Accounting Module 2

On May 1, Faux Furs, Inc., collected $25,000 from its customers. One quarter of the $25,000 was earned in May and the rest in June through August. During May, Faux Furs' had $4,000 in expenses of which only $2,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

20,750

On May 1, Faux Furs, Inc., collected $24,000 from its customers. One quarter of the $24,000 was earned in May and the rest in June through August. During May, Faux Furs' had $4,000 in expenses of which only $1,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

21,000

In its first month of business, Lord of the Fries, Inc., collected $38,000 from customers in advance during May. At May 31, it had a balance in its Unearned Revenue of $14,000. What is the amount of Revenue reported on the income statement for the month ended May 31?

24000

On May 1, Faux Furs, Inc., collected $28,000 from its customers. One quarter of the $28,000 was earned in May and the rest in June through August. During May, Faux Furs' had $4,000 in expenses of which only $1,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

24000

During December, Acme, Inc., performed and billed its customers $26,000 for services on account of which it collected $5,000. How much revenue should Acme record in December?

26,000

On January 1 of its first month of business, Bags Bunny, Inc., paid $30,000 for eight months rent beginning in January. How much will be reported as Prepaid Rent on its balance sheet at January 31?

26,250

During November, Florist Grump, Inc. performed $26,000 of services on account and sent bills to its customers. In November, Florist Grump collected $2,000 from these credit customers. How much revenue should Florist Grump record in November?

26000

On May 1, Faux Furs, Inc., collected $32,000 from its customers. One quarter of the $32,000 was earned in May and the rest in June through August. During May, Faux Furs' had $5,000 in expenses of which only $2,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

27,000

On May 1, Faux Furs, Inc., collected $35,000 from its customers. One quarter of the $35,000 was earned in May and the rest in June through August. During May, Faux Furs' had $4,000 in expenses of which only $2,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

28250

On May 1, Faux Furs, Inc., collected $34,000 from its customers. One quarter of the $34,000 was earned in May and the rest in June through August. During May, Faux Furs' had $4,000 in expenses of which only $1,000 had been paid. How much higher would Faux Furs' net income be in May if it used cash-basis accounting instead of accrual accounting?

28500

How many of the following accounts (line items) are found on the income statement? Accounts Receivable Sales Revenue Cash Collected from Customers Wages Payable Wages Expense Depreciation Expense Accumulated Depreciation

3

On May 1, the bank said it may lend money to Nim Com Soup, Inc. The amount will depend on Nim Com Soup's income statement for the month of May. Since the bank did not specify, Nim Com Soup did not follow generally accepted accounting principles (GAAP). It reported net income for the month ended May 31 of $20,000. The revenue included $2,000 of cash collected in advance from customers for services to be performed in June. The revenue also included a $12,000 increase in the value of its land. The expenses excluded $3,000 it owed for services it received in May. What is Nim Com Soup's GAAP Net Income?

3000

On May 1, the bank said it may lend money to Nim Com Soup, Inc. The amount will depend on Nim Com Soup's income statement for the month of May. Since the bank did not specify, Nim Com Soup did not follow generally accepted accounting principles (GAAP). It reported net income for the month ended May 31 of $20,000. The revenue included $1,000 of cash collected in advance from customers for services to be performed in June. The revenue also included a $12,000 increase in the value of its land. The expenses excluded $3,000 it owed for services it received in May. What is Nim Com Soup's GAAP Net Income?

4000

Eel Electronics paid $4,000 of the $5,000 its employees had earned during the period. Eel Electronics should report Wages Expense of ______ on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles.

5,000 and 1,000

In its first month of business, Eel Electronics sold $5,000 of goods to customers of which $3,000 has been collected. Using accrual accounting, Eel Electronics should report revenues of ______.

5000

Wok On Water, Inc.'s employees had worked during its first month of May and earned $5,000. Wok on Water had paid $3,000 of the amount owed. How much will be reported as Wages Expense on its May income statement?

5000

On September 30, Year 1, Royal Flush Pluming, Inc., issued a $30,000, 7%, 5-month note. At year end, December 31, Year 1, when the adjusting entry is recorded for theyear, the debit to Interest Expense equals $_______.

525

During the year, Proffitts, Inc., had revenue of $83,000 and expenses of $28,000. During the year, it collected $17,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals ______.

55,000

During the year, Proffitts, Inc., had revenue of $83,000 and expenses of $26,000. During the year, it collected $10,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals ______.

57,000

Land is purchased at a cost of $7,000. At year end, based on appraised values, the land's value increased to $42,000. At what amount should the land be reported on the year-end balance sheet?

7000

On January 1 of its first month of business, Juan in a Million, Inc., paid $37,000 for four months rent beginning in January. How much will be reported as Rent Expense on its income statement for the month ended January 31?

9250

Which of the following are true statements about the qualitative characteristics of accounting information?

Accounting information should be relevant and free from bias. Both GAAP and IFRS require the same qualitative characteristics of accounting information

When a business makes a sale on account, the asset created is a(n) ______?

