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Exam 2: Understanding the Accounting Cycle

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Question 31

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Which of the following accounts is not closed at the end of an accounting cycle?

A) Revenues
B) Retained earnings
C) Dividends
D) Expenses

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Question 32

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Kiscaden Corporation began business operations and experienced the following transactions during 2016: 1)Issued common stock for $20,000 cash. 2)Provided services to customers for $80,000 on account. 3)Incurred $36,000 of operating expenses on account. 4)Collected $46,000 cash from customers. 5)Paid $30,000 on accounts payable. Required: Record the above transactions on a horizontal statements model to reflect their effect on Kiscaden's financial statements.Precede the amount with a minus sign if the transaction reduces that section of the equation.Enter 0 for items not affected.In the last column,enter OA,IA,FA for the type of cash flow activity,or NA if there is no activity.

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Question 33

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Joseph Company purchased a delivery van on January 1,2016 for $35,000.The van is estimated to have a 5-year useful life and a $5,000 salvage value.How much expense should Joseph recognize in 2016 related to the use of the van?

Which of the following is not a principle of the AICPA Code of Professional Conduct?

Classify each of the following transactions for the purpose of the statement of cash flow as operating activities (OA),investing activities (IA),financing activities (FA),or not reported on the statement of cash flows (NA). 1)_____Sold land. 2)_____Made adjusting entry to recognize interest revenue on investments. 3)_____Borrowed funds from the bank. 4)_____Paid rent in advance for the next six months. 5)_____Paid cash to settle accrued salary expense. 6)_____Purchased supplies on account. 7)_____Collected accounts receivable.

Which of the following would be included in the "cash flow from operating activities" section of the statement of cash flows?

Accrual-basis accounting often fails to match expenses with revenues.

Earning revenue on account would be classified as a/an?

Accounts that are closed include expenses,dividends,and unearned revenues.

An adjusting entry that decreases unearned revenue and increases service revenue is a claims exchange transaction.

Which of the following events involves a deferral?

The adjusting entry to recognize work completed on unearned revenue involves which of the following?

In a company's annual report,the reader will find a company's income statement,statement of changes in stockholders' 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 ending balance of retained earnings? 2)What was the amount of cash dividends paid to the stockholders during the most recent year? 3)What was the total amount of land owned by the company? 4)What was the total amount of cash borrowed by the company during the most recent year? 5)What were the types of claims that the company had against its assets? 6)What was the total amount of cash received by the issuance of common stock in the current year? 7)Was the company profitable during the most recent year? 8)How much cash was collected from accounts receivable during the current year? 9)What was the total revenue earned by the company during the most recent year? 10)What was the amount of change in the cash balance during the current year?

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

What does the balance in accounts receivable represent?

Which of the following is not a component of the fraud triangle?

The year-end adjustment to recognize one month's work on the three-month contract results in a $2,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue) . The following account balances were drawn from the 2016 financial statements of Grayson Company: -Based on the above information,what is the balance of Common Stock for Grayson Company?

Regarding the relationships of revenues and expenses to assets and liabilities,state whether each of the following statements is true or false. _____ a)Recording an increase in a revenue account may be associated with a decrease in assets. _____ b)Recording an increase in a revenue account may be associated with a decrease in liabilities. _____ c)An increase in Salaries Expense may be accompanied by a decrease in Salaries Payable. _____ d)Recording a decrease in assets may be associated with an increase in an expense account. _____ e)A decrease in Supplies will be accompanied by an increase in Supplies Expense.

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

Which of the following is an asset source transaction?