ACCT 203 Chapter Notes - Chapter 4: Deferral, Financial Statement, Retained Earnings

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byzantiumwoodchuck93

25 Sep 2017

School

George Mason University

Department

Accounting

Course

ACCT 203

Professor

Hylton

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Document Summary

Accounting divides the economic life of a business into artificial time periods. Accounting time periods are generally a month, a quarter, or a year. Revenue recognition principle - requires that companies accounting period in which the performance obligation is satisfied. Expense recognition principle - let the expenses follow the revenues. thus, expense recognition is tied to revenue recognition. Accrual basis accounting - transactions that change a company"s financial statements are. Ensure that the revenue recognition and expense recognition. Although different accounting standards are often used by companies in other countries, Adjusting entries are necessary because the the accrual basis of accounting is central to all of these standards. principles are followed. Trial balance the first pulling together of the transaction data may not contain up-to-date and complete data. this is true for several reasons: 1. some events are not recorded daily because it is not efficient to do so. examples are.

Related Questions

1. Undercash-basis accounting, when is revenue recorded? When is itrecorded under accrual-basis accounting?

2. Under accrualaccounting, when is revenue considered earned?

3. If amembership represents an advance payment for services provided,when is it recognized as revenue under the accrual basis, and whatis it called?

4. Why isinsurance expense spread over multiple periods even though thepolicy coverage is paid in advance?

5. At the end ofthe month for Silverâs Gym, what entries need to be made under thecash basis of accounting for wages that have not yet been paid?What entries need to be made under the accrual method?

6. Why is itimportant to match expenses and revenues to reflect the performanceof a business over a particular time period?

7. When mightthe use of cash basis accounting overstate the actual profitsearned by Silverâs gym? When might it understate the actual profitsearned?

8. Which basisof accounting is in accordance with GAAP for large companies?

puceeagle823

1. Which of the following identifies the proper order of theaccounting cycle?

A. Analyze, Journalize, Unadjusted Trial Balance

B. Analyze, Post, Unadjusted Trial Balance

C. Journalize, Post, Adjusted Trial Balance

D. Unadjusted Trial Balance, Adjusted Trial Balance, Close

E. Adjusted Trial Balance, Adjustments, Financial Statements

2. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three orsix-month periods

B. That are prepared before any adjustments have beenrecorded

C. That show the assets above the liabilities and theliabilities above the equity

D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid

E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues

3. The accounting principle that requires revenue to be reportedwhen earned is the:

A. Matching principle

B. Revenue recognition principle

C. Time period principle

D. Accrual reporting principle

E. Going-concern principle

4. Adjusting entries:

A. Affect only income statement accounts

B. Affect only balance sheet accounts

C. Affect both income statement and balance sheet accounts

D. Affect only cash flow statement accounts

E. Affect only equity accounts

5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned

B. Debit Cash and credit Unearned Legal Fees

C. Debit Unearned Legal Fees and credit Legal Fees Earned

D. Debit Legal Fees Earned and credit Unearned Legal Fees

E. Debit Unearned Legal Fees and credit Accounts Receivable

7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440

C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360

D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360

E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440

9. Unearned revenue is reported on the financial statementsas:

A. A revenue on the balance sheet

B. A liability on the balance sheet

C. An unearned revenue on the income statement

D. An asset on the balance sheet

E. An operating activity on the statement of cash flows

10. Which of the following assets is not depreciated?

A. Store fixtures

B. Computers

C. Land

D. Buildings

E. Vehicles

11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:

A. Intangible expenses

B. Prepaid expenses

C. Unearned expenses

D. Net expenses

E. Accrued expenses

13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called

A. Depreciation Expense

B. Unearned Depreciation

C. Prepaid Depreciation

D. Depreciation Value

E. Book Value

14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?

A. $3,250

B. $3,500

C. $4,000

D. $6,500

E. $7,000

15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?

