Accounting 311 Exam 1

Balance sheet information is useful for all of the following except to

analyze cash inflows and outflows for the period

A trial balance

-proves that debits and credits are equal in the ledger -supplies a listing of open accounts and their balances that are used in preparing financial statements -is normally prepared three times in the accounting cycle

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:

Beginning retained earning of the earliest period presented.

Which of the following is true of accounting for changes in estimates?

Changes in estimates are not carried back to adjust prior years

Balance sheet information is useful for all of the following except

Determining free cash flows

Which of the following is an advantage of the single-step income statement over the multiple-step income statement?

It does not imply that one type of revenue or expense has priority over another

When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will:

Offset the overdraft against the cash account

What is recourse as it relates to selling receivables?

The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay

Which of the following is included in comprehensive income?

Unrealized gains on available-for-sale debt securities

An unearned revenue can best be described as an amount

collected and not currently matched with expenses

Gibson Company paid $24,000 on June 1, 2020 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2020 adjusting entry is

debit Prepaid Insurance and credit Insurance Expense, $17,000

Garcia Corporation received cash of $60,000 on August 1, 2020 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2020 adjusting entry is

debit Rent Revenue and credit Unearned Rent Revenue, $35,000

Lopez Company received $18,000 on April 1, 2020 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2020 adjusting entry is

debit Rent Revenue and credit Unearned Rent Revenue, $4,500

An accrued revenue can best be described as an amount

not collected and currently matched with expenses

Current assets are presented in the balance sheet in

order of their liquidity

A prepaid expense can best be described as an amount

paid and not currently matched with revenues

Debit always mean

the right side of an account

The single-step income statement emphasizes

total revenues and total expenses

A limitation of the balance sheet that is not also a limitation of the income statement is

valuation of items at historical cost