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Exam 3: The Accounting Cycle: End of the Period

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Question 81

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Which transaction would not be recorded under cash-basis accounting?

A) Providing services to customers for cash.
B) Paying one year of rent in advance.
C) Paying salaries to employees.
D) Purchasing supplies on account.

E) B) and D)
F) A) and B)

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Question 82

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A company paid $900 to workers during May.Of this amount,$600 was for work performed in April,while the other $300 was for work performed during May.What would the impact of this transaction be during May on (1) the balance of cash, (2) cash-basis net income,and (3) accrual-basis net income?

A) (1) No effect, (2) No effect, (3) Decrease.
B) (1) Decrease, (2) Decrease, (3) No effect.
C) (1) Decrease, (2) Decrease, (3) Decrease.

D) A) and B)
E) A) and C)

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Question 83

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When a magazine sells one-year subscriptions to customers but receives the full amount of cash immediately,it is an example of a(n) :

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

A company provided $1,500 of services to customers during the month of May.The customers paid in 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?

A customer purchased a drill press on November 14 on account from Sears.The drill press was delivered two weeks later.The customer paid for the drill press on December 5.When should Sears record the revenue for this transaction according to the revenue recognition principle?

The adjusting entry required to record accrued expenses includes:

On April 1,a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance.At the end of the year,the financial statements would report:

If a company incorrectly records a payment as an expense instead of an asset,how will this error affect net income in the current period?

Which one of the following best describes the characteristics of adjusting entries?

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

Accrual-basis accounting involves recording revenues when earned and recording expenses with their related revenues.

The accounting basis that records revenues when cash is received and expenses when cash is paid is referred to as:

The components of retained earnings include assets,expenses,and dividends.The components of retained earnings include revenues,expenses,and dividends.

Receiving a utility bill for costs in the current period but delaying payment until the following period is an example of a(n) :

Which of the following are reported as stockholders' equity in a classified balance sheet?

Suppose Simeon Company begins the year with $1,000 in supplies,purchases an additional $5,500 of supplies during the year,and ends the year with $700 in supplies.The year-end adjusting entry includes Supplies Expense of $7,200.Supplies Expense = beginning ($1,000)+ purchases ($5,500)- ending ($700).

A company has the following three events in December: 1.December 1 - Pay last month's rent (November) ,$500.2.December 15 - Pay rent for the current month (December) ,$500.3.December 31 - Pay rent for the following year,$6,000.How much would be recorded as Rent Expense for the month of December using accrual-basis accounting?

Which of the following regarding adjusting entries is correct?

The primary purpose of closing entries is to: