Question :
64. Pawn Shops Unlimited recorded the following four transactions during : 1255856
64. Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?
a. Received $600 from customers for services to be provided in May.
b. Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.
c. Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun newspaper.
d. Received $300 from customers for services performed in March.
65. Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?
a. Purchased $500 of office supplies on account (supplies were used in May and paid for in May).
b. Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.
c. Paid $700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun newspaper.
d. Received $300 from customers for services performed in March.
66. The following events pertain to Bills Company:
December 28, 2015 – Bills was contacted by a customer for possible accounting and tax
services.
December 30, 2015 – Bills signed a formal agreement with the customer to provide
accounting and tax services in 2016.
January 4, 2016 – The customer paid $1,000 in advance for the services to be provided by Bills Company.
January 11, 2016 – Bills provided accounting and tax services to the customer.
Using cash-basis accounting, on which date should Bills Company record revenue for the accounting and tax services?
a. December 30, 2015.
b. December 31, 2015.
c. January 4, 2016
d. January 11, 2016.
67. When a company provides services on account, which of the following would be recorded using cash-basis accounting?
a. Debit to Cash.
b. Debit to Service Revenue.
c. Credit to Unearned Revenue.
d. No entry would be recorded.
68. The following events pertain to Bills Company:
December 28, 2015 – Bills was contacted by a customer for possible accounting and tax
services.
December 30, 2015 – Bills signed a formal agreement with the customer to provide
accounting and tax services in 2016.
January 4, 2016 – The customer paid $1,000 in advance for the services to be provided by Bills Company.
January 11, 2016 – Bills provided accounting and tax services to the customer.
Using accrual-basis accounting, on which date should Bills Company record revenue for the accounting and tax services?
a. December 30, 2015.
b. December 31, 2015.
c. January 4, 2016.
d. January 11, 2016.
69. Consider the following transactions:
1. The company uses supplies purchased in the previous period, $1,500.
2. The company pays cash for rent in advance, $6,000.
3. The company repays a loan to the bank, $10,000 (ignore any interest cost).
The amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____.
a. $6,000; 11,500.
b. $6,000; $16,000.
c. $1,500; 16,000.
d. $1,500; $6,000.
70. A company has the following three events in December:
1. December 1 – Pay last month’s rent (November), $500
2. December 15 – Pay rent for the current month (December), $500
3. December 31 – Pay rent for the following year, $6,000
How much would be recorded as Rent Expense for the month of December using accrual-basis accounting?
a. $6,500.
b. $7,000.
c. $1,000.
d. $500.
71. A company has the following transactions:
1. Pay workers’ salaries for the current period.
2. Pay rent in advance.
3. Pay dividends to stockholders in the current period.
4. Receive (but do not pay) a utility bill.
5. Use supplies previously purchased.
How many of these transactions result in an expense being reported in the current period using accrual-basis accounting?
a. 1.
b. 2.
c. 3.
d. 4.
e. 5.
72. A company has the following transactions:
1. Pay workers’ salaries for the current period.
2. Pay rent in advance.
3. Pay dividends to stockholders in the current period.
4. Receive (but do not pay) a utility bill.
5. Use supplies previously purchased.
How many of these transactions result in an expense being reported in the current period using cash-basis accounting?
a. 1.
b. 2.
c. 3.
d. 4.
e. 5.
73. The primary difference between accrual-basis and cash-basis accounting is:
The timing of when revenues and expenses are recorded.
Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting.
Accrual-basis accounting violates both the revenue recognition and matching principles.
Adjusting entries are only a necessary part of cash-basis accounting.