Accounts Receivable

Indicate the financial statement where you would expect to find each line item

Accounts Receivable - Balance Sheet Cash Collected from Customers - Statement of Cash Flows Sales - Income Statement Unearned Revenue - Balance Sheet Cost of Goods Sold - Income Statement Cash Paid for Merchandise - Statement of Cash Flows Inventory - Balance Sheet Accounts Payable - Balance Sheet

In April, Clean Dirt, Inc. paid for advertising to be run in May. In May, the advertisement was run in the local paper. Select the correct answer for each the questions below. Under cash-basis accounting, Advertising Expense is recorded in which month? Under accrual accounting, Advertising Expense is recorded in which month?

April May

On February 20, Wursthaus, Inc., paid for $500 of the sausages purchased on account on January 21. Show the effect of this transaction on the accounting equation below.

Assets - (500) Cash Liabilities - (500) Accounts Payable Shareholders' Equity - 0 No effect

On February 12, Wursthaus, Inc., sold 600 sausages @ $10.00 each on account. The sausages cost $6.00 each. Show the effect of both the sale and the cost of the sale on the accounting equation below:

Assets - 6,000 Accounts Receivable; (3,600) Inventory Liabilities - 0 No Effect Shareholders' Equity - 6,000 Sales; (3,600) Cost of Goods Sold

In June, Dewey, Cheatum & Howe, Inc., received $1,000 from a customer for services performed in July. Select the correct answer for each the questions below. Under cash-basis accounting, revenue is recorded in which month? Under accrual accounting, revenue is recorded in which month?

Cash-basis - June Accrual - July

Equipment is recorded as an asset and then expensed as it is used. This is an "accrual" or "deferral"?

Deferral

The adjusting entry to record the amount of supplies used during the period is a result of an "accrual" or "deferral"?

Deferral

True or false: Net income equals the net amount of cash collected during the accounting period.

False

Which of the following requires the useful lives of a company's equipment be reported in the notes to the financial statements?

Full Disclosure Principle

Miss Krupt, accountant of Dewey, Cheatum and Howe, increased the company's long-term assets to their fair market values on the balance sheet. Which of the following assumptions/principles did she violate?

Historical Cost Principle

Which is violated if Jim's Jambs, Inc., revalued its assets at their higher fair market values on its balance sheet?

Historical Cost Principle

On January 1, Year 1, Nothing Bundt Cakes, Inc., purchased equipment for $10,000 with an estimated useful life of five years at which time the equipment will be taken to the dump. Given the financial statements for the year ended and at December 31, Year 2, match each description with the appropriate financial statement and amount.

Reports the amount of usefulness used during the period - $2,000 Income Statement Reports the amount of usefulness remaining at the end of the period. - $6,000 Balance Sheet

Which is violated if an advertising company increases its net income in the period it collects the cash from its customers, which is often months before the advertisement is completed and run?

Revenue and recognition principle

During August, WVU collected $6,000,000 in advance ticket sales for football games to be played in September. The games were played in September as scheduled. The $6,000,000 will be reported as ______.

Unearned Revenue on the Balance Sheet August 31

The qualitative characteristic "Comparability" means that information ______.

allows users to make comparisons across financial statements

Cash-basis accounting may distort net income when a company ______.

collects cash in advance of providing services to customers pays for expenses in advance of when the resources are used makes credit sales

The main goal of both U.S. GAAP and IFRS is to ______.

ensure that companies produce useful information for capital provider

Thistle Do Nicely had $200 of supplies on May 1. During May, it purchased $400 of supplies on account. It paid $350 of the $400 it owed for its supplies. At May 31, Thistle Do Nicely only had $150 of supplies left. Supplies Expense on the ______.

income statement will equal $450

When a company receives cash in advance for services it has not yet performed, it records a(n) ______.

liability called Unearned revenue

Characteristics of useful information include

relevancy and faithful representation and comparability and verifiability

During its first month, Pita Pan, Inc., purchased $600 of supplies on account. Pita Pan paid $100 of the $600 it owed for its supplies. At May 31, Pita Pan only had $200 of supplies left. Which of the following statements is true about the May financial statements

statement of cash flows will equal $(100)

Sew Chic, Inc., purchased $500 of supplies on account during May. Sew Chic paid $200 of the $500 it owed for its supplies. At May 31, Sew Chic only had $50 of supplies left. Which of the following statements is true about the May financial statements? Cash Paid for Supplies on the ______.

statement of cash flows will equal (200)

IFRS are

the International Financing Reporting Standards

Accounts Receivable is ______.

the amount the company expects to collect from sales made on account

The dollar amount shown on the Balance Sheet for Supplies represents ______.

the cost of supplies that remain unused at the end of the period

Revenue is recorded when

the goods or services are delivered even if the cash has not yet been collected

Deferring revenue or expense means that the amount ______.

will be reported as revenue or expense in a later period