Exam 2: Accounting for Accruals and Deferrals

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 amount of net cash flow from operating activities shown on Nelson Company's Year 1 statement of cash flows is

Vanguard Company uses accrual accounting. Indicate whether each of the following statements regarding Vanguard's accounting system is true or false. _____ a) The recognition of accounting events and the realization of cash consequences must occur in different accounting periods. _____ b) The cash consequence of a transaction sometimes precedes its accounting recognition. _____ c) Expenses may either be matched to revenues they produce or to periods in which they are incurred. _____ d) Vanguard may record accrual transactions, but may not record deferral transactions. _____ e) Vanguard is not permitted to make cash sales.

The matching concept refers to the "matching" of:

On December 31, Year 1, Gaskins Co. owed $4,500 in salaries to employees who had worked during December but would be paid in January. If the year-end adjustment is properly recorded on December 31, Year 1, what will be the effect of this accrual on the following items for Gaskins?

The matching concept leads accountants to select the recognition alternative that produces the lowest amount of net income.

Purchasing prepaid rent is classified as a(n):

Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. Net income for the period was

Jason Company paid $7,200 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

The term "recognition" means to report an economic event in the financial statements.

Which of the following describes the effects of a claims exchange transaction on a company's financial statements?

The following account balances were drawn from the financial statements of Grayson Company: Based on the above information, what is the balance of Common Stock for Grayson Company?

Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements?

Providing services to customers on account is an asset exchange transaction.

Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.

Which of the following financial statement elements is closed at the end of an accounting cycle?

Addison Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on Addison's statements?

Dixon Company collected cash during December of Year 1 from a customer for services to be performed during January of Year 2. Indicate whether each of the following statements about this transaction is true or false. _____ a) Dixon's Year 2 income statement would not be affected by this transaction. _____ b) Dixon's Year 1 statement of cash flows would be affected by this transaction. _____ c) This transaction is an asset exchange transaction. _____ d) The revenue for the services provided will be recorded in Year 2. _____ e) The transaction increases Dixon's liabilities.

Which of the following is an asset source transaction?

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 amount of retained earnings appearing on Nelson Company's December 31, Year 1 balance sheet is:

Regarding the effects of end-of-period adjustments, state whether each of the following statements is true or false. _____ a) Recording the usage of supplies involves an increase in liabilities and a decrease in equity. _____ b) The accrual of salaries is considered a claims exchange transaction. _____ c) Recording services performed on a prepaid contract involves a decrease in liabilities and an increase in assets. _____ d) End-of-period adjustments often affect cash flows. _____ e) Failure to record accrued salaries at the end of the year will cause reported net income to be higher than it should have been.