ACCTG311 Lecture Notes - Lecture 4: Accrual, Financial Statement, Perpetual Inventory

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erinwasp633

25 Nov 2014

School

University of Alberta

Department

Accounting

Course

ACCTG311

Professor

Kristie Dewald

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Document Summary

In lecture, we looked at the adjusting journal entries required for prepayments and accruals for both revenues and expenses. The following charts summarizes the entries that are used to record revenues and expenses when cash is involved before, at the same time, or after the revenue or expense is recorded. If cash is collected at the same time. Notice that, in all cases, revenue is recorded in the current period which is when it is earned. (ie. the credit entry is the same). The debit side of the entry tells us how, or when, the cash is or will be collected. The following table summarizes the entries for expenses: If cash is paid at the same time. Similar to the revenues, the expense is reported in the period it is incurred (ie. the debit side of the entry is the same). The credit portion of the entry tells us how, or when, the cash was or will be paid.

Related Questions

NEED ANSWERS ASAP

Question 23

If a resource has been consumed but a bill hasnot been received at the end of the accountingperiod, then

		an expense should be recorded when the bill is received.
		an expense should be recorded when the cash is paid out.
		an adjusting entry should be made recognizing the expense.
		it is optional whether to record the expense before the bill isreceived.

3 points

Question 24

Prepaid expenses are

		paid and recorded in an asset account before they are used orconsumed.
		paid and recorded in an asset account after they are used orconsumed.
		incurred but not yet paid or recorded.
		incurred and already paid or recorded.

3 points

Question 25

If a business has received cash in advance of services performedand credits a liability account, the adjusting entry needed afterthe services are performed will be

		debit Unearned Service Revenue and credit Cash.
		debit Unearned Service Revenue and credit Service Revenue.
		debit Unearned Service Revenue and credit Prepaid Expense.
		debit Unearned Service Revenue and credit AccountsReceivable.

3 points

Question 26

The preparation of adjusting entries is

		straight forward because the accounts that need adjustment willbe out of balance.
		often an involved process requiring the skills of aprofessional.
		only required for accounts that do not have a normalbalance.
		optional when financial statements are prepared.

3 points

Question 27

On January 1 of the current year, Doolittle Company purchasedfurniture for $7,560. The company expects to use the furniture for3 years. The asset has no salvage value. The book value of thefurniture at December 31of this year is

		$0.
		$2,520.
		$5,040.
		$7,560.

3 points

Question 28

Husker Du Supplies Inc. purchased a 12-month insurance policy onMarch 1 of the current year for $1,800. At March 31, the adjustingjournal entry to record expiration of this asset will include a

		debit to Prepaid Insurance and a credit to Cash for $1,800.
		debit to Prepaid Insurance and a credit to Insurance Expense for$200.
		debit to Insurance Expense and a credit to Prepaid Insurance for$150.
		debit to Insurance Expense and a credit to Cash for $150.

1. Using accrual accounting, revenues are recorded

a. when cash is received without regard to when the services are performed or products have been delivered to customers.

b. when a service has been performed or products have been delivered to customers without regard to when cash is received.

c. when cash is received at the time services are performed or products have been delivered to customers only if cash is received.

d.after the services are performed or products have been delivered to customers.

2. Deferred revenue is revenue that is

a. earned and the cash has been received.

b. earned but the cash has not been received.

c. not earned and the cash has not been received.

d. not earned but the cash has been received.

3. Adjusting entries always include

a. only income statement accounts.

b. only balance sheet accounts the cash account.

c. at least one income statement account and one balance sheet account.

4. Which of the following is considered to be an accrued expense?

a. a computer technician has installed the latest software updates and was paid on the same day

b. a computer technician has been paid in advance to install software updates as they become available

c. a computer technician has just signed an agreement with you regarding pricing for future work

d. a computer technician has installed the latest software updates, but you have not received an invoice or made payment

ochreplatypus211

Question 16

Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of$5,000 and advertising expense of $2,000. Which of the followingjournal entries correctly records these expenses?

		Debit: Cash $7,000 Credit: Salaries/Wages Expense$5,000 Credit: Advertising Expense $2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$7,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Salaries/Wages Payable$5,000 Credit: Accounts Payable$2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$8,000

3 points

Question 17

Corresponds to CLO 4(a) Which of the following statements iscorrect regarding accrued revenues and unearned revenues, beforeadjusting entries have been made?

