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Exam 3: Accrual Accounting

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Question 51

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Accumulated depreciation is a contra asset account.

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Question 52

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The cash account is never part of an adjusting entry.

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Question 53

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Why is the cash basis of accounting too limited for proper financial reporting?

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Three months before its year end,a company signed a $250,000,12%,eight-month note.Principal and interest will be paid at maturity.No interest should be accrued at year end because the company has no obligation to pay the interest until the note matures.

A landscaping company operates five days per week with a daily payroll of $16,000.Employees are paid every Saturday for the workweek just completed (Monday through Friday) .The last day of the month is Wednesday,March 31.What is the amount of wages expense recorded on the next payday,Saturday,April 3?

When would a company that sells merchandise to customers normally recognize revenue?

Match each statement to the item listed below. -refers to the process of assigning the cost of an asset such as a building to expense over the asset's useful life

What is another term for the dividend account?

For each transaction select the type of adjustment that would be required. (Choices may be used more than once.) -The cost of salaries earned by employees,but not paid at the end of the accounting period,is recorded.

Cabana Club The company's consolidated statement of income is provided below: -Refer to Cabana Club.Identify three specific accounts in which the company might need to accrue additional expenses as a result of adjustments.Indicate the effects of these adjustments on the fundamental accounting equation.Ignore amounts.

A tool company purchased equipment at a cost of $100,000 in January five years ago.As of January 1 of the current year,depreciation of $45,000 had been recorded on this asset.Depreciation expense for the current year is $5,000.After the adjustments are recorded and posted at December 31 of the current year,what are the balances for depreciation expense and accumulated depreciation?

Select the correct revenue recognition principle for each of the following. (Choices may be used more than once.) -interest

From the list of accounts, determine whether the account is a temporary or permanent account. (Choices may be used more than once.) -depreciation expense

A company that forgets to recognize depreciation for the year understates its income and assets.

Which of the following is the last step in the accounting cycle?

What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue?

The supplies account has a balance of $1,000 on January 1.During January,the company purchased $25,000 of supplies on account and the liability was appropriately recorded.A count of supplies at the end of January indicates a balance of $3,000.What is a correct amount to be reported on the company's financial statements for the month ending January 31?

The following unadjusted account balance was taken from the accounting records at December 31,Year 1: $\text { Unearned subscription revenue }\quad\quad\$180,000$ A) Prepare any adjusting entries necessary at December 31, Year 1, for each of the transactions that follow: 1. During the year, the company sold 12 -month subscriptions for its flagship magazine. Half of the subscriptions began October 1, Year 1, while the other half began December 1, Year 1 . 2. The company estimates its income taxes to be $40 \%$ of its estimated income of $\$ 500,000$ . B) Prepare the current liabilities section of the balance sheet by listing any current liabilities and the related amounts as a result of the adjustments in Part A.

The difference between accrual-based revenue and accrual-based expenses in the period the activity occurred is called ____________________.