Question 1

Electrodo Co.purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable.What effect does this transaction have on the accounts under the accrual basis of accounting?

Accepted Answer

A)   Net increase in assets and liabilities of $55,000
B)   Net increase in assets of $35,000 and a net increase in liabilities of $35,000
C)   Net increase in assets of $55,000 and a net decrease in liabilities of $35,000
D)   Net increase in assets of $75,000 and a net decrease in liabilities of $30,000E) A) and C)
F) C) and D)

Question 2

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

A)   An increase in inventory
B)   A decrease in accounts payable
C)   Preferred dividends declared and paid
D)   A decrease in accounts receivableE) B) and C)
F) A) and D)

Question 3

Which transaction would be recorded in a cash basis system of accounting?

Accepted Answer

A)   Purchase of equipment by signing a note
B)   Purchase of supplies on credit
C)   Sale of goods against a note
D)   Sale of goods for cashE) B) and C)
F) A) and C)

Question 4

Under accrual accounting, expenses are recorded when incurred regardless of when paid.

Accepted Answer

A) True 
 B)False

Question 5

Flyer Co.billed a client for flying lessons given in January.The payment was received in February.Under the accrual basis of accounting, when should Flyer Co.record the revenue?

Accepted Answer

A)   January
B)   February
C)   Some in January and some in February
D)   Flyer Co.should not record any revenueE) A) and B)
F) A) and C)

Question 6

Which of the following is an accrued expense?

Accepted Answer

A)   Rent owed but not yet paid
B)   Accumulated depreciation
C)   Inventory in process
D)   A prepaid advertising expenseE) B) and C)
F) A) and D)

Question 7

Which of the following is not reported as revenue on the income statement?

Accepted Answer

A)   Unearned revenue
B)   Fees revenue
C)   Commissions revenue
D)   Rent revenueE) All of the above
F) None of the above

Question 8

Under the cash basis of accounting, expenses are recorded when paid.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is the effect of depreciation being recorded by a company?​

Accepted Answer

A)   ​Its cash flow decreases.
B)   ​Its net income decreases.
C)   ​Its quick assets decrease.
D)   ​Its common stock increases.E) A) and B)
F) None of the above

Question 10

Accounts receivable arising from trade transactions amounted to $62,000 and $78,000 at the beginning and end of the year, respectively.Net income reported on the income statement for the year was $125,000.Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method are:

Accepted Answer

A)   $109,000.
B)   $141,000.
C)   $125,000.
D)   $140,000.E) C) and D)
F) A) and B)

Question 11

Using accrual accounting, expenses are recorded and reported only:

Accepted Answer

A)   when they are incurred, whether or not cash is paid.
B)   when they are incurred and paid at the same time.
C)   if they are paid before they are incurred.
D)   if they are paid after they are incurred.E) None of the above
F) A) and C)

Question 12

Which of the following statements is prepared with various sections, subsections, and captions?

Accepted Answer

A)   A statement of current assets
B)   A statement of stockholders' equity
C)   A pro forma contra asset statement
D)   A classified balance sheetE) All of the above
F) A) and C)

Question 13

Accrued revenue is shown on a balance sheet as:

Accepted Answer

A)   an asset.
B)   common stock.
C)   a liability.
D)   retained earnings.E) A) and C)
F) A) and B)

Question 14

At the end of the fiscal year, the following adjusting entries were omitted:
(a)No adjusting entry was made to transfer the $3,000 of prepaid insurance from the asset account to the expense account.
(b)No adjusting entry was made to record accrued fees of $500 for services provided to customers.
Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces.Insert "0" if the error does not affect the item.

Accepted Answer

None...

Question 15

Accrual accounting does not require that the accounting records be updated prior to preparing financial statements.

Accepted Answer

A) True 
 B)False

Question 16

Describe deferrals and accruals.

Accepted Answer

Deferrals are created by recording a tra...

