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Exam 3: Accounting for Deferrals

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Question 41

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When a revenue or an expense event is recognized after cash has been exchanged it is referred to as

A) an accrual
B) a deferral
C) either an accrual or deferral
D) neither of these terms describe this event

E) A) and B)
F) All of the above

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Question 42

Multiple Choice

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Which of the following shows how the year-end adjustment to recognize supplies expense will affect a company's financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

E) B) and D)
F) None of the above

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Question 43

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Tucker Company shows the following transactions for the accounting period ending December 31, Year 1: 1)Sold books to customers for $68,000 on account2)Collected $56,000 from customers3)Issued common stock for $16,000 cash4)Prepaid four months' rent for $8,800 on October 1, Year 15)Purchased supplies for $21,000 cash6)Physical count shows $6,500 of supplies remained on December 31, Year 17)Recorded adjustment for prepaid rent usedShow how the above transactions and year-end adjustments affect the accounting equation.

On November 1, Year 1, Falloch, Incorporated paid $3,600 cash for a contract allowing the company to use office space for one year. The company's fiscal year ends on December 31. Based on this information, the amount of cash flow from operating activities appearing on the Year 1 statement of cash flows would be

Which of the following is an asset use transaction?

Indicate how each event affects the financial statements model. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NACalloway Company collected $750 from a customer for services that Calloway agrees to perform in the future.

Thurston Company started its business on January 1, Year 1 by issuing $15,000 of common stock. On January 1, the company purchased equipment for $10,500. The equipment is estimated to have a three-year useful life and a $1,500 salvage value. Customers paid Thurston $54,000 for services performed in Year 1. The company paid $33,000 for operating expenses, and paid a $900 dividend to the stockholders. At year-end, Thurston recognized depreciation expense on the equipment.Required:a)What is the book (carrying)value of the equipment at the end of Year 1?b)What is the net income for Year 1?

Which of the following accounts would not appear on a balance sheet?

When a company purchases supplies on account

On June 1, Year 1, Jack Associates collected $48,000 cash for consulting services to be provided for one year beginning immediately. Based on this information, which of the following shows how the required adjustment on December 31, Year 1, would affect Jack's balance sheet?

Cornelius Company purchased supplies on account. Would the business event be classified as an asset source, asset use or asset exchange transaction?

When a company purchases a depreciable asset, it must estimate the asset's useful life and salvage value.

Explain the significance of the return-on-assets ratio. Who (what category or type of financial statement users)would normally be most interested in this ratio, and why?

Amelia Consulting Services collected $12,000 cash for services to be provided in the future. Which of the following shows how recognizing the cash receipt will affect the company's balance sheet?

The following data were taken from the accounting records of Li Company at December 31, Year 2. All adjustments have been recorded. Required:a)Prepare an income statement for Li Company for Year 2.b)Determine the balance in retained earnings at the end of Year 2.

Which of the following events would require a year-end adjusting entry?

Which of the following shows how paying cash to purchase supplies will affect a company's financial statements?

The carrying value of an asset is the expected selling price of an asset at the end of its useful life.

A company may recognize a revenue or expense without a corresponding cash collection or payment in the same accounting period.

Which of the following transactions would increase a company's return-on-assets ratio?