Exam 4: Accrual Accounting Concepts

Prepare year-end adjustments for the following transactions. Omit explanations. 1. Accrued interest on notes receivable is $30. 2. $1,000 of unearned service revenue has been recognized. 3. Three years' rent, totaling $45,000, was paid in advance at the beginning of the year. 4. Services totaling $2,900 had been performed but not yet billed at the end of the year. 5. Depreciation on equipment totaled $6,500 for the year. 6. Supplies purchased totaled $850. By year end, only $250 of supplies remained. 7. Salaries owed to employees at the end of the year total $960

The purpose of the post-closing trial balance is to:

An accumulated depreciation account:

Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31:

A new sales representative, Eddy Wherli, has just received his copy of the month-end financial reports. He is puzzled by the term "unearned revenue." He left the following e-mail message for you on the company's bulletin board system: What is this??? Creative Accounting, or what??? Line item 12 on year-to-date financials shows over $25Gs in Unearned Revenue!!! Come on, guys! Either we earned it, or we didn't . . . Right??! Is this how you guys lower our commissions? Reply to e.wherli@sbd Required: Write a response to send to Eddy. (Since the answer is being prepared for a "bulletin board" type system, it can be in informal language and can respond in kind to the humor. However, proper grammar and spelling are essential, as is the message about what unearned revenue really is.)

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?

A company shows a balance in Salaries and Wages Payable of $40,000 at the end of the month. The next payroll amounting to $60,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

Under International Financial Reporting Standards (IFRS)

An adjusted trial balance:

The closing entry process consists of closing:

Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Cash received from customers \ 48,000 Accounts receivable 12,000 Cash paid for expenses 26,000 Accounts payable (related to expenses) 3,000 Prepaid rent for next period 7,000

Which statement is correct concerning the adjusted trial balance?

You are part of a group of individuals (incorporators) who want to form a new corporation. During discussions on forming the business, Mark Adams makes this statement: Our business will have accounts receivable and accounts payable. It will also acquire a substantial amount of computers and equipment. Will it be acceptable to use the cash basis of accounting? Prepare a response for Mark and the other incorporators.

The periodicity assumption is often referred to as the expense recognition principle.

The expense recognition principle attempts to match ______________ with ______________.

Expenses are recognized when:

A company purchased office supplies costing $3,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Which types of accounts will appear in the post-closing trial balance?

All of the following are required steps in the accounting cycle except:

The post-closing trial balance will contain only permanent-balance sheet-accounts.