		Accrued revenues have not been earned and unearned revenues havebeen earned.
		Accrued revenues have been paid and unearned revenues havenot.
		Accrued revenues have not been recorded and unearned revenueshave been recorded.
		Accrued revenues have been recorded and unearned revenues havebeen recorded.

3 points

Question 18

Corresponds to CLO 4(b) Hudson Law Corporation received $5,500cash for legal services to be rendered in the future. The fullamount was credited to the liability account Unearned ServiceRevenue. At the end of the period, Hudson determines that $3,000 ofthe legal services have been rendered. The appropriate adjustingjournal entry to be made at the end of the period is:

		debit Unearned Service Revenue, $3,000; credit Cash, $3,000.
		debit Unearned Service Revenue, $3,000; credit Service Revenue,$3,000.
		debit Unearned Service Revenue, $2,500; credit Service Revenue,$2,500.
		debit Service Revenue, $2,500; credit Unearned Service Revenue,$2,500.

3 points

Question 19

Corresponds to CLO 4(c) Ace Corporation purchased officesupplies costing $13,000 and debited Office Supplies for the fullamount. At the end of the accounting period, a physical count ofoffice supplies revealed $2,700 still on hand. The appropriateadjusting journal entry to be made at the end of the period is:

		debit Office Supplies Expense, $10,300; credit Office Supplies,$10,300.
		debit Office Supplies, $10,300; credit Office Supplies Expense,$10,300.
		debit Office Supplies Expense, $2,700; credit Office Supplies,$2,700.
		debit Office Supplies, $2,700; credit Office Supplies Expense,$2,700.

3 points

Question 20

Corresponds to CLO 4(d) On September 1, Northgate paid $18,000to Evans Management Company for 12 months of rent beginning onSeptember 1. The appropriate journal entry was made to record thistransaction. If financial statements are prepared for the 9 monthsended September 30, the adjusting entry to be made by Northgateis:

		debit Rent Expense, $13,500; credit Prepaid Rent, $13,500.
		debit Prepaid Rent, $1,500; credit Rent Revenue, $1,500.
		debit Prepaid Rent, $1,500; credit Rent Expense, $1,500.
		debit Rent Expense, $1,500; credit Prepaid Rent, $1,500.

3 points

Question 21

Corresponds to CLO 5(a) Lennox Corporation purchased a newdelivery truck for 35,000. The sales taxes are $2,700. The logo ispainted on the side of the truck for $800. The truck's annuallicense is $200. Annual insurance on the truck is $1,300. Whatshould Lennox record as the cost of the new truck?

		$40,000
		$38,500
		$37,700
		$35,000

3 points

Question 22

Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporationpurchased equipment for $65,000. It is estimated that the equipmentwill have a $5,000 salvage value at the end of its 5 year usefullife. If Ballard uses the straight-line method of depreciation,what is the accumulated depreciation at December 31, 2013?

		$13,000
		$12,000
		$9,750
		$9,000

3 points

Question 23

Corresponds to CLO 5(c) Tyree Company purchased equipment with acost of $90,000 and an estimated salvage value of $18,000. Theequipment is expected to produce 150,000 units over its estimateduseful life of 10 years. If Tyree uses the units-of-activitymethod, what is the depreciation cost per unit to be used incalculating depreciation?

		$1.67
		$0.48
		$2.08
		$0.60

3 points

Question 24

Corresponds to CLO 5(d) Kerns Company purchased equipment with acost of $200,000 and an estimated salvage value of $10,000. Theequipment has an estimated useful life of 10 years. If Kerns usesthe double-declining balance method, what is the annualdepreciation rate to be used in calculating depreciation?

		5%
		10%
		20%
		40%

3 points

Question 25

Corresponds to CLO 6(a) Marshall Machinery made a sale for$150,000 on March 31. The customer is sent a statement on April 6and payment is received on April 15. Marshall prepares March'smonthly internal financial statements on April 20. Marshall followsGAAP and applies the revenue recognition principle. When is the$150,000 considered to be earned?

		March 31
		April 6
		April 15
		April 20

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ACCTG311 Lecture Notes - Lecture 4: Accrual, Financial Statement, Perpetual Inventory

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