Exam 2: Accounting for Accruals

Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. What was net income for the period?

Turner Company started its business by issuing $10,000 of common stock on January 1, Year 1. The company performed $38,000 of services for customers on account in Year 1. It collected $32,500 of this amount in Year 1, recorded expenses on account of $29,500, paid $21,000 of the payables owed, and paid a $500 dividend to the stockholders. Required:a)Determine the amount of total assets at the end of Year 1.b)Determine the amount of cash on hand at the end of Year 1.c)Determine the amount of net income for Year 1.d)Prepare a balance sheet as of December 31, Year 1.

The cash payment of interest is classified as a financing activity on the statement of cash flows.

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA North Company issued a note to purchase a building.

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $12,000 cash by issuing common stockProvided $4,600 of services on accountPaid $3,200 cash for operating expensesCollected $3,800 of cash from customers in partial settlement of its accounts receivablePaid a $200 cash dividend to stockholdersWhat is the amount of net cash flows from operating activities that will be reported on the Year 1 statement of cash flows?

The bankruptcies of Enron and WorldCom both indicated the occurrence of major audit failures.

Jenna Fisk started her business by issuing $8,000 of common stock on January 1, Year 1. Jenna performed $18,500 of service on account during Year 1, and she collected $16,200 of this amount by the end of Year 1. She also paid operating expenses of $14,900 and paid a $600 dividend to the stockholders during Year 1. Required:a)Determine the amount of total assets at the end of Year 1.b)Determine the amount of cash on hand at the end of Year 1.c)Determine net income for Year 1.d)Prepare a balance sheet as of December 31, Year 1.

Accrual accounting usually fails to match expenses with revenues.

When is revenue recognized under accrual accounting?

A payment to an employee in settlement of salaries payable decreases an asset and decreases stockholders' equity.

Which of the following are "matched" under the matching concept?

During Year 2, Fancy Foods Incorporated earned $104,000 of revenue on account. The beginning balance in accounts receivable was $26,000, and the ending balance was $4,000. Based solely on this information, what was the amount of cash collected from accounts receivable?

For each of the following transactions, indicate the type by entering "AS" for asset source transaction, "AU" for asset use transaction, "AE" for asset exchange transaction, and "CE" for claims exchange transaction. 1)________ Paid $10,000 for a plot of land.2)________ Recorded the accrual of $1,000 in salaries to be paid the following week.3)________ Issued common stock for $20,000 in cash.4)________ Incurred operating expense on account.5)________ Paid off its accounts payable.6)________ Earned revenue to be collected at a future date.7)________ Paid $2,000 in dividends to its stockholders.8)________ Received cash from customers in #6 above.9)________ Paid the salaries accrued in #2 above.10)________ Borrowed money from a local bank.

In a company's annual report, the reader will find a company's income statement, statement of changes in stockholder's equity, balance sheet, and statement of cash flows. These financial statements can help the reader to answer specific questions. Required:Identify which financial statement would be most useful in answering the following questions. If more than one financial statement can answer the question, identify all applicable statements. 1)How much cash was collected from customers in partial settlement of accounts receivable during the current year?2)What was the total amount of land owned by the company?3)What was the total revenue earned by the company during the most recent year?4)What were the types of claims that the company has against its assets?5)What was the total amount of cash received by the issuance of common stock?6)Was the company profitable during the most recent year?7)What was the amount of cash dividends paid to the stockholders during the most recent year?8)What was the total amount of cash borrowed by the company during the most recent year?9)What was the ending balance of retained earnings?10)What was the amount of change in the cash balance during the current year?

ABC Company ended Year 1 with the following account balances:Cash 600, Common Stock 400, and Retained Earnings 200.The following transactions occurred during Year 2:Issued common stock for $19,000 cash.ABC borrowed an additional $11,000 from Chris Bank.ABC earned $9,000 of revenue on account.ABC incurred $4,000 of operating expenses on account.Cash collections of accounts receivables were $6,000.ABC provided additional services to customers for $1,000 cash.ABC purchased land for $14,000.ABC used $3,000 in cash to make a partial payment on its accounts payable.ABC declared and paid a $200 dividend to the stockholdersOn December 31 ABC had accrued salaries of $4,000.What is the net cash flow from operating activities shown on the statement of cash flows for the year ending December 31, Year 2?

Recognizing an expense may be accompanied by which of the following?

Explain the meaning of the fraud triangle and each of its elements.

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $12,000 cash by issuing common stockProvided $4,600 of services on accountPaid $3,200 cash for operating expensesCollected $3,800 of cash from customers in partial settlement of its accounts receivablePaid a $200 cash dividend to stockholdersWhat is the amount of net income that will be reported on the Year 1 income statement?

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $12,000 cash by issuing common stockProvided $4,600 of services on accountPaid $3,200 cash for operating expensesCollected $3,800 of cash from customers in partial settlement of its accounts receivablePaid a $200 cash dividend to stockholdersWhat is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?

Oregon Company began operations on January 1, Year 1, by issuing $10,000 in common stock to the stockholders. During the year, services in the amount of $32,000 were provided to customers on account, and 80% of this amount was collected by year-end. During the year, operating expenses incurred on account were $24,000, and 60% of this amount was paid by year-end. The company paid $1,000 of dividends to stockholders during the year. During the year, Oregon paid salaries of $3,000, and on December 31, Year 1, the company accrued salaries of $2,800.Oregon recorded all appropriate year-end adjustments. 1)What would Oregon report for service revenue for Year 1?2)What would Oregon report for salaries expense for Year 1?3)What would the amount be for net cash flows from operating activities for Year 1?4)What is the net income for Year 1?5)What would the balance in the retained earnings account be at December 31, Year 1?