Exam 3: Accrual Accounting Concepts

The liabilities that are due to be paid usually within a year or less are called:

Eagle Eye, Inc., a corporation, received an additional investment of $6,000 cash in exchange for shares of capital stock. How does this transaction affect Eagle Eye's accounts?

Under the balance sheet classification of property, plant, and equipment, some accounts need adjustment and others do not. Which do and why? Which do not and why?

Fees receivable would appear on the balance sheet as a(n):

An adjusting entry would adjust revenue so that it is reported when earned and not when cash is received.

Physical assets of a long-term nature are referred to as fixed assets.

The accrual basis of accounting requires revenue to be recorded when the service is performed.

The following assets are included in Bruce Auto Parts, Inc.'s December 31, 2010, balance sheet. Accounts Receivable \ 50,000 (net of Allowance for Uncollectible Accounts) 30,000 Accumulated Depreciation, Building 100,000 Building 60,000 Cash 130,000 Land 40,000 Land Held for Future Use 70,000 Merchandise Inventory 110,000 Trademark The total dollar amount of assets classified as property, plant, and equipment on Bruce Auto Parts' December 31, 2010, classified balance sheet is:

Which of the following is an example of a deferred expense?

Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements.

Gaston Corporation's accumulated depreciation increased by $10,000, while patents decreased by $3,200 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 gain of $3,500 from sale of land. Reconcile a net income of $45,000 to net cash flow from operating activities.

Current assets are assets that are expected to be converted to cash, sold or used up within 6 months.

A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M's accounts?

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

When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected?

On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $200. On December 31, the fiscal year-end for Green Pea, it is determined that $700 of supplies still remain. What is the amount to be recorded in the adjusting entry?

Under the accrual basis of accounting, the accounting records are normally updated after the preparation of the financial statements.

Which of the following is an example of an accrued expense?

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

On April 1, Bear, Inc. paid $2,400 for an insurance premium on a three-year insurance policy. At the end of December, Bear's fiscal year-end, what should be the balance in the prepaid insurance account?