Exam 2: Accounting for Accruals and Deferrals

An increase in an expense may be accompanied by an increase in a liability.

Mackie Company provided $25,500 of services on account, and collected $18,000 from customers during the year. The company also incurred $17,000 of expenses on account, and paid $15,400 against its payables. As a result of these events.

Giambrone Corporation began business operations and experienced the following transactions during 2013: 1) Issued common stock for $15,000 cash. 2) Issued a $10,000, 6% 4-year note to the bank on February 1. 3) Provided services to customers for $40,000 cash. 4) Paid $19,000 for operating expenses. 5) Accrued interest expense on the note. 6) Paid a $2,000 dividend to shareholders. Required: Record the above transactions on a horizontal statements model to reflect their effect on Giambrone's financial statements.

Kramer Corporation began business operations and experienced the following transactions during 2013: 1) Issued common stock for $10,000 cash. 2) Provided services to customers for $40,000 on account. 3) Incurred $18,000 of operating expenses on account. 4) Collected $23,000 cash from customers. 5) Paid $15,000 on accounts payable. Required: Record the above transactions on a horizontal statements model to reflect their effect on Kramer's financial statements.

Expenses that are matched with the period in which they are incurred are frequently called:

What action did the U. S. Congress take because of the audit failures at Enron, WorldCom and other companies?

What effect does the recording of revenue normally have on total assets?

Indicate for each of the following items if the item would be reported on the income statement (IS), statement of changes in equity (CE), balance sheet (BS), or statement of cash flows (CF). Some items may appear on more than one statement, if so, identify all applicable statements. 1) Prepaid insurance 2) Dividends paid to stockholders 3) Interest revenue 4) Accounts payable 5) Salaries expense 6) Retained earnings 7) Unearned subscription revenue 8) Cash flows from operating activities 9) Beginning common stock 10) Issued stock to investors for cash 11) Salaries payable 12) Accounts receivable

Which of the following is an asset use transaction?

Which of the following choices accurately reflects how the recording of accrued salary expense affects a business's financial statements?

Tocca Co. collected a $5,000 cash advance from a customer on November 1, 2013 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect on Tocca's 2013 financial statements?

The amount of net income recognized on Norris Company's 2013 income statement is:

Houston Company began business operations and experienced the following transactions during 2013: 1) Issued common stock for $20,000 cash. 2) Provided services to customers for $50,000 on account. 3) Purchased $1,000 of supplies on account. 4) Paid $12,000 cash to rent office space for a 12-month period beginning July 1. 5) Collected $46,000 cash from customers. 6) Paid cash for $36,000 of operating expenses. 7) Adjusted the accounting records to reflect that there was $300 of supplies remaining on hand at year-end. 8) Recorded an end-of-year adjustment to recognize rent expense. Required: a) Record the above transactions on a horizontal statements model, reflecting their effect on the different financial statements. b) Prepare Houston Company's income statement, balance sheet and statement of cash flows for the year ended December 31, 2013.

The following data were taken from the accounting records of Lorenzo Company. Except where indicated, the balances are as of December 31, 2013 before closing entries have been made. Required: a) List the accounts that should be closed at the end of 2013. b) Prepare an income statement for Lorenzo Company for 2013. c) What is the balance in retained earnings after closing entries have been made?

Indicate whether each of the following statements regarding the four types of accounting events is true or false. _____ a) Asset use 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 exchange transaction involves an increase in an asset and a decrease in a claims account. _____ d) Asset exchange transactions involve an increase in one asset and a decrease in another asset. _____ e) Some claims exchange transactions involve an increase in a liability account and a decrease in an equity account.

Grant Company purchased a machine on January 1, 2013 for $13,000 cash. The machine has an estimated useful life of 4 years and a $3,000 salvage value. What would be the book value of the machine reported on Grant's December 31, 2013 balance sheet?

Record each of the following events in the horizontal statements model. After each event, record the corresponding end-of-year adjustment that would be necessary. a) Paid $18,000 for a 1-year lease beginning April 1. b) Paid $1,500 to purchase supplies. At year end, $540 of supplies remained. c) Received a $24,000 cash advance for a 6-month contract beginning on Sept. 1.

Jerry Mathers started his business by issuing $4,000 of common stock on January 1, 2013. Jerry performed $8,500 of service on account in 2013, and he collected $6,200 of this amount by year end. He paid operating expenses of $6,900 and paid a $900 dividend to the stockholders. Required: A) What is the amount of total assets at the end of 2013? B) What is the amount of cash on hand at the end of 2013? C) What is net income for 2013? D) Prepare a balance sheet for 2013.

Revenue on account amounted to $4,000. 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

The following events apply to Bowen's Cleaning Service for 2013. 1). Issued stock for $14,000 cash. 2). On May 1, paid $9,000 for one year's rent in advance. 3). Purchased on account $2,500 of supplies to be used in the business. 4). Performed services of $18,400 and received cash. 5). At December 31, an inventory of supplies showed that $360 of supplies were still unused. 6). At December 31, adjusted the records for the expired rent. Required: Draw an accounting equation and record the effects of the above events under the appropriate account headings. Show the year-end total for each account.