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Exam 3: The Financial Reporting Process

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Question 31

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Current liabilities are liabilities due within one year.

A) True
B) False

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Question 32

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

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B) False

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Question 33

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For each transaction below,calculate the amount of revenue to be recognized in the current period using accrual-basis accounting: (a)Performed $24,000 of services during the month and received full cash payment from customers at the time of service. (b)Performed $9,000 of services during the month and billed customers.Customers are expected to pay next month. (c)Received $12,000 cash from customers for services to be provided next month.

Adjusting entries:

The following events pertain to Jasper Corporation: Using cash-basis accounting,on which date should Jasper record supplies expense?

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.

The adjusted trial balance for China Tea Company at December 31,2012 is presented below: Prepare the closing entries for China Tea Company for the year ended December 31,2012.

The year-end adjusted trial balance included the following account balances: Cash,$5,000; Equipment,$25,000; Accounts payable,$7,000; Common stock,$15,000; Retained earnings,$6,000; Dividends,$1,000; Service revenue,$18,000; Salaries expense,$9,000; and Utilities expense,$6,000.Prepare the post-closing trial balance.

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.

An example of an adjusting entry would not include:

Accrued revenues involve the receipt of cash after the revenue has been earned and an asset has been recorded.

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?

Consider the following items: Land Accounts Receivable Notes Payable (due in three years) Accounts Payable Retained Earnings Prepaid Rent Unearned Revenue Buildings Notes Payable (due in six months) Equipment How many of the items listed above are generally long-term assets?

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

When the balance of the Unearned Revenue account decreases during an accounting period:

Permanent accounts would not include:

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 January 8 $\quad$ 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 revenues related to lawn services?

Adjusting entries should be prepared after financial statements are prepared.

Because cash-basis accounting violates both the revenue recognition principle and the matching principle,it is generally not accepted in preparing financial statements.

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 cash-basis accounting,what is the appropriate day to record the expenses related to the sand volleyball camp?