Exam 4: Accrual Accounting Concepts

Bluing Corporation issued a one-year 9% $300,000 note on April 30, 2014. Interest expense for the year ended December 31, 2014 was:

The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.

Walton Company collected $9,600 in May of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transaction during 2013 would be:

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the:

The adjusted trial balance of Nicks Financial Planners appears below and using the information from the adjusted trial balance, you are to prepare for the month ending December 31: 1. an income statement; 2. a retained earnings statement; and 3. a balance sheet.

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in:

Hooper Company prepared the following income statement using the cash basis of accounting: Additional data: 1. Depreciation on a company automobile for the year amounted to $7,000. This amount is not included in the expenses above. 2. On January 1, 2013, paid for a two-year insurance policy on the automobile amounting to $1,600. This amount is included in the expenses above. Instructions: (a) Recast the above income statement on the accrual basis in conformity with generally accepted accounting principles. Show computations and explain each change. (b) Explain which basis (cash or accrual) provides a better measure of income.

The Accounts Receivable account has a beginning balance of $52,000 and an ending balance of $69,000. If $42,000 was sold on account during the year, what were the total collections on account?

The trial balance for Greenway Corporation appears as follows: If service for $125 had been performed but not billed, the adjusting entry to record this would include a:

Masterfalls Corporation purchased a one-year insurance policy in January 2013 for $30,000. The insurance policy is in effect from March 2013 through February 2014. If the company neglects to make the proper year-end adjustment for the expired insurance:

The expense recognition principle matches:

The adjusting entry for unearned revenue results in an increase (a debit) to an asset account and an increase (a credit) to a revenue account.

An asset-expense relationship exists with:

Which type of accounts will not appear in the post-closing trial balance?

Nacron Company borrowed $10,000 from the bank signing a 6%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be:

On July 1 the Fisher Shoe Store paid $18,000 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:

Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance?

Adjusting entries are required:

Adjustments for accrued revenues:

The Harris Company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: