Exam 4: Income Measurement and Accrual Accounting

For each of the following sentences 3-10,select the word or group of words that best completes the statement. The ____________________ of accounting is a system in which revenues are recognized when payments are received and expenses are recognized when payments are made.

Why is the cash basis of accounting too limited for proper financial reporting?

Which one of the following steps in the accounting cycle is optional rather than required?

Temporary accounts are also known as _________________ accounts.

Determine the net income (loss)for the period.

The income statement for Horton Solutions would show the following: Horton Solutions Income Statement For the Month Ended January 31,2014

Closing entriesserve two important purposes: (1)to return the balances in all temporary or nominal accounts to zero to start the next accounting period and (2)to transfer the net income (or net loss)and the dividends of the period to the Retained Earnings account.

Tara Dance Studio's accounting records reflect the following account balances at January 1,2014. During 2014,the following transactions occurred: Required:

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

Blair Resorts purchased guest room furniture on January 1,2013 for $120,000.The furniture has an estimated useful life of ten years.What amount will appear on Blair's income statement for depreciation expense for the year ending June 30,2014?

Which one of the following adjustments decreases net income for the period?

Expenses originate from

One effect of recognizing depreciation is to decrease net income.

Irrigation Corp.purchased supplies at a cost of $5,200 during 2014.At January 1,2014,supplies on hand were $1,600.During the year,the company used $4,000 of supplies.Irrigation's accounting year ends on December 31.

What is the significance of the timing in which cash is paid or received as it relates to the adjusting process?

Which one of the following is the last step in the accounting cycle?

Wentworth Company received advance payments from customers during 2014 of $10,000.At December 31,2014,$1,000 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31,2014,the balances in the Unearned Service Revenue and Service Revenue accounts will be Unearned Service Revenue Service Revenue

Financial statements should be prepared before any adjustments are made.

When an expense is incurred prior to the payment of cash for that expense,an adjustment that increases an expense account and decreases an asset is prepared.

Every company prepares only four adjustments--one for each of the four types of adjustments.