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Exam 3: Accrual Accounting Concepts

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Question 21

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Updating accrual accounting records prior to preparing financial statements is called:

A) the closing process.
B) converting to cash basis accounting.
C) the adjustment process.
D) going concern adjustments.

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

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Question 22

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UNI Co. received $1,000 advance from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI's accounts if UNI recognizes a liability?

A) Cash is increased and revenue is increased.
B) Cash is increased and revenue is decreased.
C) Cash is increased and unearned revenue is increased.
D) It is not recorded.

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

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Question 23

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On April 1, Smart, Inc. paid $7,200 for an insurance premium on a three-year insurance policy. How does this transaction affect Smart's accounts?

XYZ Co. received $3,000 in payments from clients for services billed in a previous month. Which accounts will be affected and by what amounts under the accrual basis of accounting?

Accrued expenses are ordinarily reported on the balance sheet as:

Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash.

Expenses not related to the primary operations of the business are sometimes reported as:

St. Nick Corporation's Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800. There were $400 of supplies on hand at year-end. The year-end adjustment would include an increase in Toy-Making Supplies Expense for

Under accrual accounting, expenses are recorded when incurred regardless of when paid.

Describe the differences between the cash and accrual bases of accounting.

Rights that are short-term in nature are called intangible assets.

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n) :

Describe deferrals and accruals.

Which of the following accounts would likely be included in a deferral adjusting entry?

Accounts receivable arising from trade transactions amounted to $50,000 and $56,000 at the beginning and end of the year, respectively. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method are:

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Which of the following should be shown on a statement of cash flows under the financing activity section?

Every company must use the cash basis of accounting.

Refer to Coke's Statement of Cash Flows. What amount of depreciation and amortization did Coke record in 2008?