Copyright 2018 McGraw-Hill

1 Copyright ©2018 McGraw-Hill Survey of Accounting, 5e (Edmonds) Chapter 2 Accounting for Accruals and Deferrals 1) Bledsoe Company received $17,000 cash from the issue of stock on January 1, Year 1. During Year 1, 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 Year 1,

• Total assets increased by $20,100.
• Total assets increased by $600.
• Total assets increased by $26,100.
• Total assets did not change.

2) Addison Company experienced an accounting event that affected its financial statements as

indicated below:

Assets = Liab.+ Equity Rev. − Exp.= Net Inc. Cash Flow

+ NA + + NA + NA

Which of the following accounting events could have caused these effects on Addison's statements?

• Issued common stock.
• Earned revenue on account.
• Earned cash revenue.
• Collected cash from accounts receivable.

3) Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business?Assets=Liab.+EquityRev.-Exp.=Net Inc.Cash Flow

A.NA = + + - - - + = NA NA

B.NA = NA + +/- NA - NA = NA NA

C.NA = + + - NA - + = - NA

D. + =+ + NA NA - + = - -OA

• Option A
• Option B
• Option C
• Option D

4) Which of the following transactions does not involve an accrual?

• Recording interest earned that will be received in the next period.
• Recording operating expense incurred but not yet paid.
• Recording salary expense incurred but not yet paid.
• Recording the pre-payment of two years' worth of insurance.

Survey of Accounting 5th Edition Edmonds Test Bank Visit TestBankDeal.com to get complete for all chapters

2 Copyright ©2018 McGraw-Hill 5) Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements?Assets=Liab.+EquityRev.-Exp.=Net Inc.Cash Flow

A. + =+ + NA + - NA = + -OA

B.NA = + + - NA - + = - -IA

C. - =NA + - NA - + = - NA

D.NA = + + - NA - + = - NA

• Option A
• Option B
• Option C
• Option D

6) Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. Net income for the period was

A) $1,200.

B) $2,900.

C) $2,850.

D) $2,450.

7) The recognition of an expense may be accompanied by which of the following?

• An increase in liabilities
• A decrease in liabilities
• A decrease in revenue
• An increase in assets

8) Which of the following statements is true in regard to accrual accounting?

• Revenue is recorded only when cash is received.
• Expenses are recorded when they are incurred.
• Revenue is recorded in the period when it is earned.
• Revenue is recorded in the period when it is earned and expenses are recorded when they are

incurred.9) Recognition of revenue may be accompanied by which of the following?

• A decrease in a liability.
• An increase in a liability.
• An increase in an asset.
• An increase in an asset or a decrease in a liability.

3 Copyright ©2018 McGraw-Hill 10) 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,

• total assets would increase
• total liabilities would increase
• total equity would increase
• all of these answer choices are correct

11) Which of the following events would not require an end-of-year adjusting entry?

• Purchasing supplies for cash
• Paying for one year's rent on July 1
• Providing services on account
• Each of these answer choices would require an end-of-year adjustment

12) The adjusting entry to recognize work completed on unearned revenue involves which of the following?

• An increase in assets and a decrease in liabilities
• An increase in liabilities and a decrease in equity
• A decrease in liabilities and an increase in equity
• A decrease in assets and a decrease in liabilities

13) Jack's Snow Removal Company received a cash advance of $6,000 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

• increase assets by $2,000
• increase equity by $2,000
• increase liabilities by $2,000
• increase assets by $2,000 and increase equity by $2,000

14) The following account balances were drawn from the financial statements of Grayson

Company:

Cash $ 8,800Accounts payable $ 2,500 Accounts receivable $ 3,000Common stock ?Land $ 16,000 Retained earnings, Jan. 1 $ 5,400 Revenue $ 19,000 Expenses $ 14,500 Based on the above information, what is the balance of Common Stock for Grayson Company?

A) $15,400

B) $19,900

C) $900

D) $20,800

4 Copyright ©2018 McGraw-Hill 15) Prior to closing, Syracuse Company's accounting records showed the following balances: Retained earnings $16,800 Service revenue 21,750 Interest revenue 1,800 Salaries expense 12,300 Operating expense 3,450 Interest expense 900 Dividends 2,700 After closing, Syracuse's retained earnings balance would be

A) $16,800.

B) $23,700.

C) $21,000.

D) $26,400.

16) Sheldon Company began Year 1 with $1,200 in its supplies account. During the year, the company purchased $3,400 of supplies on account. The company paid $3,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,400 of supplies on hand.

Sheldon's financial statements for Year 1 would show:

• $1,600 of supplies; $200 of supplies expense
• $1,400 of supplies; $2,000 of supplies expense
• $1,400 of supplies; $3,200 of supplies expense
• $1,600 of supplies; $3,400 of supplies expense

17) Jason Company paid $7,200 for one year's rent in advance beginning on October 1, Year 1.Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

A) $7,200; $7,200

B) $1,800; $1,800

C) $1,800; $7,200

D) $1,200; $7,200

18) In uncertain circumstances, the conservatism principle guides accountants to:

• accelerate revenue recognition and delay expense recognition.
• accelerate expense recognition and delay revenue recognition.
• recognize expense of prepaid items when payment is made.
• delay both expense recognition and revenue recognition.

19) Purchasing prepaid rent is classified as a(n):

• asset source transaction.
• asset use transaction.
• asset exchange transaction.
• claims exchange transaction.