What is accrual accounting?
What is accrual accounting?
Description
School: Auburn University
Department: Accounting
Course: Principles of Financial Accounting
Professor: Elizabeth miller
Term: Fall 2015
Tags:
Cost: 50
Name: Exam 2 Study Guide
Description: Covers material fro Exam 2
Uploaded: 02/20/2018
Reviews
1. All of the following are examples of an adjusting entry EXCEPT:
What is accrual accounting?
a. Purchasing supplies
b. Renting office space
c. Performing services
d. Using equipment
2. Which of the following is true about Accrual Accounting
a. Record only cash transactions
b. Require complete activities to be recorded
c. Does not estimate the timing of revenue and expenses
d. Links income measurement to selling
3. On October 1st, UPS picks up a package from Amazon’s distributor and receives $40 to ship it to a customer. The package arrives October 10th. When is revenue recognized? a. When $40 dollars is received
b. When the customer receives the package
c. When the customer confirms they’ve received the package
d. When the package is on the way to be dropped off
What is the expense principle?
4. Which principle follows the rule that transactions are recorded when expense is incurred at the same time that revenue helped it generate
a. Revenue Recognition Principle
b. Expense (Matching) Principle
c. Time Period
d. Cash-Basis
5. Buffs Inc. incurred $10,000 of expenses but has not been paid for yet. This is an example of: We also discuss several other topics like What best captures our knowledge of communication?
We also discuss several other topics like Who is pedro alvares cabral?
a. Deferred Revenue
b. Accrued Revenue
c. Accrued Expense
d. Deferred Expense We also discuss several other topics like Why do live events cost more than recorded media?
6. Which method violates the Matching Principle?
a. Aging method
b. % of sales method
c. Net Method
d. Direct-Write off Method
7. Find Net Profit Margin for Buffs inc. with the following account totals: â—Ź Operating Income: $30,000
In accounting, what accounts can not be adjusted?
â—Ź Non-operating Income: $10,000
â—Ź Net Sales: $115,000
a. 0.44
b. $40,000
c. 0.347
d. $75,000
8. Which of the following journal entry correctly represents an Accrued Revenue: a. Rent Revenue $$
Rent Receivable $$
b. Rent Receivable $$ We also discuss several other topics like What is the latin word for sport?
Rent Revenue $$
c. Cash $$
Unearned Rev. $$
d. Unearned Rev. $$
Revenue $$
9. Which of the following accounts can NOT be adjusted?
a. Cash
b. Unearned Revenue
c. Prepaid Insurance
d. Interest Expense
10. What method would I be using if I wanted to take an income statement approach to estimate bad debt expense?
a. Aging Method
b. Direct Write-off Method
c. Percentage of Credit Sales
d. Matching Method
11. Buffs Inc. made a sale on account for $8,400 with credit terms of 2/10, n/30. Use the gross method to prepare the journal entry.
Answer: Accounts Receivable $8,400
Sales Revenue $8,400
12. Buffs Inc. has the following account balances at the beginning of 2014: Cash 234,700 Building 50,000 Accounts Receivable 27,400 Acc. Dep. (Building) 1,500 Supplies 300 Accounts Payable 15,000 Prepaid Advertising 1,500 Wages Payable 4,000 Equipment 150,000 Notes Payable 20,000 Acc.Depreciation 4,000 Unearned Rev 700 Retained E. (1/1/14) 85,000 Common Stock 426,100 Land 90,000 Interest Payable 4,000 If you want to learn more check out What are the gospels?
Throughout the year Buffs Inc. had the following activities:
â—Ź Purchased supplies on account for $2,500
â—Ź Provided 226,000 worth of services for cash
â—Ź Paid wages for $106,000 (4,000 were earned in 2013)
â—Ź Purchased 2-year insurance on Feb 1 for $25,000
â—Ź Paid off remaining accounts payable from 2013
â—Ź Customer paid $25,000 for services to be provided later
â—Ź Issued 300 shares of stock at $7 each We also discuss several other topics like What are the characteristics of the artwork being made in england before its conversion to christianity?
â—Ź Provided services that were paid in 2013
â—Ź Received cash of $25,000 from customers who bought on account in 2013 â—Ź Paid utilities of $4,000 throughout the year
â—Ź Purchased a warehouse for 130,000 on Aug. 1 & Depreciate $4,000 a year Prepare the Journal Entries for the above activities.
â—Ź Supplies 25,000
Acts. Payable 25,000
â—Ź Cash 226,000
Service Rev. 226,000
â—Ź Wages Payable 4,000
Wages Expense 102,000
Cash 106,000
â—Ź Prepaid Insurance 25,000
Cash 25,000
â—Ź Accounts Payable 15,000
Cash 15,000
â—Ź Cash 25,000
Unearned Rev. 25,000
â—Ź Cash (300x$7) 2,100
Common Stock 2,100
â—Ź Unearned Revenue 700
Revenue 700
â—Ź Cash 25,000
Accounts Rec. 25,000
â—Ź Utilities Expense 4,000
Cash 4,000
â—Ź Warehouse (PPE) 130,000
Cash 130,000
Information collected on Dec. 31, 2014 before adjustments are made: â—Ź Provided $20,000 of services that were prepaid earlier â—Ź Used all of the advertising that was bought in 2013
â—Ź Equipment depreciates at 200/month
â—Ź Building depreciates at 500/year
â—Ź Wages of $5,000 we unrecorded and unpaid at the end of the year â—Ź Notes payable has 12% interest rate-paid at maturity â—Ź Supplies left = 500
Prepare the adjusting Journal Entries
â—Ź Unearned Revenue 20,000
Revenue 20,000
â—Ź Ad. Expense 1,500
Prepaid Ad. 1.500
â—Ź Dep. Exp. (200x12) 2,400
Accum. Dep. 2,400
â—Ź Dep. Exp. 500
Accum. Dep. 500
â—Ź Dep. Exp.(4000x5/12) 1,667
Accum. Dep. 1,667
â—Ź Wages Expense 5,000
Wages Payable 5,000
â—Ź Interest Expense 2,400 (20,000x12%x12/12)
Interest Payable 2,400
â—Ź Supplies Expense 24,800
Supplies 24,800
â—Ź Insurance Exp. 11,458 (25,000x11/24)
Prepaid Ins. 11.458
