Question

Delta Company experienced an accounting event that affected its financial statements as indicated below: Asset Liab. 1. Equity Rev. 1- Exp |- Net Inc. Stmt of Cash Flow NA NA OA Which of the following accounting events could have caused these effects on the elements of Delta's statements? A) Paid a cash dividend B) Incurred a cash expense C) Borrowed money from a bank D) Earned cash revenue 7)_ _What is the purpose of the accrual basis of accounting? A) Recognize revenue when it is collected from customers. B) Match assets with liabilities during the proper accounting period. C) Recognize expenses when cash disbursements are made. D) Recognizing revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands 8) Which of the following adjustments would not be described as an accrual? A) Recording operating expenses that have been incurred but not paid as of the end of the accounting period. B) Recording service revenue that has been earned but will not be collected until the next accounting period. C) Recording insurance expense relating to insurance premiums that were paid in advance. D) Recording salary expense that has been incurred but not paid as of the end of the accounting period. Use the following information to answer the next two questions. ITV Company received $36,000 cash on July 1, 2019, from XYZ Company as an advance payment for services ITV promised to perform for XYZ over the next three years on a continuous basis. Assume that ITV Company's year-end is December 31. 9) On its 2019 income statement, ITV would report revenue of A) $6,000 B) $7,000. C) $11,000 D) $36,000 10) On its December 31, 2020 balance sheet ITV would report liabilities of A) $0. B) $6,000 C) $18,000. D) $36,000 Page 3 of 10

Answer 1

6]	B] Incurred a cash expense
7]	D] Recognizing…......................when
	cash changes hands
8]	c] Recording insurance expense
	relating to insurance….....................
	were paid in advance
9]	A] $6000 [36000*6/36]
10]	C] $18000 [Balance would be 36000*18/36 = 18000]