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Exam 3: The Accounting Cycle: End of the Period

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Question 41

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The statement of stockholders' equity includes which of the following for the period?

A) Details of a company's profitability that represents stockholders' claims.
B) Changes in stockholders' equity accounts.
C) Inflows and outflows of cash that benefit stockholders.

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

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Question 42

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The revenue recognition principle states that:

A) Revenue should be recognized in the period the cash is received.
B) Revenue should be recognized in the period goods and services are provided.
C) Revenue should be recognized in the balance sheet.

D) None of the above
E) A) and B)

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Question 43

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Long-term asset categories include investments;property,plant,and equipment;and intangible assets.

Current liabilities are liabilities due within one year.

The post-closing trial balance is a list of all accounts and their balances at a particular date after the account balances have been updated for closing entries.

The adjusting entry for a prepaid expense always includes a debit to an expense account and a credit to a liability account.The credit is to an asset account.

The adjusting entry required when amounts previously recorded as deferred revenues are earned by providing goods or services to customers includes:

The purpose of closing entries is to transfer:

A company purchased $400 of office supplies on account during May.All the supplies were used in May,and the account was paid during June.What would the impact of these transactions be during May on (1) the balance of cash, (2) cash-basis net income,and (3) accrual-basis net income?

The following information pertains to Sooner Company: Assuming that Sooner Company uses cash-basis accounting,when would the company record the expense related to the supplies? $\begin{array} { | l | l | } \hline \text { May } 1 & \text { Customer ordered an installation service to be done by Sooner Company on May } 15 . \\\hline \text { May } 2 & \text { Customer paid cash tor the installation job to be done on May } 15 . \\\hline \text { May } 8 & \text { The Sooner Company purchased installation supplies on account tor the job. } \\\hline \text { May } 15 & \text { The installation job was started and completed. } \\\hline \text { May } 20 & \text { Amount owed for supplies purchased on May } 8 \text { is paid. } \\\hline\end{array}$

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

Because adjusting entries allow the proper application of the revenue recognition principle or the matching principle,they are a necessary part of cash-basis accounting.Adjusting entries are a necessary part of accrual-basis accounting.

Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

The matching principle states that we recognize expenses in the same period as the revenues they help to generate.

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

A classified balance sheet separates assets into current and long-term,and separates liabilities into current and long-term.

The adjusting entry for an accrued expense always includes a debit to an expense account and a credit to a liability account.

Deferred revenues occur when cash is received after the revenue is earned.Deferred revenues occur when cash is received before the revenue is earned.

Patents,copyrights,franchises,and trademarks are examples of:

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