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Exam 3: The Accounting Cycle: End of the Period

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Question 31

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Consider the following transactions: 1.The company uses supplies purchased in the previous period,$1,500.2.The company pays cash for rent in advance,$6,000.3.The company repays a loan to the bank,$10,000 (ignore any interest cost) .The amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____.

A) $6,000;11,500
B) $6,000;$16,000
C) $1,500;16,000
D) $1,500;$6,000

E) A) and D)
F) C) and D)

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Question 32

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Consider the following events for Sophia Incorporated: Under cash-basis accounting,what is the appropriate day to record the revenues related to the sand volleyball camp? $\begin{array} { | l | l | } \hline \text { April } 5 & \text { Sophia purchases volleyballs for } \$ 200 \text { on acc ount. } \\\hline \text { April } 6 & \text { Sophia adtertises a sand volleyball camp for } \$ 20 \text { a person. } \\\hline \text { April } 12 & \text { Thirty people sign up for the camp paying a total of } \$ 600 . \\\hline \text { April } 21 & \text { Sophia hosts the sand volleyball camp. } \\\hline \text { April } 23 & \text { Sophia pays for the volleyballs purchased on April } 5 . \\\hline\end{array}$

A) April 5.
B) April 12.
C) April 21.

D) A) and B)
E) A) and C)

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Question 33

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Temporary accounts would not include:

Closing entries transfer the balances of all temporary accounts (revenues,expenses,and dividends)to the Common Stock account.Balances of temporary accounts are transferred to Retained Earnings.

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

Deferred revenues refer to:

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

Long-term liabilities are liabilities due in more than one year.

Under cash-basis accounting,we record revenues at the time we receive cash and expenses at the time we pay cash.

The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

Which of the following is a possible adjusting journal entry?

The adjusting entry for a deferred revenue has the effects of reducing liabilities and increasing net income.

On November 1,2018,a company receives $1,800 for services to be provided evenly over the next six months.The December 31,2018,adjusting entry for the company would include a credit to Deferred Revenue for $600.The adjusting entry would involve a debit to Deferred Revenue and a credit to Service Revenue for $600.

Adjusting entries are not necessary when cash is received at the same time revenues are earned.

At the beginning of December,Global Corporation had $2,000 in supplies on hand.During the month,supplies purchased amounted to $3,000,but by the end of the month the supplies balance was only $800.What is the appropriate month-end adjusting entry?

The adjusting entry for an accrued expense has the effects of decreasing net income and decreasing liabilities.The adjusting entry has the effect of increasing liabilities.

A company orders office supplies in June.Those supplies are received and used in July.The supplies are paid for in August.In which month should the company record supplies expense?

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

Which of the following is true about adjusting entries?

In November,a company hires three temporary employees that are scheduled to work only the month of December.Those employees work during December,and they are then paid their full salaries in January.In which month should the company record supplies expense?