POA Chapter 3

Monthly and quarterly time periods are called

• calendar periods.

• fiscal periods.

• interim periods.

• quarterly periods.

Which of the following is in accordance with IFRS?

• Accrual basis accounting

• Neither accrual basis nor cash basis accounting

• Cash basis accounting

• Both accrual basis and cash basis accounting

The revenue recognition principle dictates that revenue should be recognized in the accounting records

• when cash is received

• when the performance obligation is satisfied.

• at the end of the month.

• in the period that income taxes are paid.

Expenses sometimes make their contribution to revenue in a different period than when they are paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the statement of financial position at the end of the time period?

• Due from Employees.

• Due to Employer.

• Salaries and Wages Payable.

• Salaries and Wages Expense.

The following is selected information from Alpha-Beta-Gamma Corporation for the fiscal year ending October 31, 2020.

Cash received from customers                                                                €600,000

Revenue earned                                                                                        660,000

Cash paid for expenses                                                                             340,000

Cash paid for computers on November 1, 2019 that will be used

   for 3 years  (annual depreciation is $32,000)                                           96,000

Expenses incurred, including interest, but excluding any depreciation     400,000

Proceeds from a bank loan, part of which was used to pay for

     the computers                                                                                        200,000

Based on the accrual basis of accounting, what is Alpha-Beta-Gamma Corporation’s net income for the year ending October 31, 2020?

• €388,000.

• €228,000.

• €124,000.

• €260,000.

Wing Company had the following transactions during 2019:

·         Sales of ¥72,000 on account

·         Collected ¥32,000 for services to be performed in 2020

·         Paid ¥10,000 cash in salaries

·         Purchased airline tickets for ¥4,000 in December for a trip to take place in 2020

 

            What is Wing’s 2019 net income using accrual accounting?

• ¥62,000.

• ¥94,000.

• ¥90,000.

•             ¥58,000

Under International Financial Reporting Standards (IFRS)

• the cash-basis method of accounting is acceptable.

• events are recorded in the period in which the event occurs.

• interim period financial statements are either a calendar year or a fiscal year.

• a fiscal year is an accounting time period encompassing less than 12 months.

Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position?

• A company uses $400 worth of supplies during the year.

• A company records $400 worth of depreciation on equipment.

•       A company has earned $400 of revenue collected at the beginning of the year.

• A company records $400 of wages earned by employees that will be paid next year.

Adjusting entries are

• not necessary if the accounting system is operating properly.

• usually required before financial statements are prepared.

• made whenever management desires to change an account balance.

• made to statement of financial position accounts only.

Expenses incurred but not yet paid or recorded are called

•             prepaid expenses.

• accrued expenses.

• interim expenses.

• unearned expenses.