Question 1

Match each statement to the item listed below.
-allows all of the account balances to be up-to-date at the time financial statements are prepared

Accepted Answer

The answer of Match each statement to the item listed...

Question 2

What type of accounting recognizes revenues and expenses in the same accounting period that cash receipts and payments occur?

Accepted Answer

The cash basis of accounting recognizes revenues and expenses in the same accounting period that cash receipts and payments occur. This method does not take into account any unpaid bills or revenues that have been earned but not yet received. It is a simple and straightforward method, but it may not accurately reflect the financial position of the company in the long term.

Question 3

Under accrual accounting,when are revenue and expenses recognized?

Accepted Answer

Under accrual accounting, revenue is recognized when it is earned, meaning when the goods or services have been delivered or performed. This may not necessarily coincide with when the cash is received. Similarly, expenses are recognized when they are incurred, meaning when goods or services have been received or consumed, which may not be the same as when the cash is paid.

Question 4

Match each statement to the item listed below.
-a listing of all the account balances immediately before preparation of the financial statements

Accepted Answer

The adjusted trial balance is a listing of all account balances in the general ledger immediately before the preparation of financial statements. It includes the effects of all adjustments made through adjusting entries.

Question 5

Cambridge Cleaners started business on January 1 and immediately purchased $5,000 of supplies to use in the business.At the end of the month,30% of the supplies remain unpaid and 20% are still on hand.What amounts should appear as an expense on the financial statements for January?

Accepted Answer

$5,000 (Immediate purchase)F1F1F1S1*F1F1F10 $1,000 (or 20% of $5,000)= $4,000
$5,000 (Immediate purchase)F1F1F1S1*F1F1F10 $1,500 (or 30% of $5,000)= $3,500

Question 6

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

Accepted Answer

Depreciation is the process of allocating the cost of a tangible asset over its useful life, which matches the definition given.

Question 7

Match each statement to the item listed below.
-states that revenues and expenses are recorded in the time period received or paid

Accepted Answer

Cash basis accounting records revenues and expenses only when they are received or paid, unlike accrual basis accounting which records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

Question 8

Camper City started business on January 1,2013.Stanton performed services for customers totalling $250,000,of which 40% remain uncollected at the end of December.Under the accrual basis,what amounts will appear on the company's financial statements for 2013?

Accepted Answer

Income is reported as earned or when the collection of cash is reasonably assured.Because the company had 40% of its sales uncollected in December,the cash flow would be $250,000 F1F1F1S1*F1F1F10 60% = $150,000 cash collected.

Question 9

Match each statement to the item listed below.
-requires that expenses be recorded in the same period as the revenue that they helped generate

Accepted Answer

The matching principle requires that expenses be recorded in the same period as the revenue that they helped generate, ensuring that financial statements accurately reflect a company's financial performance.

Question 10

During December,Camp David Inc.purchased $5,000 of supplies for use in its business.At the end of December,20% of the supplies were still on hand but only 70% had been paid.What amounts will appear on the company's balance sheet on December 31?

Accepted Answer

$5,000 (December purchase)F1F1F1S1*F1F1F10 20% = $1,000
$5,000 (December purchase)F1F1F1S1*F1F1F10 (100% F1F1F1S1-F1F1F10 70% or 30%)= $1,500

Question 11

Calmar Corporation sold merchandise to a customer for $30,000 on credit on July 15.The customer paid Calmar Corporation the amount due on July 31.Under the accrual basis of accounting,how should Calmar Corporation record the transaction?

Accepted Answer

Under the accrual basis of accounting, revenue is recognized when earned, not when cash is received. On July 15, Calmar Corporation would record the sale as an increase in accounts receivable (an asset) and an increase in revenue. When the customer pays on July 31, cash increases and accounts receivable decreases, with no net effect on total assets.

Question 12

Match each statement to the item listed below.
-a schedule that facilitates preparation of the financial statements

Accepted Answer

A worksheet is a tool used in accounting to organize and adjust account balances, facilitating the preparation of financial statements.

