Accounting CH 3
On October 1, Year 1, Jason Company paid $7,200 to lease office space for one year beginning immediately. What is the amount of rent expense that will be reported on the Year 1 income statement and what is the cash outflow for rent that would be reported on the Year 1 statement of cash flows?
$1,800; $7,200
On September 1, Year 1, Zelda Company collected $120,000 cash for services to be provided for one year beginning immediately. The company's fiscal closing date is December 31. Based on this information, the amount of revenue appearing on the Year 1 income statement would be
$40,000
Chestnut, Inc. reported the following balances on its balance sheet at December 31, Year 1: Total Assets$460,000Total Liabilities$170,000Common Stock160,000Retained Earnings130,000Total Equity290,000Total Liabilities and Equity$460,000 On January 1, Year 2, Chestnut purchased equipment for $40,000 on account. What is the company's debt-to-assets ratio immediately after the purchase of the equipment?
0.42
Wichita, Inc. reported the following amounts on its financial statements prepared as of the end of the current accounting period: Revenues$222,000Expenses173,200Net Income$48,800Current Assets$61,000Long-term Assets183,000Total Assets$244,000Current Liabilities$42,000Long-term Liabilities91,000Total Liabilities133,000Common Stock$51,000Retained Earnings60,000Total Equity111,000Total Liabilities and Equity$244,000 What is the company's return-on-assets ratio?
20%
The entry to recognize depreciation expense incurred on equipment involves which of the following?
A decrease in assets
How does the adjusting entry to recognize the portion of the unearned revenue that a company earned during the accounting period affect the elements of the financial statements?
A decrease in liabilities and an increase in equity.
Account No.Account Title(1)Cash(2)Service Revenue(3)Accounts Receivable(4)Salaries Expense(5)Dividends(6)Common Stock(7)Salaries Payable(8)Retained Earnings Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that appear on that particular financial statement.)
Account numbers 1, 3, and 8 will appear on the balance sheet.
Which of the following shows how paying cash to purchase supplies will affect a company's financial statements?
C) Balance Sheet Income Statement Stmt ofCash FlowsAssets=Liab.+EquityRev.−Exp.=Net Inc.NANANANANANA−OA
Which of the following shows how paying cash to lease an office building for the upcoming year affects a company's financial statements?
C) Balance SheetIncome StatementStmt ofCash FlowsAssets=Liab.+EquityRev.−Exp.=Net Inc.NANANANANANA−OA
Which of the following shows how adjusting the accounts to recognize supplies expense will affect a company's financial statements?
D) Balance SheetIncome StatementStmt ofCash FlowsAssets=Liab.+EquityRev.−Exp.=Net Inc.−NA−NA+−NA
Duluth Co. collected a $6,000 cash advance from a customer on November 1, Year 1 for services to be provided over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?
Decrease liabilities and increase revenues
During Bruce Company's first year of operations, the company purchased $2,300 of supplies. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?
Expenses will increase and assets will decrease by $1,475.
When a company purchases supplies on account
Liabilities increase
On June 1, Year 1, Jack Associates collected $48,000 cash for consulting services to be provided for one year beginning immediately. Based on this information, which of the following shows how the required adjustment on December 31, Year 1, would affect Jack's ledger accounts? Assets=Liabilities+Stockholders' EquityCashPrepaidRentUnearnedRevenueCommonStockRetainedEarnings A.(28,000)28,000 B.20,000(20,000) C.(20,000)20,000 D.28,000(28,000)
Option A
Which of the following would cause net income on the accrual basis to be different from (either higher or lower than) "cash provided by operating activities" on the statement of cash flows?
Purchased supplies for cash
Which of the following events would require a year-end adjusting entry?
Purchasing supplies for cash during the year
What is the purpose of the accrual basis of accounting?
Recognizing revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands.
Which of the following events involves a deferral?
Recording supplies that have been purchased with cash but not yet used.
Which of the following accounts would not appear on a balance sheet?
Service Revenue
Accumulated Depreciation
a contra asset that indicates the sum of all depreciation expense recognized for an asset since the date of acquisition
Book value
book value of a long term asset is the original cost minus acc. depreciation to date
Prepaid expenses
deferred expenses are recorded when cash is paid in advance of reporting the expense. Deff. expenses are recorded as ____.
A deferral
exists when a company pays cash before recognizing the associated expense.
Depreciation
refers to the decline in value of long-term assets such as buildings, furniture, or equipment
Unearned revenue
the account to record a liability arising when customers pay in advance for services a business will perform in the future is