Question:
If accounts receivable have increased during the period,
A) revenues on an accrual basis are less than revenues on a cash basis.
B) revenues on an accrual basis are greater than revenues on a cash basis.
C) revenues on an accrual basis are the same as revenues on an cash basis.
D) expenses on an accrual basis are greater than expenses on a cash basis.
Cash basis of accounting provides that all expense and revenues be recognized at the time thy're paid and collected, respectively, regardless of whether the expense have been incurred or the revenue have been earned already. Accrual basis, on the other hand, records expenses and revenue at the time they were incurred and earned, regardless of when paid and collected. Accrual basis is the required method of accounting to be used by the companies.
Answer and Explanation: 1
The answer is B) revenues on an accrual basis are greater than revenues on a cash basis.
Please note that if accounts receivable increased during...
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Learn more about this topic:
The Differences Between Accrual & Cash-Basis Accounting
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Chapter 4 / Lesson 3
Learn about the difference between cash and accrual accounting. See accrual vs. cash basis accounting examples, and identify benefits of the two types of accounting.
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Bread Basket provides baking supplies to restaurants and grocery stores. During December 2015, Bread Basket's employees worked 1,200 hours at an average rate of R20 per hour. At December 31, 2015, Bread Basket has paid R10,000 of salary expense. If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2015 statement of financial position?
a. Equity is overstated by
R10,000.
b. Equity is overstated by R14,000.
c. Liabilities are overstated by R14,000.
d. Liabilities are overstated by R10,000.
Big-Mouth Frog Corporation had revenues of $210,000, expenses of $120,000, and dividends of $30,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a
a. debit of $60,000.
b. debit of $90,000.
c. credit of $60,000.
d. credit of
$90,000.
Use the following information for questions 46 through 48:
The income statement of Dolan Corporation for 2015 included the following items:
Interest revenue €55,500
Salaries and wages expense 95,000
Insurance expense 9,600
The following balances have been excerpted from Dolan Corporation's statement of financial position:
December 31, 2015 December 31, 2014
Accrued interest receivable €9,100 €7,500
Accrued salaries and wages payable
8,900 4,200
Prepaid insurance 1,100 1,500
Use the following information for questions 50 through 52:
Olsen Company paid or collected during 2015 the following items:
Insurance premiums paid $ 12,400
Interest collected 43,900
Salaries and wages paid 110,200
The following balances have been excerpted from Olsen's statement of financial position:
December 31, 2015 December 31, 2014
Prepaid insurance $ 1,200 $ 1,500
Interest
receivable 3,700 2,900
Salaries and wages payable 12,300 10,600
At the end of 2015, Diego Company made four adjusting entries for the following items:
1. Depreciation expense, R$25,000.
2. Expired insurance, R$2,200 (originally recorded as prepaid insurance.)
3. Interest payable, R$6,000.
4. Rent receivable, R$10,000.
In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is
(are)
a. Entry No. 3.
b. Entry No. 4.
c. Entry No. 3 and No. 4.
d. Entry No. 2, No. 3 and No. 4.
Garcia Corporation received cash of R$24,000 on August 1, 2015 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2015 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent Revenue, R$10,000.
b. debit Rent Revenue and credit Unearned Rent Revenue, R$14,000.
c. debit
Unearned Rent Revenue and credit Rent Revenue, R$10,000.
d. debit Cash and credit Unearned Rent Revenue, R$14,000.
Low Company received HK$9,600 on April 1, 2015 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2015 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent Revenue, HK$2,400.
b. debit Rent Revenue and credit Unearned Rent Revenue, HK$7,200.
c. debit
Unearned Rent Revenue and credit Rent Revenue, HK$2,400.
d. debit Unearned Rent Revenue and credit Rent Revenue, HK$7,200.
Caroline, Inc. hired a new controller in late 2015. The controller has not prepared financial statements using IFRS before and needs your assistance. In compiling a complete set of financial statements under IFRS, in what order should the following items be reported in the equity section on the statement of financial position at
December 31, 2015? If an item is not reported in the equity section, omit it from your answer.
I. Share premium
II. Retained earnings
III. Investments
IV. Non-controlling interest
V. Accumulated comprehensive income
VI. Share capital
a. I, VI, IV, II, V, III
b. VI, I, II, V, IV
c. VI, I, IV, II, V
d. III, VI, I, II, IV, V
Rosalie Corporation is located in London but does business throughout Europe. The company builds and sells
equipment used in manufacturing pharmaceuticals. On December 31, 2015, Rosalie has trading securities valued at £63,000; goodwill valued at £450,000; prepaid insurance valued at £36,000; patents valued at £210,000; and a customer list valued at £390,000. On Rosalie Corporation's statement of financial position at December 31, 2015, what amount should be reported as intangible assets?
a. £1,113,000
b. £1,149,000
c. £1,050,000
d. £660,000
During
2015 the DLD Company had a net income of W200,000. In addition, selected accounts showed the following changes:
Accounts Receivable W12,000 increase
Accounts Payable 4,000 increase
Buildings 16,000 decrease
Depreciation Expense 6,000 increase
Bonds Payable 32,000 increase
What was the amount of cash provided by operating activities?
a. W198,000
b. W200,000
c. W206,000
d. W238,000
Harding Corporation reports the following
information:
Net income R$1,000,000
Depreciation expense 280,000
Increase in accounts receivable 120,000
Harding should report cash provided by operating activities of
a. R$600,000.
b. R$840,000.
c. R$1,160,000.
d. R$1,400,000.
Caroline, Inc. had the following transactions during 2015:
Exchanged land for a building $764,000
Purchased treasury shares 160,000
Paid cash dividend 380,000
Purchased equipment 212,000
Issued
ordinary shares 588,000
What is Caroline, Inc.'s net cash provided (used) by investing activities?
a. $212,000 used by investing activities.
b. $552,000 provided by investing activities.
c. $372,000 used by investing activities.
d. $392,000 provided by investing activities.
Caroline, Inc. had the following transactions during 2015:
Exchanged land for a building £764,000
Purchased treasury shares 160,000
Paid cash dividend
380,000
Purchased equipment 212,000
Issued ordinary shares 588,000
What is Caroline, Inc.'s net cash provided (used) by financing activities?
a. £600,000 provided by financing activities.
b. £48,000 provided by financing activities.
c. £48,000 used by financing activities.
d. £428,000 used by financing activities.
Packard Corporation reports the following information:
Net cash provided by operating activities $275,000
Average current liabilities 150,000
Average non-current liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard's free cash flow is
a. $70,000.
b. $105,000.
c. $165,000.
d. $215,000.