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Exam 3: Accrual Accounting

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Question 111

Multiple Choice

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From the list of accounts, determine whether the account is a temporary or permanent account. (Choices may be used more than once.) -cash

A) temporary account
B) permanent account

C) A) and B)
D) undefined

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Question 112

Multiple Choice

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Match each statement to the item listed below. -a listing of all the account balances immediately before preparation of the financial statements

A) accrual basis accounting
B) adjusted trial balance
C) adjusting entries
D) cash basis accounting
E) contra accounts
F) depreciation
G) matching principle
H) revenue recognition principle
I) time period assumption
J) worksheet

K) B) and E)
L) G) and J)

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Question 113

Multiple Choice

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From the list of accounts, determine whether the account is a temporary or permanent account. (Choices may be used more than once.) -rent revenue

California Condos California Condos uses the accrual basis of accounting, and had the following account balances on its financial statements at December 31, Year 1. $\begin{array}{lr}\text { Rent revenue } & \$ 340,000 \\\text { Accounts receivable } & 89,200 \\\text { Utilities payable } & 12,000 \\\text { Rent expense } & 22,000 \\\text { Unearned revenue } & 17,000\\\text { Depreciation expense } & 12,000 \\\text { Salaries expense } & 45,000 \\\text { Salaries payable } & 4,000 \\\text { Retained earnings, January 1 } & 60,000 \\\text { Dividends } & 2,500 \\\text { Interest revenue } & 10,000\end{array}$ -Refer to California Condos.On January 1,the utilities payable account had a zero balance.The company paid cash for utilities totalling $50,000 during Year 1.How much should be reported as utilities expense for the year ended December 31,Year 1?

Carlock Systems received a six-month,12% note for $50,000 from a customer on November 1,Year 1.The note is due on April 30,Year 2.Assuming the company's accounting period ends on December 31,how much interest revenue should be recognized during Year 1 and Year 2?

Most companies use the accrual basis of accounting because it is required under generally accepted accounting principles.

Match each statement to the item listed below. -allows companies to artificially divide their operations into periods for ease of communication

What are adjusting entries and what is their purpose?