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Exam 3: The Financial Reporting Process

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Question 51

True/False

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The adjusting entry for an accrued revenue always includes a debit to a liability account and a credit to a revenue account.

A) True
B) False

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Question 52

Multiple Choice

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A company paid $900 to workers during May. Of this amount, $600 was for work performed in April, while the other $300 was for work performed during May. What would the impact of this transaction be during May on each of the following three items?

A) Option a
B) Option b
C) Option c
D) Option d

E) C) and D)
F) B) and C)

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Question 53

Multiple Choice

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Which of the following statements are correct?

The following data are taken from the cash-basis accounting records of Myerson Company for the year ended December 31, 2012: Selected Data as of December 31,2012 $\begin{array}{lr}\text { Customers billed in 2012 for services provided } & \$ 400,000 \\\text { Cash collections in 2012 for accounts billed in 2011 } & 20,000 \\\text { Cash collections in 2012 for accounts billed in 2012 } & 300,000 \\\text { Cash paid for supplies purchased in 2012 } & 12,000 \\\text { Supplies remaining at the end of 2012 } & 2,000 \\\text { Cash paid for salaries in 2012 } & 10,000 \\\text { Cash paid for annual rent on March 1, 2012 } & 18,000\end{array}$ Calculate the amount of revenues and expenses for 2012 under cash-basis accounting.

On September 1, 2012, Gold Magazine sold 400 one-year subscriptions for $90 each. The total amount received was credited to Unearned Revenue. What would be the required adjusting entry at December 31, 2012?

Long-term assets are assets that provide a benefit to a company for more than one year.

Consider the following events for Betterment Incorporated: Under accrual-basis accounting, what is the appropriate day to record the expenses related to the gasoline?

The following is selected financial information for Osmond Dental Laboratories for 2012 and 2013: Osmond issued 2,000 shares of additional capital stock in 2013 for $20,000. There were no other capital transactions. Prepare a statement of stockholders' equity for the year ended December 31, 2013.

During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

The adjusting entry for an accrued revenue has the effects of increasing assets and increasing net income.

The adjusted trial balance for China Tea Company at December 31, 2012, is presented below: Prepare a classified balance sheet for China Tea Company as of December 31, 2012:

What are the purposes of closing entries?

On July 1, 2012, Rents-A-Lot Inc. paid $72,000 for 36 months of advance rent on its warehouse. What would be the amount of rent expense in the 2013 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the term in the space provided. Terms: -____ A list of accounts and their balances prepared before adjusting entries are recorded.

The adjusting entry for an accrued expense has the effects of decreasing net income and decreasing liabilities.

The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:

A company pays $1,700 cash to employees for work performed during the month. Record the payment using (a) accrual-basis accounting and (b) cash-basis accounting.

The following answers point out the key phrases that should appear in students' answers. They are not intended to be examples of complete student responses. It might be helpful to provide detailed instructions to students on how brief or in-depth you want their answers to be. -Describe what is meant by prepaid expenses and give two examples.

The closing entry for expense accounts includes a debit to Retained Earnings and a credit to all expense accounts.

A company pays $1,200 on account for supplies purchased last month. All supplies were used last month. Record the payment using (a) accrual-basis accounting and (b) cash-basis accounting.