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Exam 3: Accounting for Deferrals

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Question 21

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The following accounts and balances were obtained from the records of Barnes Company: Based on this information alone the amount of Barnes's retained earnings is:

A) $11,600.
B) $17,200.
C) $5,200.
D) None of these answers is correct.

E) C) and D)
F) All of the above

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Question 22

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Indicate for each of the following items if the item would be reported on the income statement (IS), statement of changes in stockholders' equity (SE), balance sheet (BS), or statement of cash flows (CF). Some items may appear on more than one statement; if so, identify all applicable statements.1)Salaries payable2)Prepaid insurance3)Dividends paid to stockholders4)Supplies5)Accounts payable6)Depreciation expense7)Retained earnings8)Unearned subscription revenue9)Cash flows from operating activities10)Beginning common stock11)Accumulated depreciation12)Accounts receivable

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1)BS, 2)BS, 3)SE and...

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Question 23

Multiple Choice

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On May 1, Year 2, Cole Company paid $12,000 cash for supplies. The Year 2 adjusting entry to recognize the amount of supplies used during Year 2

Wichita, Incorporated reported the following amounts on its financial statements prepared as of the end of the current accounting period: What is the company's return-on-assets ratio?

What does the debt-to-assets ratio indicate about the level of a company's debt risk? Who would normally be most interested in this ratio?

On January 1, Year 1, Alabama Company purchased a machine for $26,000. The machine has an estimated useful life of 4 years and an estimated salvage value of $6,000. What is the book value of the machine reported on Alabama's balance sheet as of December 31, Year 1?

Chestnut, Incorporated reported the following balances on its balance sheet at December 31, Year 1: On January 1, Year 2, Chestnut purchased equipment for $40,000 on account. What is the company's debt-to-assets ratio immediately after the purchase of the equipment?

A high debt-to-asset ratio may indicate that a company has a high level of debt risk.

The effects of transactions occurring during Year 1 and their related year-end adjustments have been recorded below using the accounting equation. Required:With your knowledge of transaction analysis using an accounting equation:a)Prepare an income statement for Year 1.b)Prepare a statement of cash flows for Year 1.

On January 1, Year 1, Melon Moving Company paid $60,000 to purchase a truck. The truck was expected to have a five-year useful life and a $5,000 salvage value. If Melon uses the straight-line method, the amount of book value shown on the Year 4 balance sheet is

Regarding the relationships of revenues and expenses to assets and liabilities, state whether each of the following statements is true or false. a)Recording an increase in a revenue account may be associated with a decrease in assets.b)Recording an increase in a revenue account may be associated with a decrease in liabilities.c)Recording a decrease in assets may be associated with an increase in an expense account.d)A decrease in Supplies will be accompanied by an increase in Supplies Expense.

Hernandez Company began business operations and experienced the following transactions during Year 1, its first year of operations:1)Issued common stock for $50,000 cash.2)Provided services to customers for $125,000 on account.3)Purchased $2,500 of supplies on account.4)Paid $30,000 cash to rent office space for a 12-month period beginning July 1.5)Collected $115,000 cash from customers.6)Paid cash for $90,000 of operating expenses.7)Adjusted the accounting records to reflect that there was $750 of supplies remaining on hand at year-end.8)Recorded a year-end adjustment to recognize rent expense.Required:a)Record the above transactions on a horizontal statements model, reflecting their effect on the different financial statements.b)Prepare Hernandez Company's income statement, balance sheet and statement of cash flows for the year ended December 31, Year 1.

The following transactions apply to Einstein Corporation.1)Issued common stock for $50,000 cash.2)Provided services to customers for $28,000 on account.3)Purchased land for $16,000 cash.4)Purchased $1,500 of supplies on account.5)Paid $12,000 for operating expenses.6)Paid $550 on accounts payable.7)Collected $25,000 cash from customers.8)Accrued $600 of salary expense at year end.9)Paid $2,000 dividends to stockholders.Required:a)Identify the effect on the statement of cash flows for each of the above transactions.b)Classify the above accounting events into one of four types of transactions (asset source, asset use, asset exchange, claims exchange).

Wichita, Incorporated reported the following amounts on its financial statements prepared as of the end of the current accounting period: What is the company's return-on-assets ratio?

Recognizing an expense may be accompanied by which of the following?

Which of the following shows how the adjusting entry to recognize services provided to a client who paid for the services prior to the work being performed?

The following events occurred during a company's first year of operations, which ended on December 31:a)On April 1, paid $36,000 for to lease office space for one year beginning immediately.b)On February 1, paid $3,000 to purchase supplies; a physical count revealed $1,080 of supplies on hand on December 31.c)On September 1, received $48,000 cash in advance for services to be performed over a six-month period beginning immediately.Required:For each event:1)Show how the events affect each of the company's accounts using the horizontal statements model. In the last column, enter OA, IA, or FA for the type of cash flow activity, if applicable.2)In the row that follows, show how the corresponding adjustment, required as of December 31, affects each of the company's accounts.

Indicate how each event affects the financial statements model. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NAOn February 1, Year 1, Owen Company paid $24,000 cash to lease office space for one year beginning immediately.

Knoll Company started Year 2 with a $1,000 balance in its Cash account, a $200 balance in its Supplies account and a $1,200 balance in its common stock account. During Year 2, the company experienced the following events:(1) Paid $600 cash to purchase supplies.(2) Physical count revealed $50 of supplies on hand at the end of Year 2.Based on this information the amount of supplies expense reported on the Year 2 income statement is

Hawk Company purchased $800 of supplies on account. Which of the following shows how this purchase will affect Hawk's balance sheet?