Exam 4: Accrual Accounting Concepts

La More Company had the following transactions during 2021: -Sales of $9,000 on account -Collected $4,000 for services to be performed in 2022 -Paid $3,750 cash in salaries for 2021 -Purchased airline tickets for $500 in December for a trip to take place in 2022 What is La More's 2021 net income using accrual accounting?

Which of the following steps in the accounting cycle usually occurs only at the end of a company's annual accounting period?

Closing entries result in the transfer of net income or net loss into the Retained Earnings account.

A liability-revenue relationship exists with:

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted.Which of the following statements is true?

Expenses are recognized when:

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Adjusting entries are made to ensure that:

An adjusting entry would be made to the revenue account only when cash is received.

Accounts receivable is a permanent account.

Adjustments would not be necessary if financial statements were prepared to reflect net income from:

The expense recognition principle states that expenses should be matched with revenues.Another way of stating the principle is to say that:

The final step in the accounting cycle is to prepare:

The following is selected information from L Corporation for the fiscal year ending October 31, 2022. Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2022?

How many required steps are there in the accounting cycle?

On April 1, 2022, Propel Corporation paid $48,000 cash for equipment that will be used in business operations.The equipment will be used for four years.Propel records depreciation expense of $48,000 for the calendar year ending December 31, 2022.Which accounting principle has been violated?

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1.Prepaid Rent was debited for the full amount.If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:

DeNova Real Estate signed a four-month note payable in the amount of $40,000 on May 1.The note requires interest at an annual rate of 6%.The amount of interest to be accrued at the end of May is:

Which of the following describes an accrued expense?

Otto's Tune-Up Shop follows the revenue recognition principle.Otto services a car on August 31.The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5.Otto receives the check in the mail on September 6.When should Otto show that the revenue was recognized?