Exam (elaborations) Test Bank For Fundamental Financial Accounting Concepts 8th Edition Edmonds, Olds, McNair

Test Bank For Fundamental Financial Accounting Concepts 8th Edition Edmonds, Olds, McNairAccounting for Accruals and Deferrals Short Answer Questions 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. You do not need to enter amounts. 1. Jenkins Co. performed services for customers on account. Full file at McNair 2. George Co. collected $1,000 cash from accounts receivable. 3. Sparta Co. provided $1,600 of services for a customer who paid $1,000 cash immediately and promised to pay an additional $600 one month later. Full file at McNair 4. Aztec Co. signed contracts for $20,000 of services to be performed in the future. 5. At the end of the accounting period, Stewart Co. recognized accrued salaries. Full file at McNair 6. Curtis Company received $250 from a customer for services to be performed at a future date. 7. When is revenue recognized under accrual accounting? 8. What does the balance in accounts receivable represent? Full file at McNair 9. When are expenses recognized under accrual accounting in relation to the payment of cash? 10 . What is the effect on the accounting equation of a cash payment to creditors? 11 . Why are adjusting entries necessary in an accrual accounting system? What are some common examples? Full file at McNair 12 . What effect does the recording of revenue normally have on total assets? 13 . What effect does providing services on account have on the statement of cash flows? The balance sheet? 14 . Describe the purpose of the closing process. Full file at McNair 15 . Describe the difference between temporary and permanent accounts, and state which ones are closed. 16 . Define the accounting cycle and list the stages of the cycle. 17 . Explain the meaning of the term, "matching concept." Full file at McNair 18 . The temporary or nominal accounts are closed prior to the start of the next accounting cycle. In this closing process, the amounts in each of these accounts are transferred to what other account(s)? 19 . What is meant by the "fraud triangle"? 20 . Discuss the importance of ethics in the accounting profession. Multiple Choice Questions Full file at McNair 21 . Bledsoe Company received $15,000 cash from the issue of stock on January 1, 2013. During 2013 Bledsoe earned $8,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses. Based on this information alone, during 2013. A. Total assets increased by $24,100. B. Total assets increased by $600. C. Total assets increased by $18,100. D. Total assets did not change. 22 . Adkins 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 statements? A. Issued common stock. B. Earned cash revenue. C. Earned revenue on account. D. Collected cash from accounts receivable. Full file at McNair 23 . Which of the following choices accurately reflects how the recording of accrued salary expense affects a business's financial statements? A. B. C. D. 24 . Which of the following transactions does not involve an accrual? A. Recording interest earned that will be received in the next period. B. Recording operating expense incurred but not yet paid. C. Recording salary expense incurred but not yet paid. D. Recording the pre-payment of two years' worth of insurance. Full file at McNair 25 . Sandridge Company recorded salaries earned by employees but not yet paid. Which of the following represents the effect of this transaction on the financial statements? A. B. C. D. 26 . Revenue on account amounted to $4,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. Net income for the period was A. $20 0. B. $1,45 0. C. $1,85 0. D. $1,90 0. Full file at McNair 27 . The recognition of an expense may be accompanied by which of the following? A. An increase in assets B. A decrease in liabilities C. A decrease in revenue D. An increase in liabilities 28 . Which of the following statements is true in regard to accrual accounting? A. Revenue is recorded only when cash is received. B. Expenses are recorded when they are incurred. C. Revenue is recorded in the period when it is earned. D. Both B and C. 29 . Recognition of revenue may be accompanied by which of the following? A. A decrease in a liability. B. An increase in a liability. C. An increase in assets. D. A. and C. Full file at McNair 30 . Mackie Company provided $25,500 of services on account, and collected $18,000 from customers during the year. The company also incurred $17,000 of expenses on account, and paid $15,400 against its payables. As a result of these events. A. total assets would increase B. total liabilities would increase C. total equity would increase D. all of the above are correct 31 . Which of the following events would not require an end-of-year adjusting entry? A. Purchasing supplies for cash B. Providing services on account C. Purchasing a 12-month insurance policy on July 1 D. All of the above would require an end-of-year adjustment 32 . The entry to recognize work completed on unearned revenue involves which of the following? A. An increase in assets and a decrease in liabilities B. An increase in liabilities and a decrease in equity C. A decrease in assets and a decrease in liabilities D. A decrease in liabilities and an increase in equity Full file at McNair 33 . Franklin Trash Removal Company received a cash advance of $9,000 on December 1, 2013 to provide services during the months of December, January, and February. The year-end adjustment to recognize the partial expiration of the contract will A. increase equity by $3,000 B. increase assets by $3,000 C. increase liabilities by $3,000 D. both A and B 34 . The following account balances were drawn from the 2013 financial statements of Gunn Company Based on the above information, what is the balance of Common Stock for Gunn Company? A. $9,95 0 B. $7,70 0 C. $45 0 D. $10,40 0 Full file at McNair 35 . Prior to closing, XYZ Company's accounting records showed the following balances: After closing, XYZ's retained earnings balance would be A. $5,60 0. B. $7,00 0. C. $7,90 0. D. None of the above. 36 . Olaf Company began 2013 with $600 in its supplies account. During the year, the company purchased $1,700 of supplies on account. The company paid $1,500 on accounts payable by year end. On December 31, 2013, Olaf counted $700 of supplies on hand. Olaf's financial statements for 2013 would show: A. $800 of supplies; $100 of supplies expense B. $700 of supplies; $1,600 of supplies expense C. $700 of supplies; $1,000 of supplies expense D. $800 of supplies; $1,700 of supplies expense Full file at McNair 37 . James Company paid $1,800 for one year's rent in advance beginning on October 1, 2013. James's 2013 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of A. $1,800; $1,800 B. $450; $1,800 C. $450; $450 D. $300; $1,800 38 . In uncertain circumstances, the conservatism principle guides accountants to A. accelerate revenue recognition and delay expense recognition. B. accelerate expense recognition and delay revenue recognition. C. recognize expense of prepaid items when payment is made. D. maximize reported net income. 39 . Purchasing prepaid rent is classified as a(n): A. asset source transaction. B. asset use transaction. C. asset exchange transaction D. claims exchange transaction. Full file at McNair 40 . Revenue on account amounted to $3,000. Cash collections of accounts receivable amounted to $2,700. Cash paid for expenses was $2,500. The amount of employee salaries accrued at the end of the year was $300. Cash flow from operating activities was A. $20 0. B. $30 0. C. $50 0. D. None of these. 41 . Which of the following accounts would not appear on a balance sheet? A. Unearned Revenue. B. Salaries Payable. C. Interest Revenue. D. Retained Earnings. Full file at McNair 42 . Woodward Enterprises had the following events during 2013: The business issued $20,000 of common stock to its stockholders. The business purchased land for $12,000 cash. Services were provided to customers for $16,000 cash. Services were provided to customers for $5,000 on account. The company borrowed $16,000 from the bank. Operating