternative that produces the lowest net income is referred to as:

Which of the following is an asset use transaction?

Asset use transactions always involve the payment of cash.

Indicate whether each of the following statements regarding the four types of accounting events is true or false. _____ a) Asset exchange transactions involve an increase in one asset and a decrease in another asset. _____ b) An asset source transaction involves an increase in assets and an increase in a corresponding claims account. _____ c) An asset use transaction cannot result in an increase in equity. _____ d) Asset exchange transactions cannot affect cash flows. _____ e) Some claims exchange transactions involve an increase in a liability account and a decrease in an equity account.

The balance in a revenue account at the beginning of an accounting period will always be

The adjusting entry to recognize work completed on unearned revenue involves which of the following?

Which of the following accounts is not closed at the end of an accounting cycle?

A company may recognize a revenue or expense without a corresponding cash collection or payment in the same accounting period.

Which of the following transactions does not involve an accrual?

Recognition of revenue may be accompanied by which of the following?

Sometimes the recognition of revenue is accompanied by an increase in liabilities.

Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders. 2) Provided $4,600 of services on account. 3) Paid $3,200 cash for operating expenses. 4) Collected $3,800 of cash from accounts receivable. 5) Paid a $200 cash dividend to stockholders. The total amount of assets shown on Nelson Company's December 31, Year 1 balance sheet is:

The purpose of the accrual basis of accounting is to:

Revenue on account amounted to $9,000. Cash collections of accounts receivable amounted to $8,100. Cash paid for expenses was $7,500. The amount of employee salaries accrued at the end of the year was $900. Cash flow from operating activities was

Earning revenue on account would be classified as a/an?

After closing, all income statement accounts have non-zero balances.

Which of the following events would not require an end-of-year adjusting entry?

Mize Company provided $45,500 of services on account, and collected $38,000 from customers during the year. The company also incurred $37,000 of expenses on account, and paid $32,400 against its payables. As a result of these events,

Wheaton Co. performed services for a customer on account. Indicate whether each of the following statements about this transaction is true or false. _____ a) Assets and equity both increase when the revenue is recognized. _____ b) This transaction did not affect cash flows. _____ c) The company recorded an increase in revenue and a decrease in accounts receivable. _____ d) Recognition of revenue would be delayed until cash was received. _____ e) This transaction is an example of an asset exchange transaction.

Revenues and expenses are temporary accounts.