Exam 4: Accrual Accounting Concepts

Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance? Service revenue \ 4,300 Equipment \ 7,400 Cash 1,525 Prepaid insurance 1,225 Unearned service rev. 5,320 Depreciation expense 640 Salaries and wages expense 1,050 Accum. depreciation 1,280 Common stock 390 Retained earnings 550

An expense account is closed with a credit to the expense account and a debit to the Income Summary account.

The 2014 income statement for Moring Company showed rent expense of $9,500 and wages expense of $8,600. The related balance sheet account balance at year-end last year and this year were as follows: Calculate the following for 2014: 1. Cash paid for rent. 2. Cash paid for wages.

Depreciation is the process of:

Adjusting entries can be classified as:

Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue earned \ 16,000 Accounts receivable 3,000 Expenses incurred 7,250 Accounts payable (related to expenses) 750 Supplies purchased with cash 1,800

Skypress Company collected $8,400 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 periodicity assumption states that the economic life of a business entity can be divided into artificial time periods.

The following selected accounts appear in the adjusted trial balance for Blender Company. Identify the accounts that would be included in the post-closing trial balance.

Depreciation is an __________________ concept, not a ________________ concept.

For each of the following oversights, state whether total assets will be understated (U), overstated (O), or no affect (NA).

One part of an adjusting entry is given below. Instructions: Indicate the account title for the other part of the entry. 1. Unearned Service Revenue is debited. 2. Prepaid Rent is credited. 3. Accounts Receivable is debited. 4. Depreciation Expense on equipment is debited. 5. Utilities Expense is debited. 6. Interest Payable is credited. 7. Service Revenue is credited (give two possible debit accounts). 8. Interest Receivable is debited.

In a service company, revenue is earned when the service is _______________.

Failure to adjust a prepaid expense account for the amount expired will cause _______________ to be understated and ________________ to be overstated.

Raxon Company borrowed $40,000 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:

The statements of financial position of Rocky Acre Spread Ltd. include the following: 12/31/14 12/31/13 Interest Receivable €4,300 € -0- Supplies 5,000 3,000 Salaries and Wages Payable 3,600 3,800 Unearned Service Revenue -0- 4,000 The income statement for 2014 shows the following: Interest Revenue €14,400 Service Revenue 75,700 Supplies Expense 8,700 Salaries and Wages Expense 36,000 Instructions Calculate the following for 2014: 1. Cash received for interest. 2. Cash paid for supplies. 3. Cash paid for salaries and wages. 4. Cash received for service revenue.

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause:

Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 The Thoma Company began the year with a $3,000 balance in the Supplies account. During the year, $8,500 of additional supplies were purchased. A physical count of supplies on hand at the end of the year revealed that $8,300 worth of supplies had been used during the year. No adjusting entry has been made until year end. Case 2 The Leno Company has a calendar year-end accounting period. On July 1, the company purchased office equipment for $30,000. It is estimated that the office equipment will depreciate $200 each month. No adjusting entry has been made until year end. Case 3 Yeats Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 2 tenants in $900 per month apartments and one tenant in the $1,000 per month apartment had not paid their December rent as of December 31^st.

Adjustments for unearned revenue:

Closing entries: