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Exam 3: Accounting for Deferrals

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Question 1

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Indicate how each event affects the financial statements model. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NANickle Company performed a physical count of supplies and determined that the company used $600 of supplies during the year.

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Recognizing supplies expense is an asse...

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Question 2

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A cost may be recorded as an expense or as an asset purchase.

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B) False

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Question 3

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A deferral exists when a company receives cash

During Bruce Company's first year of operations, the company purchased $2,300 of supplies. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?

Regarding the relationships of depreciation expense, book value, and accumulated depreciation, state whether each of the following statements is true or false. a)To determine the book value of a long-term asset, the balance in the accumulated depreciation account must be subtracted from current market value of the asset.b)The amount of accumulated depreciation gets smaller every year that passes.c)The amount of depreciation expense recognized each year is added to the beginning balance of accumulated depreciation account to determine the ending balance of accumulated depreciation account.d)The salvage value is the expected selling value of an asset at the end of its useful life.

Which of the following events involves a deferral?

An increase in revenue may be accompanied by a decrease in a liability.

Wichita, Incorporated reported the following amounts on its financial statements prepared as of the end of the current accounting period: What is the company's debt-to-assets ratio?

On August 1, Year 1, Carson Company collected $84,000 for services to be provided for one year beginning immediately. The company's fiscal year ends on December 31. Based on this information, the amount of service revenue and the cash flow from operating activities shown on the Year 1 financial statements would be

What is the formula for calculating depreciation expense using the straight-line method?

Which of the following statements is true regarding accrual accounting?

Which of the following shows how receiving cash for services that will be performed in the future affects the company's financial statements?

On January 1, Year 1, Marino Moving Company paid $68,000 cash to purchase a truck. The truck was expected to have a four-year useful life and a $4,000 salvage value. If Marino uses the straight-line method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements?

On October 1, Year 1, Gomez Company collected $18,600 in advance from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31, Year 1? How much would the company report as net cash flows from operating activities for Year 1?

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 land2)________ Received cash for services to be provided in the future3)________ Borrowed funds from the bank4)________ Paid rent in advance for the next six months5)________ Recognized depreciation expense6)________ Purchased supplies on account

Which of the following ratios would be most useful in evaluating a company's performance from the owners' perspective?

What is financial leverage? What financial ratio can be increased by using financial leverage?. a)Dixon's Year 2 income statement would not be affected by this transaction.b)Dixon's Year 1 statement of cash flows would be affected by this transaction.c)This transaction is an asset exchange transaction.d)The revenue for the services provided will be recorded in Year 2.e)The transaction increases Dixon's liabilities.

On August 1, Year 1, Lace Company paid $2,400 cash for an insurance policy that would provide protection for a one-year term. Which of the following shows how the required adjustment on December 31, Year 1, will affect Lace Company's balance sheet?

On December 1, Year 1, Jack's Snow Removal Company received $6,000 of cash in advance from a customer and promised to provide services for that customer during the months of December, January, and February. How will the Year 1 year-end adjustment to recognize the partial expiration of the contract impact the financial statements?

Recognition of depreciation expense is an asset use transaction.