Question 1

The transactions for the Newman Company are below:
1.The owners invested $10,000 cash in the company.
2.The company acquired equipment that cost $8,000.25% was paid in cash and the rest was settled with a note.
3.The company acquired $2,800 of inventory and paid cash.
4.The company acquired $600 of supplies on account.
5.The company sold merchandise for $1,800 on account.The inventory had a cost of $1,000.
6.The company received $400 from Transaction #5.
7.The company paid $300 on accounts payable.
Required:
Prepare an analysis of Newman Company's transactions using the equation approach.

Accepted Answer

The answer of The transactions for the Newman Company are...

Question 2

The cash basis of accounting recognizes the impact of transactions in the period when ________.

Accepted Answer

The cash basis of accounting records transactions when cash is received or disbursed, rather than when revenues and expenses occur or assets and liabilities change.

Question 3

Given below are the daily balances in the accounts of Superior Company.Assume one transaction occurs each day.Explain the nature of each transaction for each day.

Accepted Answer

The answer of Given below are the daily balances in...

Question 4

The activity of Reno Company for the month of April is given below:  Using the cash basis of accounting,the total expenses for Reno Company for the month of April are ________.

Accepted Answer

Using the cash basis of accounting, expenses are recorded when they are paid. From the information given in the activity, the total expenses paid during the month of April are:
$18,000 + $26,000 + $23,000 = $67,000.
Therefore, the best answer is B.

Question 5

A deficiency of cash-basis accounting is ________.

Accepted Answer

Cash-basis accounting only records transactions when cash is received or paid, ignoring other transactions that impact economic performance such as credit sales, unpaid expenses, or depreciation. Therefore, it fails to match revenues and expenses to measure economic performance accurately.

Question 6

A cash payment of accounts payable does not affect stockholders' equity.

Accepted Answer

A cash payment of accounts payable is a transaction between the company and its creditors, and does not involve any changes to the stockholders' equity accounts.

Question 7

This transaction will decrease net income under the cash basis,but will not affect net income under the accrual basis.

Accepted Answer

Under the cash basis, the payment of rent in advance is considered an expense in the period it is paid. Therefore, it will decrease net income. However, under the accrual basis, the rent expense would be recognized when the period for which it applies actually occurs, and so it would not be affected by the advance payment. The other options would affect net income under both the cash and accrual basis.

Question 8

Gamble Company had the following transactions: 1.The owner started the company by investing $8,000 of cash.
2.The company paid $2,000 for six months of rent.The rent was paid in advance.
3.The company acquired $3,300 in inventory and put one-third of the purchase on account.The company paid $2,200 cash.
4.The company sold inventory costing $1,400 for $2,900 on account.
After all these transactions,what is the balance in the cash account?

Accepted Answer

The cash account is affected by only two transactions:
1. The owner invested $8,000 of cash. This increased the cash balance to $8,000.
2. The company paid $2,200 cash for inventory. This decreased the cash balance to $5,800.

Therefore, the balance in the cash account is $5,800. Option B is the correct answer.

Question 9

Revenues do not affect stockholders' equity.

Accepted Answer

Revenues directly affect stockholders' equity through the increase in retained earnings. Retained earnings, a component of stockholders' equity, is calculated by adding net income (which includes revenues) and subtracting any dividends paid to shareholders.

Question 10

The activity of Spencer Company for the month of April is presented below:  Using the accrual basis of accounting,the total expenses for Spencer Company for the month of April is ________.

Accepted Answer

The answer of The activity of Spencer Company for the...

Question 11

This transaction will increase net income under the accrual basis,but will not increase net income under the cash basis.

Accepted Answer

Under the accrual basis, revenue is recognized when earned, so a sale on account increases net income. Under the cash basis, revenue is recognized when cash is received, so a sale on account does not affect net income until payment is received.

Question 12

The balance sheet is not linked to the income statement.

Accepted Answer

The balance sheet is linked to the income statement through the retained earnings account, which reflects the net income or loss from the income statement.

Question 13

Given below are the activities of the Tahoe Company:  Using the cash basis of accounting,the total revenues for Tahoe Company are ________.

Accepted Answer

The answer of Given below are the activities of the...

Question 14

This transaction will decrease income under both the accrual basis and the cash basis of accounting.

Accepted Answer

Payment of rent for the current month decreases income under both accrual and cash basis because it is an expense that is recognized immediately in both accounting methods.

Question 15

The income statement measures performance over a given amount of time.

Accepted Answer

The income statement is also known as the profit and loss statement, which measures an organization's financial performance over a specific period, usually a quarter or a year. It shows the revenue earned, expenses incurred, and ultimately calculates the net income or loss during that period.

Question 16

Revenue and expense accounts are permanent stockholders' equity accounts.

Accepted Answer

Revenue and expense accounts are temporary accounts that are closed at the end of each accounting period. Permanent stockholders' equity accounts include common stock, retained earnings, and treasury stock.

Question 17

This transaction will decrease income under both the accrual basis and the cash basis of accounting.

Accepted Answer

The payment of current period's rent will decrease income under both the accrual basis and the cash basis of accounting because it represents an expense incurred during the current period.

Question 18

The excess of revenues over expenses is called a net profit.

Accepted Answer

This is correct. Net profit is the amount left over after all expenses have been deducted from revenues.

Question 19

Nicklaus Company sold inventory costing $1,000 for $1,400 on account.Nicklaus Company operates under the accrual basis.What effect will the transaction have on the liabilities and owners' equity of the company?

Accepted Answer

The sale of inventory will increase the company's revenues by $1,400, which in turn will increase owners' equity by $1,400. Since the sale was made on account, the company's accounts receivable (a type of liability) will also increase by $1,400. However, since the question is only asking about the effect on liabilities and owners' equity, the correct answer is C - owners' equity will increase by $400.

Question 20

The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when ________.

Accepted Answer

The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when revenues are earned and expenses are incurred, regardless of when cash is received or disbursed. This helps to provide a more accurate picture of a company's financial performance and position.

Quiz 15: Basic Accounting: Concepts, techniques, and Conventions

The cash basis of accounting recognizes the impact of transactions in the period when ________.

Given below are the daily balances in the accounts of Superior Company.Assume one transaction occurs each day.Explain the nature of each transaction for each day.

The activity of Reno Company for the month of April is given below: Using the cash basis of accounting,the total expenses for Reno Company for the month of April are ________.

A deficiency of cash-basis accounting is ________.

A cash payment of accounts payable does not affect stockholders' equity.

This transaction will decrease net income under the cash basis,but will not affect net income under the accrual basis.

Revenues do not affect stockholders' equity.

The activity of Spencer Company for the month of April is presented below: Using the accrual basis of accounting,the total expenses for Spencer Company for the month of April is ________.

This transaction will increase net income under the accrual basis,but will not increase net income under the cash basis.

The balance sheet is not linked to the income statement.

Given below are the activities of the Tahoe Company: Using the cash basis of accounting,the total revenues for Tahoe Company are ________.

This transaction will decrease income under both the accrual basis and the cash basis of accounting.

The income statement measures performance over a given amount of time.

Revenue and expense accounts are permanent stockholders' equity accounts.

This transaction will decrease income under both the accrual basis and the cash basis of accounting.

The excess of revenues over expenses is called a net profit.

Nicklaus Company sold inventory costing $1,000 for $1,400 on account.Nicklaus Company operates under the accrual basis.What effect will the transaction have on the liabilities and owners' equity of the company?

The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when ________.