ACCT 200 Lecture Notes - Lecture 6: Deferral, Accrual, Accounting

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mauvecricket694

9 Sep 2016

School

University of Arizona

Department

Accounting

Course

ACCT 200

Professor

Silverberg

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Document Summary

Accountants divide the economic life of a business into artificial time periods (periodicity assumption) Fiscal year (any 12-month period) versus calendar year (january 1st december 31st) When a company agrees to perform a service or sell a product to a customer, it has a performance obligation. Companies recognize revenue in the accounting period in which the performance obligation is satisfied. Example: a customer booked a ticket with an airway on january 15th, and paid cash for the ticket on. The flight took place on april 15th, so the revenue was recognized on april 15th, rather than the day that the customer paid for the ticket. Expense recognition principle: match expenses with revenues in the period when the company makes efforts to generate those revenues. Transactions recorded in the period in which the events occur. Revenues are recognized when services are performed, even if cash was not received. Expenses are recognized when incurred, even if cash was not paid.

Related Questions

1. Which of the following identifies the proper order of theaccounting cycle?

A. Analyze, Journalize, Unadjusted Trial Balance

B. Analyze, Post, Unadjusted Trial Balance

C. Journalize, Post, Adjusted Trial Balance

D. Unadjusted Trial Balance, Adjusted Trial Balance, Close

E. Adjusted Trial Balance, Adjustments, Financial Statements

2. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three orsix-month periods

B. That are prepared before any adjustments have beenrecorded

C. That show the assets above the liabilities and theliabilities above the equity

D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid

E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues

3. The accounting principle that requires revenue to be reportedwhen earned is the:

A. Matching principle

B. Revenue recognition principle

C. Time period principle

D. Accrual reporting principle

E. Going-concern principle

4. Adjusting entries:

A. Affect only income statement accounts

B. Affect only balance sheet accounts

C. Affect both income statement and balance sheet accounts

D. Affect only cash flow statement accounts

E. Affect only equity accounts

5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned

B. Debit Cash and credit Unearned Legal Fees

C. Debit Unearned Legal Fees and credit Legal Fees Earned

D. Debit Legal Fees Earned and credit Unearned Legal Fees

E. Debit Unearned Legal Fees and credit Accounts Receivable

7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440

C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360

D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360

E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440

9. Unearned revenue is reported on the financial statementsas:

A. A revenue on the balance sheet

B. A liability on the balance sheet

C. An unearned revenue on the income statement

D. An asset on the balance sheet

E. An operating activity on the statement of cash flows

10. Which of the following assets is not depreciated?

A. Store fixtures

B. Computers

C. Land

D. Buildings

E. Vehicles

11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:

A. Intangible expenses

B. Prepaid expenses

C. Unearned expenses

D. Net expenses

E. Accrued expenses

13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called

A. Depreciation Expense

B. Unearned Depreciation

C. Prepaid Depreciation

D. Depreciation Value

E. Book Value

14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?

A. $3,250

B. $3,500

C. $4,000

D. $6,500

E. $7,000

15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?

A. $2,700

B. $2,900

C. $3,300

D. $3,500

E. $3,700

chocolatereindeer731

Question 16

Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of$5,000 and advertising expense of $2,000. Which of the followingjournal entries correctly records these expenses?

		Debit: Cash $7,000 Credit: Salaries/Wages Expense$5,000 Credit: Advertising Expense $2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$7,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Salaries/Wages Payable$5,000 Credit: Accounts Payable$2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$8,000

3 points

Question 17

Corresponds to CLO 4(a) Which of the following statements iscorrect regarding accrued revenues and unearned revenues, beforeadjusting entries have been made?

		Accrued revenues have not been earned and unearned revenues havebeen earned.
		Accrued revenues have been paid and unearned revenues havenot.
		Accrued revenues have not been recorded and unearned revenueshave been recorded.
		Accrued revenues have been recorded and unearned revenues havebeen recorded.

3 points

Question 18

Corresponds to CLO 4(b) Hudson Law Corporation received $5,500cash for legal services to be rendered in the future. The fullamount was credited to the liability account Unearned ServiceRevenue. At the end of the period, Hudson determines that $3,000 ofthe legal services have been rendered. The appropriate adjustingjournal entry to be made at the end of the period is:

		debit Unearned Service Revenue, $3,000; credit Cash, $3,000.
		debit Unearned Service Revenue, $3,000; credit Service Revenue,$3,000.
		debit Unearned Service Revenue, $2,500; credit Service Revenue,$2,500.
		debit Service Revenue, $2,500; credit Unearned Service Revenue,$2,500.

3 points

Question 19

Corresponds to CLO 4(c) Ace Corporation purchased officesupplies costing $13,000 and debited Office Supplies for the fullamount. At the end of the accounting period, a physical count ofoffice supplies revealed $2,700 still on hand. The appropriateadjusting journal entry to be made at the end of the period is:

		debit Office Supplies Expense, $10,300; credit Office Supplies,$10,300.
		debit Office Supplies, $10,300; credit Office Supplies Expense,$10,300.
		debit Office Supplies Expense, $2,700; credit Office Supplies,$2,700.
		debit Office Supplies, $2,700; credit Office Supplies Expense,$2,700.

