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Exam 4: Income Measurement and Accrual Accounting

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Question 41

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Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

A) Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays
B) Prepaid insurance is assigned to expense as the insurance expires
C) A building is depreciated and its cost is assigned to the current and future accounting periods in which the building is expected to be used
D) Merchandise inventory is assigned to cost of goods sold in the period the goods are sold

E) A) and B)
F) A) and C)

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Question 42

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When cash is paid before an expense is incurred,an accrual is necessary.

A) True
B) False

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Question 43

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Under the accrual basis of accounting,at what point in time should a fast food restaurant recognize revenue? _________________________

Tracy,Inc. Tracy,Inc.adjusts its books each month but closes its books at the end of the year.The trial balance at July 31 before adjustments is as follows: Refer to the trial balance for Tracy,Inc. According to contracts,$4,810 of Unearned Service Revenue has been earned in July.Which of the following is the correct amount of Service Revenue to be reported in the July income statement?

Expired costs are called assets.

The basis of accounting that fails to take into consideration amounts earned that are not collected and expenses incurred but are not paid is the _________________________.

When using a worksheet:

Given below are the accounts from Surf Corporation's ledger accounts after adjustments have been posted at December 31,2014.

Which one of the following is an example of an accrued liability?

What effect does "recognizing an accrued liability for utilities at the end of the accounting period" have on the accounting equation?

Assuming the use of a work sheet,are the formal adjusting entries recorded and posted to the accounts before or after the financial statements are prepared? Explain your answer.Would your answer change if a work sheet was not prepared? Explain.

Camp Consulting Services started business on January 1,2014.Camp performed services for customers totaling $100,000 of which 40% remain uncollected at the end of December.Under the accrual basis,what amounts would appear on Camp Consulting's financial statements for 2014? Income Statement Statement of Cash Flows

Malco Tile Shop purchased insurance coverage for two years on July 1,2013,for its retail shop for $3,600.Malco recorded the prepayment as an asset.Malco prepares its adjusting entries at year end December 31

As a general rule,revenue is recognized at the point of sale.Which one of the following situations illustrates this rule?

Explain the purpose of a work sheet.

Failure to record accrued interest expense would result in which of the following?

Which one of the following adjustments increases net income for the period?

Reconstruct the adjusting and closing entries from the following T-Accounts.

Cuisine Company received a 6-month,6% note for $10,000 from its president on October 1,2014.The note is due on March 31,2015.If Cuisine's accounting period ends on December 31,how much interest revenue should Cuisine recognize during 2014 and 2015? 2014 2015

Grove Corp.purchased equipment at a cost of $260,000 in January,2010.As of January 1,2014,depreciation of $88,000 had been recorded on this asset.Depreciation expense for 2014 is $22,000.After the adjustments are recorded and posted at December 31,2014,what are the balances for the Depreciation Expense and Accumulated Depreciation? Depreciation Expense Accumulated Depreciation