Accounting for Non-Financial-chap2

If a company performs and completes all services in year 1, but does not receive cash for the services until year 2, in which year should the company record revenue?

Year 1.

During Year 1, Chung Corporation earned $4,800 of cash revenue and accrued $2,500 of salaries expense. Required Based on this information alone: Prepare the December 31, Year 1, balance sheet. Determine the amount of net income that Chung would report on the Year 1 income statement. Determine the amount of net cash flow from operating activities that Chung would report on the Year 1 statement of cash flows.

Accounting Equation

In Year 1, Lee Inc. billed its customers $56,000 for services performed. The company collected $41,700 of the amount billed. Lee incurred $37,500 of other operating expenses on account. Lee paid $24,400 of the accounts payable. Lee acquired $33,000 cash from the issue of common stock. The company invested $15,000 cash in the purchase of land. a. What amount of revenue will Lee report on the Year 1 income statement? b. What amount of cash flow from revenue will be reported on the statement of cash flows? c. What is the net income for the period? d. What is the net cash flow from operating activities for the period? f. What is the amount of net cash flow from investing activities? g. What is the amount of net cash flow from financing activities? h. What amounts of total assets, liabilities, and equity will be reported on the year-end balance sheet?

Accounting Equation

Which of the following is not one of the steps in the accounting cycle? Record transactions Adjust accounts Prepare Statements

All the above are steps in the accountings cycle

Which of the following best describes an accrued expense?

An expense that is recognized prior to being paid

During Year 1, Chung Corporation earned $4,800 of cash revenue and accrued $2,500 of salaries expense. Required Based on this information alone: Prepare the December 31, Year 1, balance sheet. Determine the amount of net income that Chung would report on the Year 1 income statement. Determine the amount of net cash flow from operating activities that Chung would report on the Year 1 statement of cash flows.

Balance Sheet

Companies make sacrifices known as expenses to obtain benefits called revenues. The accurate measurement of net income requires that expenses be matched with revenues. In some circumstances, matching a particular expense directly with revenue is difficult or impossible. In these circumstances, the expense is matched with the period in which it is incurred. Required Distinguish the following items that could be matched directly with revenues from the items that would be classified as period expenses:

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Which of following is the best measure of performance for an accounting period?

Net income

During Year 1, Chung Corporation earned $4,800 of cash revenue and accrued $2,500 of salaries expense. Required Based on this information alone: Prepare the December 31, Year 1, balance sheet. Determine the amount of net income that Chung would report on the Year 1 income statement. Determine the amount of net cash flow from operating activities that Chung would report on the Year 1 statement of cash flows.

Net income, cash flow

Assume in Year 1, a company signs a contract worth $50,000 to perform services in Year 2. This transaction will affect which of the following financial statements in Year 1? Income statement Balance sheet and income statement Income statement, balance sheet, and statement of cash flows

No affect on all statements

Life, Inc., experienced the following events in Year 1, its first year of operation: Performed counseling services for $28,400 cash. On February 1, Year 1, paid $19,800 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: Record the events under an accounting equation. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Req A

The following events apply to Lewis and Harper, a public accounting firm, for the Year 1 accounting period: Performed $77,000 of services for clients on account. Performed $46,000 of services for cash. Incurred $40,000 of other operating expenses on account. Paid $18,000 cash to an employee for salary. Collected $60,000 cash from accounts receivable. Paid $18,000 cash on accounts payable. Paid a $6,000 cash dividend to the stockholders. Accrued salaries were $3,200 at the end of Year 1. Required Show the effects on the financial statements using the following horizontal statements model. In the cash flow column, use OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change. If the element is not affected by the event, leave the cell blank. The first transaction is shown as an example. What is the amount of total assets at the end of Year 1? What is the balance of accounts receivable at the end of Year 1? What is the balance of accounts payable at the end of Year 1? What is the net income for Year 1? What is the amount of net cash flow from operating activities for Year 1?

Req A

Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $47,000 cash from the issue of common stock. Performed services on account for $75,000. Paid a $4,700 cash dividend to the stockholders. Collected $53,000 of the accounts receivable. Paid $47,000 cash for other operating expenses. Performed services for $17,000 cash. Recognized $1,700 of accrued utilities expense at the end of the year. Required a. & c. Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows. In the Statement of Cash Flows column, use OA to designate operating activity, FA for financing activity, or IA for investing activity. If the element is not affected by the event, leave the cell blank. b. Based on your response to Requirement a, determine the amount of net income reported on the Year 1 income statement. d. Based on your response to Requirement c, determine the amount of cash flow from operating activities reported on the Year 1 statement of cash flows. e. What is the before- and after-closing balance in the service revenue account? f. What is the balance of the retained earnings account that appears on the Year 1 balance sheet?

Req A and C Revenue - expenses = net income Net cash flow = add up all $$ from OA Before closing is revenue number After closing is zero Retained earnings = net income - dividends

In Year 1, Lee Inc. billed its customers $56,000 for services performed. The company collected $41,700 of the amount billed. Lee incurred $37,500 of other operating expenses on account. Lee paid $24,400 of the accounts payable. Lee acquired $33,000 cash from the issue of common stock. The company invested $15,000 cash in the purchase of land. a. What amount of revenue will Lee report on the Year 1 income statement? b. What amount of cash flow from revenue will be reported on the statement of cash flows? c. What is the net income for the period? d. What is the net cash flow from operating activities for the period? f. What is the amount of net cash flow from investing activities? g. What is the amount of net cash flow from financing activities? h. What amounts of total assets, liabilities, and equity will be reported on the year-end balance sheet?

