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Exam 2: Accounting for Accruals

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Question 31

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Grant Hylton started a consulting business, Hylton Consulting, on January 1, Year 1, and the business engaged in the following transactions during the year:1)Issued $40,000 of common stock for cash2)Provided services on account, $46,5003)Incurred $37,500 of operating expense, but only paid $32,000 of this amount4)Collected $39,000 of the revenue that was previously recorded on account5)Paid a cash dividend of $4,000 to the stockholders Required:a)Show the effects of the above transactions on the accounting equation

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Question 32

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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. 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. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Epstein Company paid $20,000 in cash dividends to its stockholders.

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Paying a cash dividend is an asset use ...

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Question 33

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If retained earnings decreased during the year, and no dividends were paid, which of the following statements must be true?

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. 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. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Pierce Company paid $40,000 cash to purchase land.

The Merry Maids provided cleaning services to Orange Company on account. Which of the following would describe the transaction's effect on the Merry Maids' financial statements?

Rushmore Company provided services for $25,500 cash during Year 1. Rushmore incurred $19,000 of operating expenses on account during Year 1, and by the end of the year, $6,500 of that amount had been paid with cash. If these are the only accounting events that affected Rushmore during Year 1, which of the following statements is true?

Which of the following would be included in the "cash flow from operating activities" section of the statement of cash flows?

Nelson Company experienced the following transactions during Year 1, its first year in operation.Acquired $12,000 cash by issuing common stockProvided $4,600 of services on accountPaid $3,200 cash for operating expensesCollected $3,800 of cash from customers in partial settlement of its accounts receivablePaid a $200 cash dividend to stockholdersWhat is the balance of the retained earnings that will be reported on the balance sheet as of December 31, Year 1?

What is the term used to describe the policies and procedures that are designed to reduce the opportunities for fraud?

Expenses incurred on account increase the accounts receivable balance.

The Sarbanes-Oxley Act includes several significant reforms that affect the auditing profession, but it did not reduce an audit firm's ability to provide nonaudit services to its audit clients.

The following transactions apply to Kellogg Company.1)Issued common stock for $20,000 cash2)Provided services to customers for $38,000 on account3)Purchased land for $15,000 cash4)Incurred $29,000 of operating expenses on account5)Collected $35,000 cash from customers for services provided in event #26)Paid $27,000 on accounts payable7)Paid $2,000 dividends to stockholdersRequired:a)Identify the dollar amount effect on the statement of cash flows, if any, for each of the above transactions.b)If applicable, indicate whether each transaction involves operating, investing, or financing activities.

Paying cash to settle a salaries payable obligation will affect which section of the statement of cash flows?

Discuss the importance of ethics in the accounting profession..a)Assets and stockholders' equity both increase when the revenue is recognized.b)This transaction did not affect cash flows.c)The Company recorded an increase in revenue and a decrease in accounts receivable.d)Recognition of revenue would be delayed until cash was collected.e)This transaction is an example of an asset exchange transaction.

Which of the following shows how a payment made to settle an accrued expense, such as salaries payable, will affect a company's financial statements?

The ethical standards for certified public accountants only require that such accountants comply with applicable laws and regulations.

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. 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. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Perez Company paid $220,000 cash for salaries expense.

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. 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. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Bell Company provided consulting services for $20,000 cash.

Classify each of the following transactions for the purpose of the statement of cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or not reported on the statement of cash flows (NA).1)________ Collected accounts receivable2)________ Made adjusting entry to accrue salary expense at the end of the year3)________ Borrowed funds from the bank4)________ Paid cash to settle accounts payable5)________ Issued common stock for $30,000 cash6)________ Paid cash to acquire land

During Year 1 China Enterprises experienced the following events.(1) Earned $10,000 of revenue on account(2) Incurred $9,000 of expenses on accountBased on this information, which of the following describes the combined effects of both events on the amount of total assets, net income and cash flow from operating activities shown on the Year 1 financial statements?