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Exam 2: Understanding the Accounting Cycle

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Question 1

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Tucker Company shows the following transactions for the accounting period ending December 31,2016: 1)Sold books to customers for $68,000 on account 2)Collected $56,000 from customers 3)Issued common stock for $16,000 cash 4)Prepaid four months' rent for $8,800 on October 1,2016 5)Purchased supplies for $21,000 cash 6)Physical count shows $6,500 of supplies remained on December 31,2016 7)Recorded adjustment for prepaid rent used Show how the above transactions and year-end adjustments affect the accounting equation.Precede the amount with a minus sign if the transaction reduces that section of the equation.Enter 0 for items not affected.

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Question 2

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Use the following information for questions Nelson Company experienced the following transactions during 2016,its first year in operation. 1.Issued $12,000 of common stock to stockholders. 2.Provided $4,600 of services on account. 3.Paid $3,200 cash for operating expenses. 4.Collected $3,800 of cash from accounts receivable. 5.Paid a $200 cash dividend to stockholders. -The total amount of assets shown on Nelson Company's December 31,2016 balance sheet is:

A) $12,400.
B) $12,600.
C) $13,400.
D) $13,200.

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Question 3

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When are expenses recognized under accrual accounting in relation to the payment of cash?

Use the following information for questions Nelson Company experienced the following transactions during 2016,its first year in operation. 1.Issued $12,000 of common stock to stockholders. 2.Provided $4,600 of services on account. 3.Paid $3,200 cash for operating expenses. 4.Collected $3,800 of cash from accounts receivable. 5.Paid a $200 cash dividend to stockholders. -The amount of net cash flow from operating activities shown on Nelson Company's 2016 statement of cash flows is

The term "accrual" describes an earnings event that is recognized before cash is paid or received.

What effect does the recording of revenue normally have on total assets?

Indicate whether each of the following statements regarding the four types of accounting events is true or false. _____ a)Asset exchange transactions involve an increase in one asset and a decrease in another asset. _____ b)An asset source transaction involves an increase in assets and an increase in a corresponding claims account. _____ c)An asset use transaction cannot result in an increase in equity. _____ d)Asset exchange transactions cannot affect cash flows. _____ e)Some claims exchange transactions involve an increase in a liability account and a decrease in an equity account.

Explain the meaning of the term,"matching concept."

Mize Company provided $45,500 of services on account,and collected $38,000 from customers during the year.The company also incurred $37,000 of expenses on account,and paid $32,400 against its payables.As a result of these events,

The following events apply to Bowman's Cleaning Service for 2016. 1).Issued stock for $44,000 cash. 2).On May 1,paid $27,000 for one year's rent in advance. 3).Purchased on account $4,500 of supplies to be used in the business. 4).Performed services of $68,400 and received cash. 5).At December 31,adjusted the records for the expired rent. 6).At December 31,an inventory of supplies showed that $660 of supplies were still unused. Required: Draw an accounting equation and record the effects of the above events under the appropriate account headings.Show the year-end total for each account.Precede the amount with a minus sign if the transaction reduces that section of the equation.Enter 0 for items not affected.

What effect does providing services on account have on the statement of cash flows? The balance sheet?

The effects of transactions occurring during 2016 and their related end-of-year 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 2016,and b)Prepare a statement of cash flows for 2016.Precede a cash outflow amount with a minus sign.

Gomez Company collected $9,000 on September 1,2016 from a customer for services to be provided over a one-year period beginning on that date.How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31,2016? How much would it report as cash flows from operating activities for 2016?

Maggie Stern started a consulting business,Stern Consulting,on January 1,2016 by issuing $9,000 of common stock.In addition,the following events occurred in 2016. Provided services on account,$27,500. Paid cash for $13,500 in operating expenses. Collected $11,000 of the revenue that was previously recorded on account. Paid a cash dividend of $5,000 to the stockholders. Required: a)Show the effects of the above transactions on the accounting equation.Precede the amount with a minus sign if the transaction reduces that section of the equation.Enter 0 for items not affected. b)Prepare an income statement and statement of cash flows for 2016.Precede a cash outflow amount with a minus sign.

Adjusting entries never affect a business's cash account.

The matching concept refers to the "matching" of:

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts. -At the end of the accounting period,Signet Co.recognized accrued salaries.

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

Which of the following accounts would not appear on a balance sheet?

A payment to an employee in settlement of salaries payable decreases an asset and decreases equity.