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Exam 2: Accounting for Accruals

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Question 71

Multiple Choice

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Zimmerman Company sold land for $25,000 cash. The original cost of the land was $25,000. Which of the following accurately reflects how this event affects the company's horizontal financial statements model?

A) Option A
B) Option B
C) Option C
D) Option D

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

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Question 72

Multiple Choice

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Which of the following is an asset exchange transaction?

A) Issued common stock
B) Accrued salary expense at the end of the accounting period
C) Collected cash on accounts receivable
D) Earned cash revenue for services provided

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

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Question 73

Multiple Choice

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What happens when a company collects cash from accounts receivable?

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

Revenue on account amounted to $5,600. Cash collections of accounts receivable amounted to $3,500. Expenses for the period were $2,900. The company paid dividends of $850. What was net income for the period?

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $9,200 cash by issuing common stock.Provided $5,500 of services on account.Paid $2,400 cash for operating expenses.Collected $3,500 of cash from customers in partial settlement of its accounts receivable.Paid a $260 cash dividend to stockholders.What is the balance of the retained earnings that will be reported on the balance sheet as of December 31, Year 1?

Leece 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 company's financial statements?

When are expenses recognized under accrual accounting in relation to the payment of cash?

The matching concept leads accountants to select the recognition alternative that produces the lowest amount of net income.

Mize Company provided $45,500 of services on account, and collected $38,000 from customers during the year. The company also incurred $37,000 of expenses on account, and paid $32,400 against its payables. How do these events impact the elements of the horizontal financial statements model?

Sammy Company shows the following transactions for the accounting period ending December 31, Year 1: 1)Sold books to customers for $68,000 on account2)Collected $56,000 from customers3)Issued common stock for $16,000 cash4)Accrued salary expense of $20,000 cash5)Paid operating expenses of $8,000 Show how the above transactions and year-end adjustments affect the accounting equation. Put the amount in parentheses if the transaction reduces that section of the equation. Leave cells blank for items not affected.

Reynolds 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 Reynolds' statements?

Bledsoe Company acquired $18,000 cash by issuing common stock on January 1, Year 1. During Year 1, Bledsoe earned $8,800 of revenue on account. The company collected $6,600 cash from customers in partial settlement of its accounts receivable and paid $5,700 cash for operating expenses. Based on this information alone, what was the impact on total assets during Year 1?

Issuing a note is an asset use transaction.

Revenue on account amounted to $9,000. Cash collections of accounts receivable amounted to $8,100. Cash paid for operating expenses was $7,500. The amount of employee salaries accrued at the end of the year was $900. What was the net cash flow from operating activities?

Thurston Company started its business on January 1, Year 1 by issuing $15,000 of common stock. On March 1, Thurston issued a $27,000, 6% five-year note to Community Bank. Customers paid Thurston $54,000 for services performed in Year 1. The company paid $33,000 for operating expenses, and paid a $900 dividend to the stockholders. At year-end, Thurston recognized interest expense on the note. Required:a)What is the amount of interest expense Thurston will recognize in Year 1?b)What is the net income for Year 1?

Consider the following independent scenarios:a)At January 1, Year 2 accounts receivable was $20,000. Revenue earned on account was $100,000. Cash collected on accounts receivable during Year 1 was $45,000. What was the ending balance in accounts receivable on December 31, Year 2?b)At January 1, Year 2, accounts payable was $17,000. During Year 2, expenses on account were $72,000. The amount of cash paid on accounts payable was $20,000. What was the ending balance in accounts payable on December 31, Year 2?

What is the purpose of the accrual basis of accounting?

Greg Company recognized revenue on account. Which of the following financial statements are affected by this accounting event?

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 Todd Company collected $2,000 cash from customers in partial settlement of its accounts receivable.