Exam 2: Understanding the Accounting Cycle

Perez Company was founded in 2012 and engaged in the following transactions: 1.issued common stock for cash 2.purchased supplies on account 3.collected cash from a customer for services to be provided over a period of 1 year 4.paid a cash dividend to stockholders 5.purchased a 2-year fire insurance policy 6.provided services to customers on account 7.collected cash from accounts receivable 8.paid cash for various operating expenses 9.paid rent in advance for 3 months at a time Required: a)For which of these transactions would adjusting entries be required at the end of the year? b)Explain the reason why adjusting entries are required before financial statements can be prepared.

Immediately after closing,every temporary account has a balance of $0.

Remsen Co.paid $200 cash on accounts payable.

Waller Co.collected $1,000 cash from accounts receivable.

When is revenue recognized under accrual accounting?

What type of account is Salaries Payable?

A transaction that increases cash and increases notes payable is a/an

What type of account is Prepaid Rent?

ABC Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on ABC's financial statements?

Cash-basis accounting often fails to match expenses with revenues.

Which of the following accounts would not be closed at the end of an accounting cycle?

What effect does the collection of accounts receivable have on total assets?

The effects of Blank Company's transactions occurring during 2012 and the related end-of-year adjustments have been recorded below using the accounting equation. Required: With your knowledge of transaction analysis and the accounting equation, a)Prepare an income statement for 2012,and b)Prepare a statement of cash flows for 2012.

Gates Co.provided services on account for customers.

The matching concept leads accountants to select the recognition alternative that produces the lowest amount of net income.

The collection of an account receivable is a claims exchange transaction.

The following selected account balances were drawn from the 2012 balance sheet and income statement of Fultz Company: Based on the above information,what is the balance of Common Stock for Fultz Company?

An adjusting entry that decreases Unearned Service Revenue and increases Service Revenue is a claims exchange transaction.

What is the effect on the accounting equation of a cash payment for an operating expense?

What effect does the recording of revenue normally have on total assets?