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Exam 3: Accounting for Deferrals

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Question 31

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Which of the following is a claims exchange transaction?

A) Recognized revenue earned on a contract where the cash had been collected at an earlier date
B) Issued common stock
C) Provided services on account
D) Purchased land for cash

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

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Question 32

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Determine whether each of the following events are asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE)transactions. ________1)Borrowed $6,000 from creditors________2)Issued common stock to investors for $8,000 cash________3)Paid one year's rent in advance________4)Provided services to customers and collected $35,000 cash________5)Recognized depreciation expense________6)Received $3,000 of revenue in advance________7)Provided services to customers on account, $12,000________8)Collected $2,000 from customers in partial settlement of accounts receivable________9)Recognized accrued salary expense of $2,000________10)Adjusted the records for supplies used of $800

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1)AS 2)AS 3)AE 4)AS 5)AU 6)AS 7)AS 8)AE ...

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Question 33

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Which of the following shows how paying cash to lease office space for one year affects the company's financial statements?

On October 1, Year 1, Jason Company paid $7,200 to lease office space for one year beginning immediately. What is the amount of rent expense that will be reported on the Year 1 income statement and what is the cash outflow for rent that would be reported on the Year 1 statement of cash flows?

On February 1, Year 1, Cora Company collected $60,000 cash for consulting 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 unearned revenue appearing on the December 31, Year 2 balance sheet would be

Which of the following shows how purchasing supplies for cash will affect a company's financial statements at the date of purchase?

What is the purpose of the accrual basis of accounting?

Recognition of depreciation expense on equipment decreases the accumulated depreciation on the equipment.

The entry to recognize depreciation expense incurred on equipment involves which of the following?

Hans Company's December 31, Year 1, balance sheet showed $800 cash, $500 supplies, $400 accounts payable, $300 common stock, and $600 retained earnings. The company experienced the following events during year 2.(1) Purchased $1,000 of supplies on account(2) Earned $2,000 cash revenue(3) Paid $1,200 cash to reduce accounts payable created in Event 1 above(4) Physical count revealed $300 of supplies on hand at the end of Year 2Based on this information, the company would report

Sometimes the recognition of revenue is accompanied by an increase in liabilities.

During Bruce Company's first year of operations, the company purchased $2,600 of supplies. At year-end, a physical count of the supplies on hand revealed that $975 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?

Purchasing a truck for $50,000 cash with a four-year useful life and $6,000 salvage value is an example of a deferred expense.

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

Allen Company received $12,000 cash from Gerry Corporation for cleaning services that Allen agrees to perform over a one year period beginning on June 1, Year 1. How would the adjustment on December 31, Year 1 to recognize the portion of the revenue that Allen earned during Year 1 affect Allen company's financial statements?

At the end of Year 1, the following information is available for Grumpy, Happy, and Doc Companies. Which company has the highest return-on-assets ratio?

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?

Which of the following shows how paying cash to lease an office building for the upcoming year affects a company's financial statements?

At the end of Year 1, the following information is available for Grumpy, Happy, and Doc Companies. Which company has the highest level of debt risk?

Pierce Company was founded in Year 1 and engaged in the following transactions:Issued common stock for cashPaid rent in advance for three months at a timePurchased supplies on accountCollected cash from a customer for services to be provided over a period of one yearPaid a cash dividend to stockholdersPurchased a two-year fire insurance policyProvided services to customers on accountCollected cash from customers in partial settlement of accounts receivablePaid cash for various operating expensesRequired:a)Identify the transactions from the list above that will require adjusting entries at year end.b)Explain why adjusting entries are required before financial statements can be prepared.