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Exam 2: Accounting for Accruals and Deferrals

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Question 31

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Which of the following would be included in the cash flow from operating activities section of the statement of cash flows?

A) Accrual of salary expense at year-end.
B) Purchase of equipment for cash.
C) Payments of cash dividends to the owners of the business.
D) Cash paid for interest on a note payable.

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

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Question 32

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

A) True
B) False

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Question 33

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The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31,Year 1: -What is the amount of net income that will be reported on the Year 1 income statement?

How does the adjusting entry to recognize the portion of the unearned revenue that a company earned during the accounting period affect the elements of the financial statements?

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

Recognizing an expense may be accompanied by which of the following?

Which of the following events involves a deferral?

On January 1,Year 1,Alabama Company purchased a machine for $26,000.The machine has an estimated useful life of 4 years and an estimated salvage value of $6,000.What is the book value of the machine reported on Alabama's balance sheet as of December 31,Year 1?

Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.

Which of the following is not an element of the fraud triangle?

Recognition of depreciation expense on equipment decreases the equipment account.

Warren Enterprises began operations during Year 1.The company had the following events during Year 1: The business issued $40,000 of common stock to its stockholders. The business purchased land for $24,000 cash. Services were provided to customers for $32,000 cash. Services were provided to customers for $10,000 on account. The company borrowed $32,000 from the bank. Operating expenses of $24,000 were incurred and paid in cash. Salary expense of $1,600 was accrued. A dividend of $8,000 was paid to the stockholders of Warren Enterprises. After closing,what is the balance of the Retained Earnings account as of December 31,Year 1?

The following accounts and balances were drawn from the records of Barnes Company: Based on this information alone the amount of Barnes's retained earnings is:

A payment to an employee in settlement of salaries payable decreases an asset and decreases equity.

Which of the following is an asset use transaction?

Which of the following is a claims exchange transaction?

Which of the following is not one of the common elements that are typically present when fraud occurs?

The Sarbanes-Oxley Act includes several significant reforms that affect the auditing profession,but it did not reduce an audit firm's ability to provide non-audit services to its audit clients.

Accrual accounting usually fails to match expenses with revenues.

What action did the U.S.Congress take because of the audit failures at Enron,WorldCom and other companies?