Accruals and Deferrals
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Accruals and Deferrals
Copyright © Professor Dan Gode
http://www.dangode.com
Total points for the test: 100.
Round all decimals to the second place. Enter decimals with dot (.) not comma (,). You need
not enter .00 if there are no decimals.
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Blank cells are interpreted as 0.
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see correct answers to the remaining questions.
1.
(3 points) Cash received from shareholders is profit for the company and is therefore
included on the income statement as revenue.
No feedback for 2-choice questions.
True
False
2.
(3 points) Principal received from creditors is a profit generated by the company and is
therefore included on the income statement as revenue.
No feedback for 2-choice questions.
True
False
3.
(3 points) A firm books revenues before collecting cash from its customers.
a.
Its receivables will increase.
b.
Its receivables will decrease.
c.
Its unearned revenues (advances from customers) will increase.
d.
Its unearned revenues (advances from customers) will decrease.
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Accruals and Deferrals
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e.
4.
5.
6.
7.
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None of the above.
(3 points) A firm receives cash from its customers in advance of booking revenue.
a.
Its receivables will increase.
b.
Its receivables will decrease.
c.
Its unearned revenues (advances from customers) will increase.
d.
Its unearned revenues (advances from customers) will decrease.
e.
None of the above.
(3 points) A firm books revenues at the same time it receives cash from its customers.
a.
Its receivables will increase.
b.
Its receivables will decrease.
c.
Its unearned revenues (advances from customers) will increase.
d.
Its unearned revenues (advances from customers) will decrease.
e.
None of the above.
(3 points) Receivables or accrued revenues increase when
a.
revenue is booked today for cash that was received yesterday
b.
revenue is booked today for cash that will be received tomorrow
c.
cash is received today for revenue that was booked yesterday
d.
cash is received today for revenue that will be booked tomorrow
e.
none of the above
(3 points) Receivables or accrued revenues decrease when
a.
revenue is booked today for cash that was received yesterday
b.
revenue is booked today for cash that will be received tomorrow
c.
cash is received today for revenue that was booked yesterday
d.
cash is received today for revenue that will be booked tomorrow
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e.
8.
9.
10.
none of the above
(3 points) Advances received from customers or deferred or unearned revenues increase
when
a.
revenue is booked today for cash that was received yesterday
b.
revenue is booked today for cash that will be received tomorrow
c.
cash is received today for revenue that was booked yesterday
d.
cash is received today for revenue that will be booked tomorrow
e.
none of the above
(3 points) Advances received from customers or deferred or unearned revenues decrease
when
a.
revenue is booked today for cash that was received yesterday
b.
revenue is booked today for cash that will be received tomorrow
c.
cash is received today for revenue that was booked yesterday
d.
cash is received today for revenue that will be booked tomorrow
e.
none of the above
(4 points) In Year 1, AccrueCo delivers goods to its customers, who promise to pay $70 in
Year 2. AccrueCo has no doubts about collecting cash from customers, and it does collect
the cash in Year 2. Fill in the table below with amounts from AccrueCo’s perspective.
Year 1 Year 2
Revenues
Receipt from customers
11.
70
0
0
70
(4 points) In Year 1, DeferCo receives $65 in advance from its customers. DeferCo
delivers the goods in Year 2. Fill in the table below with amounts from DeferCo’s
perspective.
Year 1 Year 2
Revenues
Receipt from customers
0
65
65
0
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12.
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(3 points) You are given the following data:
Beginning accounts receivable = $100
Credit sales during the year = $56
Cash collected from credit customers = $36
Ignore bad debts and refunds.
Which one of the following numbers equals the ending accounts receivable?
a.
$156.
b.
$80.
c.
$136.
d.
$120.
e.
None of the above.
13.
(3 points) Assume that there were no deferred revenues and allowance for bad debts. For
simplicity, you may assume that all sales are on credit.
Beginning receivables = $100
Ending receivables = $145
Sales revenue recognized during the year = $234
Total cash received from customers during the year =?
189
14.
(3 points) You are given the following data:
Beginning balance of deferred revenue or unearned revenue = $1,000
Sales revenue earned during the year due to shipments made to customers = $192
Advance receipts from customers during the year = $42
There were no refunds or cancellations.
Which one of the following numbers equals the ending balance of deferred revenue?
15.
a.
$1,192
b.
$1,150
c.
$850
d.
$1,042
e.
None of the above.
(3 points) Assume that there were no receivables and allowance for bad debts. For
simplicity, you may assume that all sales are against advances.
Beginning balance of deferred revenue = $110
Ending balance of deferred revenue = $123
Sales revenue earned and recognized during the year = $384
Total cash received from customers during the year =?