3 points

Question 20

Corresponds to CLO 4(d) On September 1, Northgate paid $18,000to Evans Management Company for 12 months of rent beginning onSeptember 1. The appropriate journal entry was made to record thistransaction. If financial statements are prepared for the 9 monthsended September 30, the adjusting entry to be made by Northgateis:

		debit Rent Expense, $13,500; credit Prepaid Rent, $13,500.
		debit Prepaid Rent, $1,500; credit Rent Revenue, $1,500.
		debit Prepaid Rent, $1,500; credit Rent Expense, $1,500.
		debit Rent Expense, $1,500; credit Prepaid Rent, $1,500.

3 points

Question 21

Corresponds to CLO 5(a) Lennox Corporation purchased a newdelivery truck for 35,000. The sales taxes are $2,700. The logo ispainted on the side of the truck for $800. The truck's annuallicense is $200. Annual insurance on the truck is $1,300. Whatshould Lennox record as the cost of the new truck?

		$40,000
		$38,500
		$37,700
		$35,000

3 points

Question 22

Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporationpurchased equipment for $65,000. It is estimated that the equipmentwill have a $5,000 salvage value at the end of its 5 year usefullife. If Ballard uses the straight-line method of depreciation,what is the accumulated depreciation at December 31, 2013?

		$13,000
		$12,000
		$9,750
		$9,000

3 points

Question 23

Corresponds to CLO 5(c) Tyree Company purchased equipment with acost of $90,000 and an estimated salvage value of $18,000. Theequipment is expected to produce 150,000 units over its estimateduseful life of 10 years. If Tyree uses the units-of-activitymethod, what is the depreciation cost per unit to be used incalculating depreciation?

		$1.67
		$0.48
		$2.08
		$0.60

3 points

Question 24

Corresponds to CLO 5(d) Kerns Company purchased equipment with acost of $200,000 and an estimated salvage value of $10,000. Theequipment has an estimated useful life of 10 years. If Kerns usesthe double-declining balance method, what is the annualdepreciation rate to be used in calculating depreciation?

		5%
		10%
		20%
		40%

3 points

Question 25

Corresponds to CLO 6(a) Marshall Machinery made a sale for$150,000 on March 31. The customer is sent a statement on April 6and payment is received on April 15. Marshall prepares March'smonthly internal financial statements on April 20. Marshall followsGAAP and applies the revenue recognition principle. When is the$150,000 considered to be earned?

		March 31
		April 6
		April 15
		April 20

apricotbutterfly16

Hi there

Please answer the below in 15 mins, urgent. tahnks in advance:

1.The Tom Root Corporation guarantees its product againstdefects for one year. In what year should the corporation reportthe warranty expense?

Select one:

a. The cost of warranty is included in the product's sellingprice, and therefore warranty expense is never recorded.

b. in the year the product is sold

c. Expense is not disclosed because of the Liability forWarranty.

d. in the year the product becomes defective and is repaired orreplaced

2.Financial accounting focuses on the specific needs of decisionmakers external to the organization. Which of the following wouldnot be an external user?

Select one:

a. Internal Revenue Service

b. Vice President - Marketing

c. banks

d. stockholders

When dividends are paid,

Select one:

a. total assets remain the same.

b. total assets will decrease.

c. total assets will increase.

d. stockholders' equity will increase.

The basic rights usually attached to shares of common stockinclude:

Select one:

a. the guaranteed right to receive dividend payments eachyear.

b. the right to determine CEO's pay rate.

c. the right to vote on the matter brought before the annualshareholder meeting.

d. all of the above.

Outstanding shares of stock are:

Select one:

a. shares of stock owned by unknown individuals.

b. issued shares that are still in circulation.

c. also called treasury shares.

d. authorized shares that have not yet been issued.

Par value:

Select one:

a. specifies the exact amount for which an individual share ofstock must be sold.

b. is the maximum amount for which a share of stock may besold.

c. establishes the minimum price for the stock when issued.

d. is an amount determined by the marketplace when shares ofstock are sold.

Which of the following would not be a source of informationabout the financial condition of a company?

Select one:

a. the auditor's report

b. the company's 10K

c. articles in the business press

d. All of the above are sources.

In making investment and lending decisions:

Select one:

a. there is no relationship between risk and rate of return.

b. alternatives with the highest return generally have thelowest risk.

c. alternatives with the highest risk are selected.

d. alternatives with the lowest return generally have the lowestrisk.

8.ith which of the following would creditors be mostconcerned?

Select one:

a. dividends

b. profitability

c. future security prices

d. none of the above

A fiscal year:

Select one:

a. is any twelve consecutive months.

b. ends on December 31.

c. always ends at the end of the month.

d. end on June 30.

10.

The key components in measuring income are:

Select one:

a. assets and liabilities.

b. revenue and liabilities.

c. retained earnings and expenses.

d. revenue and expenses.

e. expenses and assets.

f. revenue and assets.

11.Which of the following help(s) determine when a sale shouldbe included in the income statement?

Select one:

a. recognition principle

b. cost recovery principle

c. matching principle

d. Both a. and c.

12.

The recording of expenses in the same time period as the relatedrevenues is called:

Select one:

a. matching.

b. accuracy.

c. allocation.

d. recognition.

carminetrout975

ACCT 200 Lecture Notes - Lecture 6: Deferral, Accrual, Accounting

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