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Exam 4: Accrual Accounting Concepts

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Question 51

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Using accrual accounting expenses are recorded and reported only:

A) when they are incurred whether or not cash is paid.
B) when they are incurred and paid at the same time.
C) if they are paid before they are incurred.
D) if they are paid after they are incurred.

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Question 52

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At December 31 2022 before any year-end adjustments Dallis Company's Prepaid Insurance account had a balance of $5800.It was determined that $2600 of the Prepaid Insurance had expired.The adjusted balance for Insurance Expense for the year would be:

A) $2600.
B) $3200.
C) $5800.
D) $2800.

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Question 53

Multiple Choice

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Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues) ?

Hancock Bicycle Company purchased supplies on account during the month of December.The company's records included the following tabular analysis prior to adjustment: $\begin{array}{llcc} \underline{\text { Assets } } &= & \underline{\text { Liabilities }} &+\underline{ \text { Stockholders' Equity} }\end{array}$ $\begin{array}{c}\begin{array}{lll}\\\\\text {Bal.}\\\hline \end{array}\begin{array}{l}\\\underline{\text { Supplies }}=\\2,300 \\\hline\end{array}\begin{array}{c}\text {Accounts}\\\underline{\text { Payable }}\\2,000\\\hline\end{array}\begin{array}{c}\text {common}\\ \underline{\text {Stock}}+\\\\\hline\end{array}\begin{array}{l}\\\underline{\text {Revenue }} -\\\\\hline\end{array}\begin{array}{lll}\text { Supplies }\\\underline{\text {Expense}} - \\ \\\hline \end{array}\begin{array}{lll}\\\underline{\text { Div. }}\\\\\hline\end{array}\end{array}$ If the company has supplies on hand of $500 at the end of the month what entry would be made to the analysis?

Which of the following is an example of a deferral adjustment?

The policy at Adler Corporation is to expense all office supplies at the time of purchase.On the last day of the accounting period there are $1100 of unused office supplies on hand and the balance of supplies expense is $3500.What should the accountant do?

Given the following adjusted tabular summary amounts: $\begin{array} { l r } \text { Cash } & \$ 831 \\\text { Accounts receivable } & 1,049 \\\text { Inventory } & 1,562 \\\text { Prepaid rent } & 43 \\\text { Equipment } & 150 \\\text { Accumulated depreciation-equipment } & 26 \\\text { Accounts payable } & 41 \\\text { Unearned service revenue } & 86 \\\text { Common stock } & 103 \\\text { Retained earnings } & 3,305 \\\text { Service revenue } & 159 \\\text { Interest revenue } & 28 \\\text { Salaries and wages expense } & 80 \\\text { Travel expense } & 33\end{array}$ What is the amount of total assets on the balance sheet?

Muldoon Advertising has an opening balance in its supplies account of $2400 and purchases $3000 of supplies during the year.A year-end physical count shows $2800 in supplies inventory.Which is the appropriate adjustment at year end?

Adjustments are required:

On January 1 2022 M.Johanson Company purchased equipment for $54000.The company is depreciating the equipment at the rate of $750 per month.The book value of the equipment at December 31 2022 is:

An adjusted tabular summary:

Ye Olde Christmas shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season.The note is signed on October 1 in the amount of $30000 with annual interest of 6%.What is the adjustment to be made on December 31 for the interest expense accrued to that date if no adjustments have been made previously for the interest?

A new accountant working for Metcalf Company records $800 Depreciation Expense as an increase to Depreciation Expense and a decrease to Cash.The effect of this is to:

An adjustment always involves a balance sheet account and an income statement account.

Accounts often need to be adjusted because:

Based on the adjusted account balances below what is the total of the asset side of the adjusted tabular summary? $\begin{array} { l r l r } \text { Service revenue } & \$ 5,300 & \text { Equipment } & \$ 7,400 \\\text { Cash } & 2,525 & \text { Prepaid insurance } & 1,225 \\\text { Unearned service rev. } & 5,320 & \text { Depreciation expense } & 640 \\\text { Salaries and wages expense } & 1,050 & \text { Accum. depreciation } & 1,280 \\\text { Common stock } & 390 & \text { Retained earnings } & 550\end{array}$

Which of the following would not result in unearned revenue?

An adjusted tabular summary must be prepared before the adjustments can be recorded.

On November 1 2021 Weller Industries which uses a calendar year as its fiscal year signs a $30000 7% six-month note payable.The transaction to record the payment of the note and entire interest on May 1 2022?

The following accounts show balances on the adjusted tabular summary.Which of these account balances will not appear the same on the balance sheet?