397
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16.
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(3 points) Cash paid as a return of capital (to buy back stock for example) is a loss for the
company and is therefore included on the income statement as an expense.
No feedback for 2-choice questions.
True
False
17.
(3 points) Cash paid as dividends as a distribution of earnings to shareholders is a loss for
the company and is therefore included on the income statement as an expense.
No feedback for 2-choice questions.
True
False
18.
(3 points) Principal repaid to creditors is a loss for the company and is therefore included
on the income statement as an expense.
No feedback for 2-choice questions.
True
False
19.
20.
(3 points) A firm pays its rent before booking a rent expense.
a.
Its prepaid rent will increase.
b.
Its prepaid rent will decrease.
c.
Its accrued rent (rent payable) will increase.
d.
Its accrued rent (rent payable) will decrease.
e.
None of the above.
(3 points) A firm books a rent expense before paying its rent.
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21.
22.
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a.
Its prepaid rent will increase.
b.
Its prepaid rent will decrease.
c.
Its accrued rent (rent payable) will increase.
d.
Its accrued rent (rent payable) will decrease.
e.
None of the above.
(3 points) A firm books a rent expense at the same time it pays its rent in cash.
a.
Its prepaid rent will increase.
b.
Its prepaid rent will decrease.
c.
Its accrued rent (rent payable) will increase.
d.
Its accrued rent (rent payable) will decrease.
e.
None of the above.
(4 points) AccrueCo’s employees work in Year 1, but AccrueCo pays them their salary of
$55 for Year 1 in Year 2. Fill in the table below with amounts from AccrueCo’s perspective.
Do NOT enter negative numbers for expenses or payments.
Year 1 Year 2
23.
Expenses
55
0
Payments
0
55
(4 points) In Year 1, DeferCo pays $43 in advance to its advertising agency for advertising
to be designed and aired in Year 2. Fill in the table below with amounts from DeferCo’s
perspective. Do NOT enter negative numbers for expenses or payments.
Year 1 Year 2
24.
Expenses
0
43
Payments
43
0
(3 points) Interest paid to lenders reflects the cost of borrowing and therefore the interest
expense is included on the income statement.
No feedback for 2-choice questions.
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True
False
25.
26.
27.
28.
(3 points) Accrued expenses or payables to outsiders increase when
a.
expenses are booked today for cash that was paid yesterday
b.
expenses are booked today for cash that will be paid tomorrow
c.
cash is paid today for expenses that were booked yesterday
d.
cash is paid today for expenses that will be booked tomorrow
e.
none of the above
(3 points) Accrued expenses or payables to outsiders decrease when
a.
expenses are booked today for cash that was paid yesterday
b.
expenses are booked today for cash that will be paid tomorrow
c.
cash is paid today for expenses that were booked yesterday
d.
cash is paid today for expenses that will be booked tomorrow
e.
none of the above
(3 points) Deferred expenses or prepayments to outsiders increase when
a.
expenses are booked today for cash that was paid yesterday
b.
expenses are booked today for cash that will be paid tomorrow
c.
cash is paid today for expenses that were booked yesterday
d.
cash is paid today for expenses that will be booked tomorrow
e.
none of the above
(3 points) Deferred expenses or prepayments to outsiders decrease when
a.
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expenses are booked today for cash that was paid yesterday
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29.
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b.
expenses are booked today for cash that will be paid tomorrow
c.
cash is paid today for expenses that were booked yesterday
d.
cash is paid today for expenses that will be booked tomorrow
e.
none of the above
(3 points) You are given the following data:
Beginning salary payable = $100
Salaries paid during the year = $56
Salary expense during the year = $96
if you prefer, you may assume that all salary payments are against salary payable,
although you do not really need such an assumption.
Which one of the following numbers equals the ending salary payable?
a.
$156
b.
$196
c.
$140
d.
$60
e.
$44
30.
(3 points) For simplicity, you may assume that all salaries are on credit.
Beginning salary payable = $456
Ending salary payable = $193
Salary expense during the year = $419
Salaries paid during the year =?
682
31.
(3 points) You are given the following data:
Beginning prepaid advertising = $1,000
Advertising payments during the year = $134
Advertising expensed during they year = $434
if you prefer, you may assume that all advertising is prepaid, although you don’t really
need such an assumption.
Which one of the following numbers equals the ending balance of prepaid advertising?
a.
$700
b.
$1,300
c.
$1,434
d.
$1,134
e.
None of the above.
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32.
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(3 points) For simplicity, you may assume that all insurance is paid in advance.
Beginning prepaid insurance = $100
Ending prepaid insurance = $198
Insurance expense during the year = $345
Insurance payments during the year =?
443
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