Exam 2: Accounting for Accruals and Deferrals

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

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

The ethical standards for certified public accountants simply require that such accountants comply with applicable laws and regulations.

Which of the following is not an article of the AICPA Code of Professional Conduct?

Certified public accountants are obligated to act in a way that serves the public interest.

Describe the difference between temporary and permanent accounts, and state which ones are closed.

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

The results of the matching process are best reported on which financial statement?

Gonzales Company collected $18,000 on September 1, 2013 from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gonzales Company report related to this contract on its income statement for the year ended December 31, 2013? How much would it report as cash flows from operating activities for 2013?

What is meant by the "fraud triangle"?

Crosby Company recorded $3,000 of depreciation expense on a delivery van.

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

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 a decrease in assets 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 never affect cash flows. _____ e) Failure to record accrued salaries at the end of the year will cause reported income to be higher than it should have been.

Define the accounting cycle and list the stages of the cycle.

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

Dandridge Company collected cash in 2012 from a customer for services to be performed beginning January 2013. Indicate whether each of the following statements about this transaction is true or false. _____ a) Dandridge's 2012 income statement would not be affected by this transaction. _____ b) Dandridge's 2012 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 2013. _____ e) This transaction is considered an accrual transaction.

In a company's annual report, the reader will find a company's income statement, statement of changes in stockholder's equity, balance sheet, and statement of cash flows. These financial statements can help the reader to answer specific questions. Identify which financial statement would be most useful in answering the following questions. If more than one financial statement can answer the question, please identify all applicable statements. 1) What was the amount of cash dividends paid to the stockholders during the most recent year? 2) What was the total amount of land owned by the company? 3) What was the total amount of cash borrowed by the company during the most recent year? 4) What were the types of claims that the company has against its assets? 5) What was the total amount of cash received by the issuance of common stock? 6) Was the company profitable during the most recent year? 7) How much cash was collected from accounts receivable during the current year? 8) What was the total revenue earned by the company during the most recent year? 9) What was the ending balance of retained earnings? 10) What was the amount of change in the cash balance during the current year?

The Sarbanes-Oxley Act includes several significant reforms that affect the auditing profession, but it did not reduce an audit firm's ability to provide non-audit services to its audit clients.

The term "accrual" describes an earnings event that is recognized after cash is paid or received.

Creighton Company accrued $120 of interest expense.