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

The revenue recognition principle requires that revenue be recognized in the accounting records ________.

Cash flows from operating activities include cash received from customers for selling goods.

Team instructions: Provide students with copies of real merchandising companies' annual reports,or give students the Web addresses of real merchandising companies and ask them to print out the annual reports. Divide the class into teams of three or four people.All team members should work with the same company's annual report.Give the students time in class to answer the following questions for their company.Each team should turn in only one copy of the answers for grading,along with a copy of the annual report that they used.All team members will receive the same grade.

Use the following code to identify the financial statement(s)where each of these line items is shown.(Remember that some line items may be found on more than one statement.) a.Balance sheet b.Income statement c.Statement of changes in shareholders' equity d.Statement of cash flows ______ 1.Interest receivable ______ 2.Interest expense ______ 3.Interest paid to creditors ______ 4.Office supplies ______ 5.Depreciation expense ______ 6.Equipment ______ 7.Accumulated depreciation ______ 8.Office supplies expense ______ 9.Prepaid rent ______ 10.Rent expense

Clean Sweep,Inc.paid $7,200 on May 1,2011 for 12 months' insurance coverage starting May 1.How much insurance expense should appear on the company's balance sheet at December 31,2011?

Lacy & Jacobs,Attorneys at Law,purchased office computers for $24,600 on February 1,2009.The computers are estimated to have a $3,000 salvage value and to last for a total of 3 years.The firm has a December 31 yearend and prepares annual financial reports at that time. Required: 1.Determine the depreciation expense that will be reported on the income statement for the year ended December 31,2009. 2.Determine the balance sheet carrying value (also known as book value)of the computers on December 31,2009,2010 and 2011.

Net income means the same thing as net ________.

If supplies have been consumed during the period,but not adjusted at the end of the period,cash will be understated.

Which financial statement shows Interest expense?

Assume Sundry,Inc.used cash to purchase $8,000 of supplies during the current year and had $500 of the supplies left over unused at the end of the accounting period.How would this information be reported on the financial statements of Sundry,Inc.? The statement of cash flows: The income statement: The balance sheet:

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 cash paid for insurance should the company show on its statement of cash flows for the year ended December 31,2011?

Generally accepted accounting principles require the use of accrual accounting.

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.Calculate the book value of the equipment that will be reported on the balance sheet dated December 31,2012.

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

On January 1,2011,Swinger,Inc.purchases a batting machine for $240,000 that has an estimated useful life of 5 years and an expected residual value of $20,000.What is the effect of this transaction on the company's statement of cash flows for the year ended December 31,2011?

On April 1,Spring Floral,Inc.has a balance of $300 in office supplies.During April,the company buys $900 more of the office supplies.On April 30,the company counts the supplies and finds $200 of supplies remaining.The effect of the April 30 entry to adjust supplies will include a ________.

At December 31,2010,McToil,Inc.owes its employees $20,000 for work performed in 2010.Payday is not until the first week in January 2011.What is the effect of the December 31,2010 adjusting entry on the company's total assets?

Company A has a profit margin on sales ratio of 8% and Company B has a profit margin on sales ratio of 12%.Which of the following must be true?

Team instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final,correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade. Part A: Record the effect on the accounting equation of the following events that occurred to Quackers,Inc.Show the correct dollar amounts using parentheses for negative amounts,and write in the titles of the accounts affected. Part B: Fill in the missing information on the financial statements: Part C: For each description listed below,WRITE IN THE AMOUNT in the column that represents the December 31,2011 financial statement where this information is reported. Part D: Calculate the profit margin on sales ratio.________ Calculate the current ratio.________

Recording revenue before it is earned will overstate net income.