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Exam 2: Accounting for Accruals

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Question 61

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The collection of an account receivable is a claims exchange transaction.

A) True
B) False

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Question 62

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Consider the following independent scenarios:a)At January 1, Year 2, accounts receivable was $24,000. Cash collected on accounts receivable during Year 2 was $55,000. At December 31, Year 2, accounts receivable was $30,000. What were the revenues earned on account during Year 2?b)At January 1, Year 2, accounts payable was $19,000. During Year 2, expenses on account were $68,000. At December 31, Year 2, accounts payable was $15,000. What was the amount of cash payments on accounts payable that were made during Year 2?

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a)Beginning accounts receivable of $24,0...

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Question 63

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Certified public accountants are obligated to act in a way that serves the public interest.

A company may recognize a revenue or expense without a corresponding cash collection or payment in the same accounting period.

In Year 1, Dale Company incurred $4,000 of utility expense on account. Dale paid cash for these expenses in Year 2. Which of the following shows how paying cash for Year 1's utility expense will affect Dale's accounting equation in Year 2?

On December 31, Year 1, Gaskins Company owed $4,500 in salaries to employees who had worked during December but will not be paid until January, Year 2. If the year-end adjustment is properly recorded on December 31, Year 1, what will be the effect of this accrual on net income and cash flows from operating activities reported for Year 1?

The term "accrual" describes an earnings event that is recognized before cash is received or paid.

What is the effect on the accounting equation of a cash payment to creditors?

Accounts receivable is an asset account on the balance sheet.

Which of the following illustrates how the recognition of revenue earned on account affects the financial statements?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. 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. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA At the end of the accounting period, Signet Company recorded accrued salaries.

Tandem Company borrowed $32,000 of cash from a local bank. Which of the following accurately reflects how this event affects the company's horizontal financial statements model?

The Merry Maids provided cleaning services to Orange Company on account. Which of the following would describe the transaction's effect on the Orange Company's financial statements?

What does the balance in accounts receivable represent?

Maggie Stern started a consulting business, Stern Consulting, on January 1, Year 1. The following events occurred in Year 1: 1)Acquired $9,000 cash by issuing common stock2)Provided services on account, $27,5003)Paid cash for $13,500 in operating expenses4)Collected $11,000 of the revenue that was previously recorded on account5)Paid a cash dividend of $5,000 to the stockholders Required: a)Show the effects of the above transactions on the accounting equation. b)Prepare an income statement and statement of cash flows for Year 1.

Pizitz Company experienced a business event that affected its financial statements as indicated below. Which of the following events could have caused these effects on the company's financial statements?

Stannous Company earns $10,000 of revenue on account in Year 1. Cash collections of receivables amount to $3,500 in Year 1 with the remainder being collected in Year 2. Which of the following shows how the collection of cash will affect the company's accounting equation in Year 1?

Which of the following financial statements is impacted most significantly by the matching concept?

Delta Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on the elements of Delta's statements?

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $6,800 cash by issuing common stock.Provided $3,100 of services on account.Paid $1,800 cash for operating expenses.Collected $2,300 of cash from customers in partial settlement of its accounts receivable.Paid a $140 cash dividend to stockholders.What is the amount of net income that will be reported on the Year 1 income statement?