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Exam 3: The Accounting Cycle: End of the Period

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Question 51

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An accrued revenue represents:

A) Customers paying cash in advance of the good or service to be provided.
B) Revenue being recorded prior to cash collection from the customer.
C) Revenue being recorded at the same time the cash is collected from the customer.

D) None of the above
E) A) and C)

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Question 52

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A current liability is defined as:

A) An amount borrowed less than one year ago.
B) An amount due to an employee.
C) An amount due within one year.

D) None of the above
E) A) and C)

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Question 53

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For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

The primary difference between accrual-basis and cash-basis accounting is:

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue,how will this error affect net income for the current period?

Prepaid expenses involve payment of cash (or an obligation to pay cash)for the purchase of an asset before the expense is incurred.

The accounting basis that records revenues when goods or services are provided to customers and expenses with related revenues is referred to as:

Which of the following describes the purpose(s) of closing entries?

Which of the following accounts will NOT be involved in closing entries?

On December 31,2018,employees who earn $500 per day have worked eight days and will be paid on January 6,2019.The adjusting entry on December 31,2018,includes a debit to Salaries Expense for $4,000.

A list of all accounts and their balances after posting closing entries is referred to as:

Permanent accounts would not include:

Consider the following events for Betterment Incorporated: Under accrual-basis accounting,what is the appropriate day to record the revenues related to lawn services? $\begin{array} { | l | l | } \hline \text { January } 1 & \text { Betterment purchases gasoline for } \$ 200 \text { on account. } \\\hline \text { January } 7 & \text { Betterment advertises lawn mowing services for } \$ 100 \text { per lawn. } \\\hline \text { January } 9 & \text { Betterment signs up } 8 \text { customers who pay a total of } \$ 800 \text { cash. } \\\hline \text { January } 12 & \begin{array} { l } \text { Betterment mows the lawns of the } 8 \text { customers and all gasoline purchased on } \\\text { January } 1 \text { is used. }\end{array} \\\hline \text { January } 13 & \text { Betterment pays for the gasoline purchased on Januay } 1 . \\\hline\end{array}$

With respect to current assets,liquidity refers to:

The following events pertain to Bills Company: Using cash-basis accounting,on which date should Bills Company record revenue for the accounting and tax services? $\begin{array}{|l|l|}\hline\text { December } 28,2018 & \begin{array}{l}\text { Bills was contacted by a customer for possible accounting and tax } \\\text { services. }\end{array} \\\hline \text { December } 30,2018 & \begin{array}{l}\text { Bills signed a formal agreement with the customer to provide } \\\text { accounting and tax services in } 2019 .\end{array} \\\hline \text { January } 4,2019 & \begin{array}{l}\text { The customer paid } \$ 1,000 \text { in advance for the services to be provided } \\\text { by Bills Company. }\end{array} \\\hline \text { January } 11,2019 & \text { Bills provided accounting and tax services to the customer. } \\\hline\end{array}$

When a company makes an end-of-period adjusting entry,which includes a debit to Supplies Expense,the usual credit entry is made to:

Current assets are assets that provide a benefit to a company over more than one year.Current assets provide a benefit to a company over the next year only.

According to the revenue recognition principle,if a company provides services to a customer in the current year but does not collect cash until the following year,the company should report the revenue in the current year.

A company orders office supplies in June.Those supplies are received and paid for in July.The supplies are used in August.In which month should the company record supplies expense?

Which of the following is true concerning temporary and permanent accounts?