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Exam 3: The Accounting Cycle: End of the Period

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Question 61

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Which of the following statements are correct? For accrual-basis accounting: (1) record revenues when earned.(2) record expenses when cash is paid.For cash-basis accounting: (3) record revenue when cash is received.(4) record expenses when benefit is received.

A) (1) and (4) .
B) (2) and (3) .
C) (1) and (3) .

D) All of the above
E) B) and C)

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Question 62

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The Deferred Revenue account is shown in which statement?

A) Income statement.
B) Statement of cash flows.
C) Balance sheet.

D) B) and C)
E) A) and B)

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Question 63

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Eve's Apples opened for business on January 1,2018,and paid for two insurance policies effective that date.The liability policy was $36,000 for 18 months,and the crop damage policy was $12,000 for a two-year term.What was the balance in Eve's Prepaid Insurance account as of December 31,2018?

The following information pertains to Sooner Company: Assuming that Sooner Company uses accrual-basis accounting,when would the company record the expense related to the supplies? $\begin{array} { | l | l | } \hline \text { May } 1 & \text { Customer ordered an installation service to be done by Sooner Compary on May } 15 . \\\hline \text { May } 2 & \text { Customer paid cash for the installation job to be done on May } 15 . \\\hline \text { May } 8 & \text { The Sooner Company purchased installation supplies on account for the job. } \\\hline \text { May } 15 & \text { The installation job was started and completed. } \\\hline \text { May } 20 & \text { Amount owed for supplies purchased on May } 8 \text { is paid. } \\\hline\end{array}$

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?

Providing goods or services to customers on account is an example of a(n) :

If the beginning balance of Retained Earnings equals $12,000,the ending balance of Retained Earnings equals $15,000,and dividends for the year equal $1,000,then net income for the year equals $4,000.

An advantage of a classified balance sheet is that it is easy to see:

When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent,the debit is usually made to:

Adjusting entries involve recording events that have occurred but that have not yet been recorded by the end of the period.

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

Consider the adjustment process at the end of the accounting period.1.Record the adjusting entries in the journal.2.Prepare an adjusted trial balance to check the equality of the debits and credits.3.Determine the accounts requiring adjustment,using the unadjusted trial balance.4.Post the adjusting entries to the general ledger.Place the items in the proper order.

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

The following table contains financial information for Trumpeter's Inc.before closing entries: What is the amount of Trumpeter's total liabilities? $\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salaries Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expenses } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$

Allen Inc.took out a 1-year,8%,$100,000 loan on March 31,2018.Interest is due upon maturity of the loan.The loan and interest must be paid back on March 31,2019.As of December 31,2018,what amount,if any,should Allen Inc.report for interest payable?

According to the concept of expense recognition under accrual-basis accounting,if costs associated with producing revenue in the current year are not paid in cash until the following year,the costs should be expensed in the current year.

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

Frosty Inc.has the following balances on December 31 prior to closing entries: Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries? $\begin{array} { | l | r | } \hline \text { Revenues } & \$ 36,000 \\\hline \text { Retained Earnings, Jan. } 1 & 10,000 \\\hline \text { Cash } & 7,000 \\\hline \text { Expenses } & 23,000 \\\text { Accounts Payable } & 4,000 \\\hline \text { Dividends } & 1,000 \\\hline \text { Supplies } & 18,000 \\\hline\end{array}$

Which of the following current liabilities does not involve the future payment of cash?

The revenue recognition principle states that we record revenue in the period in which we collect cash.The revenue recognition principle states that we record revenue in the period in which we earn it.