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Exam 2: Understanding the Accounting Cycle

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Question 61

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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. -Banks Co.performed $5,000 of services for customers on account.

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(I)(N)(I)(...

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Question 62

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What action did the U.S.Congress take because of the audit failures at Enron,WorldCom and other companies?

A) Required publicly-traded companies to be audited by a government agency
B) Passed the Sarbanes-Oxley Act
C) Required companies to begin preparing an additional financial statement
D) Passed an amendment to the Securities and Exchange Act

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Question 63

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Which of the following is not a common feature of ethical misconduct?

Providing services to customers on account is an asset exchange transaction.

After closing,all income statement accounts have non-zero balances.

Recognition of depreciation expense on equipment decreases the equipment account.

The year-end adjustment to recognize one month's work on the three-month contract results in a $2,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue) . The following account balances were drawn from the 2016 financial statements of Grayson Company: -Prior to closing,Syracuse Company's accounting records showed the following balances: After closing,Syracuse's retained earnings balance would be

Turner Company started its business by issuing $10,000 of common stock on January 1,2016.The company performed $38,000 of service for customers on account in 2016.It collected $32,500 of this amount in 2016,recorded expenses on account of $29,500,paid $21,000 of the payables owed,and paid a $500 dividend to the stockholders. Required: a)What is the amount of total assets at the end of 2016? b)What is the amount of cash on hand at the end of 2016? c)What is the net income for 2016? d)Prepare a balance sheet for 2016.

Indicate whether each of the following statements about the closing process and the accounting cycle is true or false. _____ a)The closing process transfers certain account balances to retained earnings at the end of the accounting cycle. _____ b)Only accounts that appear on the income statement are closed at the end of each accounting cycle. _____ c)Another name for temporary accounts is "nominal accounts." _____ d)The permanent accounts contain information that is cumulative in nature. _____ e)The retained earnings balance at the end of any given year is equal to that year's net income.

Purchasing prepaid rent is classified as a(n) :

Dixon Company collected cash in 2015 from a customer for services to be performed beginning January 2016.Indicate whether each of the following statements about this transaction is true or false. _____ a)Dixon's 2016 income statement would not be affected by this transaction. _____ b)Dixon's 2015 statement of cash flows would be affected by this transaction. _____ c)This transaction is an asset exchange transaction. _____ d)The revenue for the services provided will be recorded in 2016. _____ e)The transaction increases Dixon's liabilities.

Bledsoe Company received $17,000 cash from the issue of stock on January 1,2016.During 2016 Bledsoe earned $8,500 of revenue on account.The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses.Based on this information alone,during 2016,

When a company purchases a depreciable asset,it must estimate the asset's useful life and salvage value.

What is the "fraud triangle"?

Which of the following is an asset exchange transaction?

Wyatt Company paid $57,000 in January 2016 for salaries that had been earned by employees in December 2015.Indicate whether each of the following statements about financial statement effects of the January 2016 event is true or false. _____ a)The income statement for 2016 is not affected because the salaries expense had been recognized at the end of December in 2015. _____ b)On the 2016 statement of cash flows,cash flows from operating activities decreased. _____ c)Payment of the salaries in 2016 increased a liability. _____ d)The 2016 statement of changes in stockholders' equity would not be affected because the salaries expense had been recognized at the end of December in 2015. _____ e)Both assets and equity decreased in 2016 as a result of this transaction.

Chester Company began 2016 with a note payable of $20,000 and interest payable of $800.During the year,the company accrued an additional $400 of interest expense,and paid off the note with interest.On the company's 2016 income statement,cash flows for financing activities related to the note would be:

The matching concept most significantly influences which financial statement?

Why are adjusting entries necessary in an accrual accounting system? What are some common examples?

Asset use transactions always involve the payment of cash.