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Exam 3: The Financial Reporting Process

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Question 51

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For each transaction below,calculate the amount of expense to be recognized in the current period using accrual-basis accounting: (a)Paid $3,500 on account for supplies purchased last period.All supplies were used last month. (b)Paid $5,000 cash for advertising in the current period. (c)Employees worked in the current period but will not be paid until the following period,$4,500.

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(a)$0; (b)...

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Question 52

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The adjusted trial balance for China Tea Company at December 31,2012,is presented below: Prepare an income statement for China Tea Company for the year ended December 31,2012:

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Question 53

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Consider the following events for Sophia Incorporated: April 5 $\quad$ Sophia purchases volleyballs for $\$ 200$ on account. April 6 $\quad$ Sophia advertises a sand volleyball camp for $\$ 20$ a person. April 12 $\quad$ Thirty people sign up for the camp paying a total of $\$ 600$ . April 21 $\quad$ Sophia hosts the sand volleyball camp. April 23 $\quad$ Sophia pays for the volleyballs purchased on April 5. Under accrual-basis accounting,what is the appropriate day to record the revenues from the sand volleyball camp?

A company receives $2,500 cash from customers for services to be provided next month.Record the cash receipt using (a)accrual-basis accounting and (b)cash-basis accounting.

A company reports the following amounts: Assets = $6,000; Liabilities = $2,000; Stockholders' equity = $4,000; Dividends = $500; Revenues = $5,000; and Expenses = $3,000.What amount is reported for net income?

Suppose Simeon Company begins the year with $1,000 in supplies,purchases an additional $5,500 of supplies during the year,and ends the year with $700 in supplies.The year-end adjusting entry includes Supplies Expense of $7,200.

The adjusting entry for an unearned revenue always includes a debit to an asset account and a credit to a revenue account.

After closing entries are prepared,all asset and liability accounts have a balance of zero.

Which accounting principle states that a company should "record revenues when they are earned"?

A list of all accounts and their balances after posting closing entries is referred to as:

When a magazine sells subscriptions to customers,it is an example of:

The closing entry for dividends includes a debit to the Dividends account and a credit to Retained Earnings.

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

A company performs $4,200 of services during the month and receives full cash payment from customers at the time of service.Record the cash receipt using (a)accrual-basis accounting and (b)cash-basis accounting.

The following financial information is from Shovels Construction Company for 2012: $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 15,000 \\\hline \text { Buildings } & 80,000 \\\hline \text { Cash } & 10,500 \\\hline \text { Accounts Receivable } & 9,500 \\\hline \text { Sales Tax Payable } & 4,500 \\\hline \text { Retained Earnings } & 47,500 \\\hline \text { Supplies } & 40,000 \\\hline \text { Notes Payable (due in 18 months) } & 35,000 \\\hline \text { Interest Payable } & 3,000 \\\hline \text { Common Stock } & 35,000 \\\hline\end{array}$ What is the amount of current assets,assuming the accounts above reflect normal activity?

When a company makes an end-of-period adjusting entry which includes a debit to Supplies Expense,the usual credit entry is made to:

For each of the following accounts,indicate whether the account is shown in the income statement or the balance sheet:

Consider the following events for Betterment Incorporated: January 1 $\quad$ Betterment purchases gasoline for $\$ 200$ on account. January 7 $\quad$ Betterment advertises lawn mowing services for $\$ 100$ per lawn. January 9 $\quad$ Betterment signs up 8 customers who pay a total of $\$ 800$ cash. January 12 $\quad$ Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used. January 13 $\quad$ Betterment pays for the gasoline purchased on January 1. Under accrual-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?

Consider the following events for Betterment Incorporated: January 1 $\quad$ Betterment purchases gasoline for $\$ 200$ on account. January 7 $\quad$ Betterment advertises lawn mowing services for $\$ 100$ per lawn. January 9 $\quad$ Betterment signs up 8 customers who pay a total of $\$ 800$ cash. January 12 $\quad$ Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used. January 13 $\quad$ Betterment pays for the gasoline purchased on January 1. Under cash-basis accounting,what is the appropriate day to record the expenses related to the gasoline?