Req A to D Revenue recognized = sales or billed for serv perform Cash flow from rev - collected $$ for amount billed Net income = revenue - expenses Net cash flow form OA = coll a/r - pay a/p

Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $47,000 cash from the issue of common stock. Performed services on account for $75,000. Paid a $4,700 cash dividend to the stockholders. Collected $53,000 of the accounts receivable. Paid $47,000 cash for other operating expenses. Performed services for $17,000 cash. Recognized $1,700 of accrued utilities expense at the end of the year. Required a. & c. Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows. In the Statement of Cash Flows column, use OA to designate operating activity, FA for financing activity, or IA for investing activity. If the element is not affected by the event, leave the cell blank. b. Based on your response to Requirement a, determine the amount of net income reported on the Year 1 income statement. d. Based on your response to Requirement c, determine the amount of cash flow from operating activities reported on the Year 1 statement of cash flows. e. What is the before- and after-closing balance in the service revenue account? f. What is the balance of the retained earnings account that appears on the Year 1 balance sheet?

Req B and D to F Revenue - expenses = net income Net cash flow = add up all $$ from OA Before closing is revenue number After closing is zero Retained earnings = net income - dividends

The following events apply to Lewis and Harper, a public accounting firm, for the Year 1 accounting period: Performed $77,000 of services for clients on account. Performed $46,000 of services for cash. Incurred $40,000 of other operating expenses on account. Paid $18,000 cash to an employee for salary. Collected $60,000 cash from accounts receivable. Paid $18,000 cash on accounts payable. Paid a $6,000 cash dividend to the stockholders. Accrued salaries were $3,200 at the end of Year 1. Required Show the effects on the financial statements using the following horizontal statements model. In the cash flow column, use OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change. If the element is not affected by the event, leave the cell blank. The first transaction is shown as an example. What is the amount of total assets at the end of Year 1? What is the balance of accounts receivable at the end of Year 1? What is the balance of accounts payable at the end of Year 1? What is the net income for Year 1? What is the amount of net cash flow from operating activities for Year 1?

Req B to D

Life, Inc., experienced the following events in Year 1, its first year of operation: Performed counseling services for $28,400 cash. On February 1, Year 1, paid $19,800 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: Record the events under an accounting equation. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Req B1 Inc Stmt Revenue = cash for services performed Expense = rent used for the year Net income = revenue - expense

Life, Inc., experienced the following events in Year 1, its first year of operation: Performed counseling services for $28,400 cash. On February 1, Year 1, paid $19,800 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: Record the events under an accounting equation. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Req B2 Bal Sheet Assets - cash from Stmt of CF prepaid rent - not used NO liabilities Equity Retained earnings from net income

Life, Inc., experienced the following events in Year 1, its first year of operation: Performed counseling services for $28,400 cash. On February 1, Year 1, paid $19,800 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: Record the events under an accounting equation. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Req B3 CF Stmt Cash receipt from revenue = cash for serv performed cash payment for rent = cash to rent office space

Life, Inc., experienced the following events in Year 1, its first year of operation: Performed counseling services for $28,400 cash. On February 1, Year 1, paid $19,800 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: Record the events under an accounting equation. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Req C Unused rent

The following events apply to Lewis and Harper, a public accounting firm, for the Year 1 accounting period: Performed $77,000 of services for clients on account. Performed $46,000 of services for cash. Incurred $40,000 of other operating expenses on account. Paid $18,000 cash to an employee for salary. Collected $60,000 cash from accounts receivable. Paid $18,000 cash on accounts payable. Paid a $6,000 cash dividend to the stockholders. Accrued salaries were $3,200 at the end of Year 1. Required Show the effects on the financial statements using the following horizontal statements model. In the cash flow column, use OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change. If the element is not affected by the event, leave the cell blank. The first transaction is shown as an example. What is the amount of total assets at the end of Year 1? What is the balance of accounts receivable at the end of Year 1? What is the balance of accounts payable at the end of Year 1? What is the net income for Year 1? What is the amount of net cash flow from operating activities for Year 1?

Req F to G

In Year 1, Lee Inc. billed its customers $56,000 for services performed. The company collected $41,700 of the amount billed. Lee incurred $37,500 of other operating expenses on account. Lee paid $24,400 of the accounts payable. Lee acquired $33,000 cash from the issue of common stock. The company invested $15,000 cash in the purchase of land. a. What amount of revenue will Lee report on the Year 1 income statement? b. What amount of cash flow from revenue will be reported on the statement of cash flows? c. What is the net income for the period? d. What is the net cash flow from operating activities for the period? f. What is the amount of net cash flow from investing activities? g. What is the amount of net cash flow from financing activities? h. What amounts of total assets, liabilities, and equity will be reported on the year-end balance sheet?

Req F to H Net cash flow from investing = purchasing (land) New cash flow from financing = issue (common stock) total assets = cash + A/R + land Total liabilities = A/P Total equity = common stock + retained earnings

A company using accrual accounting may report revenue on the income statement even if it does not collect cash. This statement is

True

Financial statements are presented

vertically