Question 13

Match each statement to the item listed below.
-allows companies to artificially divide their operations into periods for ease of communication

Accepted Answer

The time period assumption is an accounting principle that allows companies to divide their operations into specific periods (such as months, quarters, or years) for reporting purposes, making it easier to compare and communicate financial performance over time.

Question 14

A tax service prepared tax returns for 20 clients at $200 each.By the end of June,the service had collected from 8 clients.Under the accrual basis,what amounts will be reported on the income statement and the statement of cash flows for June?

Accepted Answer

20 x $200 = $4,000
8 x $200 = $1,600

Question 15

Which of the following concepts is important to accrual accounting?

Accepted Answer

Time period is an important concept in accrual accounting because it requires that financial transactions be recorded in the period in which they occur, regardless of when cash changes hands. This ensures that the financial statements reflect an accurate picture of the company's financial performance over a specific period of time.

Question 16

Which of the following is NOT involved in the measurement of the economic effects on an entity?

Accepted Answer

Recording economic effects in the financial statements is a crucial step in measuring the economic effects on an entity and is, therefore, involved in the process.

Question 17

Match each statement to the item listed below.
-states that revenues should be recorded in the period in which it is earned

Accepted Answer

The answer of Match each statement to the item listed...

Question 18

A local tennis club sells season memberships for $1,000 each.During January,50 season memberships were sold.As of March 31,only $25,000 of season membership fees had been collected from customers.The tennis season runs for six months starting April 1.Which of the following is an amount reported on the balance sheet dated March 31?

Accepted Answer

As of March 31, only $25,000 of the membership fees had been collected so the remaining $25,000 is considered unearned revenue. Therefore, the correct choice is A) unearned tennis membership revenue of $25,000.

Question 19

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

Accepted Answer

Salaries payable is a liability account, representing an amount owed to employees. It is a permanent account because it carries its ending balance into the next accounting period and is not closed at the end of the accounting year.

Question 20

Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold.During the month of December,a salesperson sold three cycles.The company pays commissions on the fifth day of the month following the sale.When is the recognized revenue?

Accepted Answer

The company incurs the commission expense when the sales are made, which is in December, even though the payment is made in January.

Quiz 3: Accrual Accounting

Match each statement to the item listed below. -allows all of the account balances to be up-to-date at the time financial statements are prepared

What type of accounting recognizes revenues and expenses in the same accounting period that cash receipts and payments occur?

Under accrual accounting,when are revenue and expenses recognized?

Match each statement to the item listed below. -a listing of all the account balances immediately before preparation of the financial statements

Cambridge Cleaners started business on January 1 and immediately purchased $5,000 of supplies to use in the business.At the end of the month,30% of the supplies remain unpaid and 20% are still on hand.What amounts should appear as an expense on the financial statements for January?

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

Match each statement to the item listed below. -states that revenues and expenses are recorded in the time period received or paid

Camper City started business on January 1,2013.Stanton performed services for customers totalling $250,000,of which 40% remain uncollected at the end of December.Under the accrual basis,what amounts will appear on the company's financial statements for 2013?

Match each statement to the item listed below. -requires that expenses be recorded in the same period as the revenue that they helped generate

During December,Camp David Inc.purchased $5,000 of supplies for use in its business.At the end of December,20% of the supplies were still on hand but only 70% had been paid.What amounts will appear on the company's balance sheet on December 31?

Calmar Corporation sold merchandise to a customer for $30,000 on credit on July 15.The customer paid Calmar Corporation the amount due on July 31.Under the accrual basis of accounting,how should Calmar Corporation record the transaction?

Match each statement to the item listed below. -a schedule that facilitates preparation of the financial statements

Match each statement to the item listed below. -allows companies to artificially divide their operations into periods for ease of communication

A tax service prepared tax returns for 20 clients at $200 each.By the end of June,the service had collected from 8 clients.Under the accrual basis,what amounts will be reported on the income statement and the statement of cash flows for June?

Which of the following concepts is important to accrual accounting?

Which of the following is NOT involved in the measurement of the economic effects on an entity?

Match each statement to the item listed below. -states that revenues should be recorded in the period in which it is earned

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

Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold.During the month of December,a salesperson sold three cycles.The company pays commissions on the fifth day of the month following the sale.When is the recognized revenue?