Exam 3: Accruals and Deferrals: Timing Is Everything in Accounting

Sure Enuf,Inc.paid $4,800 on May 1,2012 for 12 months' insurance coverage starting May 1.How much insurance expense should appear on the company's balance sheet at December 31,2012?

For each event,determine the amount of expense to be recorded,even if $0,in May.

Ima Hogg wants to borrow money to expand her business.Her plan is to open a new store on each of the major islands in the Caribbean.She knows that her bank will want to see a full set of this year's financial statements before agreeing to lend the company money.Ima tells the company accountant,Tom Trueheart,not to pay December rent or utilities.That way there will be less rent expense and utility expense on this year's income statement. 1.What effect will failing to pay these bills have on this year's income statement? How will the balance sheet be affected? Why would Ima Hogg ask Tom Trueheart to do this? 2.Would it be ethical for Tom to do as Ima asks? Why?

The employees of Dew Drop Inn get paid every Friday for a 5-day workweek (Monday through Friday).The total payroll is $5,000 per day of work.If the accounting period ends on Friday of a given week,what effect will this have on the company's accounting system?

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Avatar show on its income statement for the year ended December 31,2012?

On January 1,2011,Beyers Company pays $205,000 cash for factory equipment that has an estimated useful life of 10 years and an expected residual value of $5,000.What will Beyers report on its income statement for the year ended December 31,2011?

Stimpy,Inc.collected $3,600 on December 20,2011 from a customer for services to be performed next year in 2012.In Stimpy's information system,the entire cash receipt of $3,600 was recorded as revenue earned.Stimpy forgot to make the necessary adjusting entry before preparing financial statements on December 31,2011.Put an X in the appropriate box to show how each of these line items will be reported on Stimpy's December 31,2011 financial statements.Dollar amounts are not required.

Use the following code to classify the accounts listed below by the appropriate balance sheet category: a.Asset b.Liability c.Shareholders' equity ______ 1.Cash ______ 2.Accounts receivable ______ 3.Common stock ______ 4.Office computers ______ 5.Office supplies ______ 6.Accounts payable ______ 7.Factory equipment ______ 8.Salaries payable ______ 9.Accumulated depreciation ______ 10.Interest receivable

Fair Play,Inc.paid $3,600 on September 1,2011 for an 18-month insurance policy beginning on that day.The company recorded the entire amount as prepaid insurance.How much insurance expense should the company show on its income statement for the year ended December 31,2011?

Other receivables represents the amount ________.

Assume XYZ Co.used cash to purchase $500 of supplies during the current year and had $200 of the supplies left over unused at the end of the accounting period.In the space provided below,describe how this information would be reported on the financial statements of XYZ Co: The statement of cash flows: The income statement: The balance sheet:

The cost of borrowing money from a creditor is called the principal of the loan.

Which financial statement shows Cash paid for interest?

Computerized accounting systems make sure that the accounting equation is in balance.

The employees of Dew Drop Inn get paid every Friday for a 5-day workweek (Monday through Friday).The total payroll is $5,000 per day of work.If the accounting period ends on Wednesday of a given week and the proper adjustment is made on Wednesday,what will be the effect of the adjustment on the company's financial statements?

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.What is the book value of the machine on Maxine's balance sheet at December 31,2013?

If a one-year insurance policy is purchased,an asset should be recorded.

Identify the effects of each of the following items of information on the accounting equation.Show the correct dollar amount and name the accounts involved.The first transaction has been done for you. a.Supplies used up during the period,$56 b.Prepaid rent used up during the period,$120 c.Interest accrued on a note payable but unpaid,$203 d.Depreciation on long-term assets,$4,000 e.The portion of unearned revenue that has been earned,$1,000 f.A $12,000,12-month insurance policy was purchased 7 months ago

Making an adjustment for a transaction in which the action has occurred but the cash has not yet changed hands is called "accruing" the revenue or expense.