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Exam 3: The Accounting Cycle: End of the Period

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Question 21

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A company maintains its records using cash-basis accounting.During the year,the company received cash from customers,$34,000,and paid cash for taxes,$24,000.At the beginning of the year,customers owe the company $3,000.By the end of the year,customers owe $5,000.At the beginning of the year,the company owes taxes of $4,000.At the end of the year,the company owes taxes of $5,000.Determine cash-basis net income and accrual-basis net income for the year.

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Question 22

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The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:

A) A debit to a liability.
B) A debit to an asset.
C) A credit to a liability.
D) A credit to an asset.

E) All of the above
F) C) and D)

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Question 23

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The revenue recognition principle states that we record revenue in the period in which we collect cash.

Consider the following events for Betterment Incorporated: Under cash-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

During the year,Cheng Company paid salaries of $24,000.In addition,$8,000 in salaries has accrued by the end of the year but has not been paid.The year-end adjusting entry would include which one of the following?

Temporary accounts would not include:

Resources owned by the company that will provide a benefit for more than one year are called:

The Retained Earnings account had a beginning credit balance of $26,000.During the period,the business had a net loss $12,000,and the company paid dividends of $8,000.The ending balance in the Retained Earnings account is:

Adjusting entries are not necessary when cash is paid at the same time expenses are incurred.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the correct term by placing the letter designating the term in the space provided. -____ Records events that have occurred but not previously recorded.

Consider the following events for Sophia Incorporated: Under accrual-basis accounting,what is the appropriate day to record the revenues from the sand volleyball camp?

Prepayments occur when:

The post-closing trial balance does not include any assets or liabilities,because these accounts all have zero balances after closing entries.

The adjusting entry for an accrued revenue has the effects of increasing assets and increasing net income.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the correct term by placing the letter designating the term in the space provided. -____ A list of accounts and their balances prepared before adjusting entries are recorded.

Permanent accounts would not include:

The components of retained earnings include assets,expenses,and dividends.

A company receives a $700 utility bill for the current month but does not plan to pay the bill until early next month.Record the receipt of the utility bill using (a)accrual-basis accounting and (b)cash-basis accounting.

On July 1,2015,Rents-A-Lot Inc.paid $72,000 for 36 months of advance rent on its warehouse.What would be the amount of rent expense in the 2016 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

Under cash-basis accounting,if a company provides services to a customer in the current year but does not collect cash until the following year,the company should report the revenue in the current year.