Question

74 Edmond Survey of Accounting Se (2018) - Full color sohbound 74 Chapter 2 QUESTIONS ity, and statement of cachows are dated with the phrase for the period ended 28. In what order areas listed on the balance 1. What does accrual 10. Oive an example of an accounting attempt to exchange transaction accomplish? What is the effect of this 2. Define mention. How is transaction on the account i independent of collecting ing equation or paying cach? 11. What is the effect on the What does the term right side of the account deferral mean? ing equation when cash is 4. If cash is collected in collected in advance of advance of performing performing services? services, when is the 12. What does the term associated revenue anamned w e mean? recognized 13. What effect does expense 5. What does the term asset recognition have on the some transaction mean? accounting equation? 6. What effect does the issue 14. What does the term claims of common stock have on Exchange fraction mean? the accounting equation? 15. What type of transaction is 7. How does the recognition a cash payment to credi- of revenue on account tors? How does this type (accounts receivable) affect of transaction affect the the income statement com- accounting equation? pared to its effect on the 16. When are expenses recog. statement of cash flows? nized under accrual 8. Give an example of an accounting? asset source transaction. 17. Why may net cash flow What is the effect of this from operating activities transaction on the on the cash flow state- accounting equation? ment be different from the When is revenue recog- amount of net income nized under accrual reported on the income accounting? statement? IR. What is the relationship between the income to ment and changes in sus and abilities? 19. How does not income affect the stockholders' claims on the business's assets? 20. What is the difference between a cost and an expense? 21. When does a cost become an expense? Do all costs become expenses? 22. How and when is the cost of the supplies we recog- nized in an accounting period? 28. What does the term expense mean? 24. What does the term revenue mean? 25. What is the purpose of the statement of changes in stockholders' equity! 26. What is the main purpose of the balance sheet? 27. Why is the balance sheet dated as of a specific date when the income state- ment, statement of changes in stockholders' 29. What does the statement of cash flows explain? M. What does the term adjust ing entry mean? Give an Example 31. What types of accounts are closed at the end of the accounting period? Why is it necessary to close these accounts? 32. Give several examples of period costs. 33. Give an example of a cost that can be directly matched with the revenue produced by an accounting firm from preparing a tax return 34. List and describe the four, stages of the accounting cycle discussed earlier in this chapter. MULTIPLE CHOICE QUESTIONS Multiple-choice questions are available in Connect. TION 1 EXERCISES LO 2-1 connect All applicable Exercises are available in Connect. Where applicable in all exercises, round computations to the nearest dollar. Exercise 2-1 Effect of collecting accounts receivable on the accounting equation and financial statements Holloway Company earned $18,000 of service revenue on account during 2018. The company col- lected $14,000 cash from accounts receivable during 2018. Required Based on this information alone, determine the following for Holloway Company. (Hint: Record the events in general ledger accounts under an accounting equation before satisfying the requirements.)

Answer 1

	Assets		=	Liabilities		+	Equity
a	Accounts Receivable	$    18,000					Service Revenue	$       18,000
b	Cash	$    14,000
	Accounts Receivable	$ -14,000