Note 19 - CFA prep PDF

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

A cost may be recorded as an expense or as an asset purchase. This statements is - TRUE

Accounting provides a service to society by gathering and reporting information about a company's profit potential. This statement is - TRUE

Accrued revenue - exists when a company receives cash after recognizing the associated revenue.

Alpha Company's December 31, Year 1 balance sheet showed $1,700 cash, $1,000 common stock, and $700 retained earnings. The company experienced the following event during Year 2.

(1) On March 1, paid $1,200 to purchase insurance coverage for one year beginning immediately.

Based on this information alone, - the year 2 balance sheet would show $200 of prepaid insurance

AmRon Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show - a cash inflow from investing activities of $26,500 on the statement of cash flows.

Assume a company has Year 1 beginning common stock of $10,000 and Year 2 ending stockholders' equity of $150,000. Which of the following is true in regards to this scenario? Revenues have exceeded expenses over the last two accounting cycles

At the end of the accounting period Anderson Company had $4,500 in accounts receivable and $500 in its allowance for doubtful accounts account. Based on this information the net realizable value of accounts receivable is - $4,000

Barnett Company paid a cash dividend. This event is - an asset use transaction

Bookmyer Company experienced a business event that affected its financial statements as indicated below. Which of the following events could have caused these effects? - paid cash to purchase supplies

Businesses earn profits by converting financial, physical, and labor resources into goods and services that satisfy consumer demands. This statement is - TRUE

Capitalizing the cash cost of a piece of equipment is - an asset exchange event

Certain transactions entered into the accounting equation will cause the equation not to balance. This statement is - FALSE

Common size statements are presented as percentages to promote comparisons between different size companies. This statement is - TRUE

Deferred revenue - exists when a company receives cash before recognizing the associated revenue.

During Year 2, the company experienced the following accounting events.

Paid of $500 of its note payable. Earned $700 of cash revenue. Paid $400 of cash expenses. Paid a $100 cash dividend.

Based on this information alone, what percent of the company's assets at the end of Year 2 were provided by creditors? - 20%

Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.) - Assets, Equity and net income decrease expenses increase statement of cash flow not effected

Ellen Elder and her brother, Buster started Elder Company when they each invested $600 in the company. After the investments there will be? - three reporting entities

Escrow Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information, the net income or (net loss) amounted to - ($8,000)

Fen Company paid a $300 cash dividend. Which of the following shows how this event will affect the company's accounting equation? The letters "NA" indicate that the component of the equation is not affected. - Assets and retained earnings decrease 300

Generally Accepted Accounting Principles (GAAP) are designed to provide guidance for Financial Accounting

GreyCo and Sons earns $6,900 of revenue on account in Year 1. Cash collections of receivables amount to $6,300 in Year 1 with the remainder being collected in Year 2. Based on this information alone the company's financial statements would show - a balance of $600 in accounts receivable at the beginning Year 2.

Guadalupe, Inc. provided $5,000 of services in Year 1 but did not collect cash from its customers until Year 2. Select the correct answer from the following options assuming Guadalupe used accrual accounting. - The Company will recognize $5,000 of revenue in Year 1 and $5,000 of cash flow from operations in Year 2.

How accounting transactions are recorded will vary depending on the entity perspective taken. This statement is - TRUE

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

If a company recognizes accrued salary expense - the employees have completed work bot have NOT been paid

If total assets increase, then - liabilities, common stock or retained earning must increase

Information in temporary accounts is transferred to the common stock account at the end of an accounting period. This statement is - FALSE

John Hamilton borrowed $500,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $450,000 of the cash he borrowed to the restaurant on first day of the year. This statement includes how many reporting entities? - three reporting entities

Juarez Company acquired $1,200 from the issue of common stock. Which of the following shows how this event will affect the company's accounting equation? The letters "NA" indicate that the component of the equation is not affected. - Assets and Common stock increase 1200

Keisha Dress Shops experienced the following events during its third accounting period.

(1) Sold merchandise that cost $92,000 for $140,000 cash. (2) Paid $30,000 of operating expenses. (3) Paid a $4,000 cash dividend.

Based on this information, the amount of the gross margin is - $48,000

Knoll Company started Year 2 with a $500 balance in its Cash account, a $500 balance in its Supplies account and a $1,000 balance in its common stock account. During Year 2 the company experienced the following events.

(1) Paid $400 cash to purchase supplies

(2) Physical count revealed $100 of supplies on hand at the end of Year 2

Based on this information the amount of supplies expense reported on the Year 2 income statement is - $800

Land is different from other tangible assets in that its utility is not diminished by its use. This statement is - TRUE

Lawyers Inc. accepted a $12,000 retainer for which the company agreed to provide services in the future. Recognizing this event would - defer the recognition of revenue, caused the companies assets to increase, causes the companies liabilites to increase (ALL OF THE ABOVE)

Liabilities - have priority in business liquidations

Maria Company began Year 2 with $85,000 in its Land account. During Year 2 the company made two separate purchases of land. The first purchase of land cost $52,000. The second purchase of land cost $94,000. Based on this information the company's accounting records will have - one land account.

two land accounts.

three land accounts.

McDonald's will recognize a gain if it generates an amount of revenue that is higher than its operating expenses. This statement is - FALSE

Most companies expect to collect the full balance of all of their accounts receivable. This statement is - FALSE

Ocean Breeze Co. paid $500 cash for expenses related to advertising for the period. Which of the following shows how this event will affect the company's accounting equation? The letters "NA" indicate that the component of the equation is not affected. - Assets and retained earning decrease 500

On August 1 of Year 1 Accounting Associates collected $1,200 cash for consulting 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 unearned revenue appearing on the Year 2 balance sheet would be - zero

On August 1 of Year 1 Presco Enterprises paid $1,200 cash for an insurance policy that would provide protection for a one year term. The company's fiscal closing date is December 31. Based on this information, the amount of insurance expense appearing on the Year 1 income statement would be - $500

On December 31, Year 1 Adam Company incurred $3,000 of accrued salary expense. The Year 2 recognition of the cash payment for these expenses - decreased the amount of liabilities shown on year 2 balance sheet...