Question 17

Which of the following transactions will affect the profitability metric of a company?​

Accepted Answer

A)   ​Rent received in advance
B)   ​Prepaid insurance
C)   ​Purchase of supplies on account
D)   ​Fees received in cash for services providedE) B) and D)
F) A) and B)

Question 18

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called:

Accepted Answer

A)   current assets.
B)   intangible assets.
C)   fixed assets.
D)   notes receivable.E) B) and D)
F) A) and B)

Question 19

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 20

Under the accrual basis of accounting, net cash flows from operating activities on the statement of cash flows will normally be the same as net income.

Accepted Answer

A) True 
 B)False

Exam 3: Basic Accounting Systems: Accrual Basis

Describe deferrals and accruals.

Correct Answer
verified
Deferrals are created by recording a tra...
View Answer

Accrued revenue is shown on a balance sheet as:

Correct Answer
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Which of the following statements is prepared with various sections, subsections, and captions?

Correct Answer
verified

Flyer Co.billed a client for flying lessons given in January.The payment was received in February.Under the accrual basis of accounting, when should Flyer Co.record the revenue?

Correct Answer
verified

Under the accrual basis of accounting, net cash flows from operating activities on the statement of cash flows will normally be the same as net income.

Correct Answer
verified

Correct Answer
verified

Accrual accounting does not require that the accounting records be updated prior to preparing financial statements.

Correct Answer
verified

Which of the following is an accrued expense?

Correct Answer
verified

Which transaction would be recorded in a cash basis system of accounting?

Correct Answer
verified

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called:

Correct Answer
verified

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Correct Answer
verified

Which of the following is not reported as revenue on the income statement?

Correct Answer
verified

Under the cash basis of accounting, expenses are recorded when paid.

Correct Answer
verified

Correct Answer
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None...
View Answer

Electrodo Co.purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable.What effect does this transaction have on the accounts under the accrual basis of accounting?

Correct Answer
verified

Using accrual accounting, expenses are recorded and reported only:

Correct Answer
verified

Under accrual accounting, expenses are recorded when incurred regardless of when paid.

Correct Answer
verified

Which of the following is the effect of depreciation being recorded by a company?

Correct Answer
verified

Which of the following transactions will affect the profitability metric of a company?

Correct Answer
verified

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Correct Answer
verified

Exam 3: Basic Accounting Systems: Accrual Basis

Describe deferrals and accruals.

Correct AnswerverifiedDeferrals are created by recording a tra...View AnswerShow Answer

Accrued revenue is shown on a balance sheet as:

Correct AnswerverifiedShow Answer

Which of the following statements is prepared with various sections, subsections, and captions?

Correct AnswerverifiedShow Answer

Flyer Co.billed a client for flying lessons given in January.The payment was received in February.Under the accrual basis of accounting, when should Flyer Co.record the revenue?

Correct AnswerverifiedShow Answer

Under the accrual basis of accounting, net cash flows from operating activities on the statement of cash flows will normally be the same as net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accrual accounting does not require that the accounting records be updated prior to preparing financial statements.

Correct AnswerverifiedShow Answer

Which of the following is an accrued expense?

Correct AnswerverifiedShow Answer

Which transaction would be recorded in a cash basis system of accounting?

Correct AnswerverifiedShow Answer

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called:

Correct AnswerverifiedShow Answer

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Correct AnswerverifiedShow Answer

Which of the following is not reported as revenue on the income statement?

Correct AnswerverifiedShow Answer

Under the cash basis of accounting, expenses are recorded when paid.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Electrodo Co.purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable.What effect does this transaction have on the accounts under the accrual basis of accounting?

Correct AnswerverifiedShow Answer

Using accrual accounting, expenses are recorded and reported only:

Correct AnswerverifiedShow Answer

Under accrual accounting, expenses are recorded when incurred regardless of when paid.

Correct AnswerverifiedShow Answer

Which of the following is the effect of depreciation being recorded by a company?​

Correct AnswerverifiedShow Answer

Which of the following transactions will affect the profitability metric of a company?​

Correct AnswerverifiedShow Answer

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Deferrals are created by recording a tra...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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None...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following is the effect of depreciation being recorded by a company?

Correct Answer
verified

Which of the following transactions will affect the profitability metric of a company?

Correct Answer
verified

Correct Answer
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