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Exam 4: Income Measurement and Accrual Accounting

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Question 91

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For each of the following sentences ,select the word or group of words that best completes the statement. $\begin{array} { l l l } \text { Matching } & \text { Cash basis } & \text { Measurement } \\\text { Deferred revenue } & \text { Adjustments } & \text { Deferred expense } \\\text { Accrual basis } & \text { Recognition } & \text { Accrued asset }\end{array}$ -____________________ is the association of the costs incurred with the associated revenue of a period.

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Question 92

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Scenic View Foods Corporation The following consolidated statements of income are for Scenic View Foods Corporation for the years ending December 31,2017 and 2018: -Refer to the consolidated statements of income for Scenic View Foods Corporation. ​Required (1)Notice that Scenic View Foods reported "Provision for income taxes." What type of account is this? What adjustment would have been made if this accrual were necessary at December 31,2018? ​ (2)Scenic View Foods' reported $3.1 million and $2.8 million of accrued interest in the Liability section of its balance sheet at December 31,2018 and 2017,respectively.How much cash did it pay during 2017 for interest? ​ (3)Is Scenic View Foods income statement an "interim statement"? Explain.

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(1)This account represents income taxes ...

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Question 93

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Adjustments are necessary only if

Lucky Company purchased a truck at a cost of $12,000 in 2012.As of January 1,2017,depreciation of $10,000 had been recorded on this asset.Depreciation expense for 2017 is $2,000.After the adjustments are recorded and posted at December 31,2017,what is the carrying value of the truck?

Which of the following is the attribute used to measure many assets that are recognized on a balance sheet,because it is more objective and verifiable?

Ramos Corporation employs 14 workers in its retail service center.Each employee is paid $10 per hour and works six hours per day,Monday through Friday.Employees are paid every Friday for the workweek just ending.The last payday was Friday,December 26,on which day the employees were paid through that date. A. Compute the dollar amount of the weekly payroll. B. Determine the effect on the accounting equation of the adjusting entry needed on Wednesday, December 31, the last day of Ramos Corporation's fiscal period.

Camp Consulting Services started business on January 1,2017.Camp performed services for customers totaling $100,000 of which 40% remain uncollected at the end of December.Under the accrual basis,what amounts would appear on Camp Consulting's financial statements for 2017? $\begin{array}{l}\text { Income Statement }&\text { Statement of Cash Flows }\end{array}$ a. $\begin{array}{cc}&&&\$100,000&&&&&&\$60,000\end{array}$ b. $\begin{array}{cc}&&&\$100,000&&&&&&\$100,000\end{array}$ c. $\begin{array}{cc}&&&\$60,000&&&&&&&\$60,000\end{array}$ d. $\begin{array}{cc}&&&\$60,000&&&&&&&\$100,000\end{array}$

What is the revenue recognition principle? Are there any exceptions to this rule? If so,what are they? If not,explain why.

A company forgot to record four adjustments during 2017.Which one of the following omissions of adjustments will overstate assets?

Jenning Co. Jenning Co.adjusts its books each month but closes its books at the end of the year.The trial balance at July 31 before adjustments is as follows: $\begin{array}{lr}&\text { Debit }&\text {Credit }\\\text { Cash } & \$ 12,920 \\\text { Accounts Receivable } & 9,620 \\\text { Supplies } & 1,400 \\\text { Prepaid Insurance } & 3,120 \\\text { Equipment } & 26,000\\\text { Accumulated Depreciation-Equipment } && \$ 10,400 \\\text { Unearned Service Revenue } && 6,500 \\\text { Capital Stock } && 7,190 \\\text { Retained Earnings } && 23,500\\\text { Dividends } & 1,560 \\\text { Service Revenue } &&16,510 \\\text { Wages and Salaries Expense } & 7,800 \\\text { Utilities Expense } & 380 \\\text { Rent Expense } & \underline{1,300} \\& \underline{\$ 64,100}& \underline{\$64,000} \\\end{array}$ -Refer to the trial balance for Jenning Co. According to contracts,$4,810 of Unearned Service Revenue has been earned in July.Which of the following is the correct amount of Service Revenue to be reported in the July income statement?

Marcus Roberts operates a small retail establishment.The following unadjusted amounts were taken from Roberts' accounting records at December 31,2017: ? $\begin{array} { l r } \text { Accumulated Depreciation } & \$ 5,000 \\\text { Machinery } & 50,000 \\\text { Prepaid Advertising } & 1,200\end{array}$ Determine the effect on the accounting equation of the adjusting entries at December 31,2017,for each of the transactions that follow: ? A. The advertising costs are for television commercials to be aired equally throughout December 2017 and January and February 2018. ? B. The machinery had an original cost of $\$ 50,000$ and was purchased during 2016 . The estimated useful life is six years with an estimated salvage value equal to $\$ 8,000$ . Roberts uses the straight-line method of depreciation. ?

Conceptually,anytime a cost is incurred,an asset is acquired.

Windstar Corp.purchased supplies at a cost of $6,000 during the year.At December 31,supplies on hand are $1,400.Supplies expense for the year was $5,200.How much were supplies on hand at January 1?

On January 1,2017,ABC,Inc.purchased a copier for $9,000 cash and decided to depreciate it over five years.What amounts associated with the copier will appear on ABC's financial statements for the year ending December 31,2017? $\begin{array}{l}\text { Income Statement }&\text { Statement of Cash Flows }\end{array}$ a. $\begin{array}{cc}&&&\$1,800&&&&&&\$9,000\end{array}$ b. $\begin{array}{cc}&&&\$1,800&&&&&&\$0\end{array}$ c. $\begin{array}{cc}&&&\$9,000&&&&&&&\$0\end{array}$ d. None of these are correct.

____________________ is the name given to balance sheet accounts because they are permanent in nature.

The ____________________ principle attempts to associate with the revenue of the period,all costs necessary to generate that revenue.

All of the following describe a revenue except a revenue

On October 1, 2017, Winter Corp. buys a computer system for $270,000 in cash. Assume that the computer is expected to have a five-year life and an estimated salvage value of $30,000 at the end of that time. Required 1. Prepare the journal entry to record the purchase of the computer on October 1, 2017. 2. Compute the depreciable cost of the computer. 3. Using the straight-line method, compute the monthly depreciation. 4. Prepare the adjusting entry to record depreciation at the end of October 2017. 5. Compute the computer’s carrying value that will be shown on Winter’s balance sheet prepared on December 31, 2017.

Every adjustment involves at least one income statement and one balance sheet account.

Which one of the following steps in the accounting cycle is optional rather than required?