A. $2,700

B. $2,900

C. $3,300

D. $3,500

E. $3,700

chocolatereindeer731

1) Which of the following items would be reported net of taxesafter income from continuing operations?

Select one:

a. Gain or loss on the sale of property.

b. Loss due to a factory strike.

c. Interest expense.

d. Gain or loss on the sale of a major segment of theentity.

Given the following list of accounts, calculate TotalAssets:

Accounts Receivable	$ 5,000
Capital Stock	20,000
Cash	14,300
Equipment	15,400
Fees Earned	44,400
Miscellaneous Expense	18,200
Rent Expense	4,150
Retained Earnings	6,550
Wages Expense	13,900

Select one:

a. $54,700

b. $26,550

c. $79,100

d. $34,700

Which of the following is NOT associated with accrual basisaccounting?

Select one:

a. Income statement.

b. Matching principle.

c. Statement of cash flows.

d. Revenue recognition principle.

Which of the following is an example of an intangible asset?

Select one:

a. Trademark

b. Timber

c. Equipment

d. Marketable securities

Which of the following would be shown under the financingactivities section on the statement of cash flows?

Select one:

a. Cash received from customers.

b. The payment of cash to retire a long-term note.

c. Depreciation expense.

d. The proceeds from the sale of a building.

A machine was purchased for $32,000 on April 1st. It has auseful life of 5 years and a residual value of $4,000. What is thedepreciation expense for the first fiscal year ending on December31st under the straight-line method?

Select one:

a. $1,400

b. $6,400

c. $4,200

d. $5,600

The entry to record the signing of a contract to receiveinventory and make payment at a future date includes

Select one:

a. No debits or creditsâjust a memorandum.

b. A debit to cost of goods sold.

c. A credit to cash.

d. A debit to inventory.

An inventory cost flow assumption is NOT needed for a productline

Select one:

a. If all of the inventory available for sale was purchased atthe same unit cost.

b. If all of the inventory looks the same.

c. If there is still some inventory on hand at the end of theyear.

d. If there is no beginning inventory carried over from theprevious accounting period.

Fees received this period from customers for services to beperformed in the next accounting period, would be a(n)

Select one:

a. Expense disclosed on the statement of cash flows.

b. Revenue disclosed on the income statement.

c. Liability disclosed on the balance sheet.

d. Item not included on the financial statements until the nextaccounting period.

10)

Which of the following is TRUE of a corporation?

Select one:

a. They are incorporated with a national agency.

b. At least one owner has unlimited liability.

c. They are a separate taxable entity.

d. More than 70% of businesses are organized this way.

11)

The effects on the accounts of recording the cost of merchandisesold for cash using a perpetual inventory system include an

Select one:

a. Increase in Accounts Payable.

b. Increase in Merchandise Inventory.

c. Increase in Sales.

d. Increase in Cost of Goods Sold;

12)

Which of the following is NOT a limitation of externallyreported accounting information?

Select one:

a. The income statement contains atypical data due to the timingof the fiscal year end.

b. Accounting information relies on estimates.

c. Management has some discretion regarding the reportingclassification and choice of accounting measurement methods.

d. There is a hodge-podge of valuation techniques used on thefinancial statements.

13)

Given the following information regarding merchandise inventoryat the end of the fiscal year:

Ending inventory at cost $34,000

Ending inventory at market $33,400

Which of the following is correct?

Select one:

a. No journal entry should be made based upon the informationgiven.

b. Inventory should be reported on the balance sheet at$34,000.

c. Inventory should be reported on the balance sheet at$33,400.

d. A journal entry should be made to recognize a gain of$600.

14)

Which of the following describes the closing process when acompany has net earnings for the period?

Select one:

a. The Dividends account is debited for its balance.

b. The individual asset accounts are credited for theirbalances.

c. The individual expense accounts are debited for theirbalances.

d. The Income Summary account is debited for its balance.

ACCT 203 Chapter Notes - Chapter 4: Deferral, Financial Statement, Retained Earnings

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