Accounting : Accounting
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Example Questions
Example Question #1 : Current Liabilities And Payroll Accounting
All of the following conditions except which of the following must be met in order for an employer to accrue liability for employee compensation for future absences?
The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered
The obligation relates to rights that vest or accumulate
The employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered
Payment of the compensation is probable
The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered
In relation to compensated absences, the knowledge of the conditions that must be met in order to accrue loss contingency is helpful in accounting for compensated absences such as vacation, sick pay, and leave. In order for an employer to accrue liability for employee's compensation for future absences, several conditions must be met. These conditions include the following: the employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered; the obligation relates to rights that vest or accumulate; payment of the compensation is probable; and the amount can be reasonably estimated.
Example Question #2 : Current Liabilities And Payroll Accounting
All of the following conditions except which of the following must be met in order for an employer to accrue liability for employee compensation for future absences?
The employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered
The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered
The obligation relates to rights that vest or accumulate
Payment of the compensation is probable
The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered
In relation to compensated absences, the knowledge of the conditions that must be met in order to accrue loss contingency is helpful in accounting for compensated absences such as vacation, sick pay, and leave. In order for an employer to accrue liability for employee's compensation for future absences, several conditions must be met. These conditions include the following: the employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered; the obligation relates to rights that vest or accumulate; payment of the compensation is probable; and the amount can be reasonably estimated.
Example Question #1 : Corporations: Dividends, Retained Earnings, And Income Reporting
A company provides 
April's income statement will show revenue of
April's income statement will show a receipt of 
June's income statement will show revenue of
June's income statement will show an increase in accounts receivable of
April's income statement will show revenue of
Revenue is recorded in the period that services are earned or goods are delivered,not in the period that cash is received; therefore, the company will record an increase in revenue of 
Example Question #11 : Accounting
Which of the following is true regarding retained earnings?
They include preferred stock
They are decreased by net income (i.e. debit)
They increase when dividends are declared
They are increased with net income (i.e. credit)
They are increased with net income (i.e. credit)
Net income increases retained earnings; therefore, net income is considered to be credit. Dividends, once declared, decrease retained earnings. Last, preferred stock is not accounted in retained earnings.
Example Question #3 : Corporations: Dividends, Retained Earnings, And Income Reporting
For the current year, The Echo Company possessed the following income:
In the Echo Company's current year taxable income, how much should be included for dividends received?
This problem is asking us to determine the amount of dividends to be included in the Echo Company's taxable income for the current year. The dividends were received from 20%-owned taxable domestic corporations; therefore, they are eligible for an 80% dividends received deduction. We can compute this value using the following formula:
Example Question #4 : Corporations: Dividends, Retained Earnings, And Income Reporting
A company provides
April's income statement will show a receipt of
June's income statement will show revenue of
June's income statement will show an increase in accounts receivable of
April's income statement will show revenue of
April's income statement will show revenue of
Revenue is recorded in the period that services are earned or goods are delivered,not in the period that cash is received; therefore, the company will record an increase in revenue of
Example Question #12 : Accounting
Which of the following is true regarding retained earnings?
They are increased with net income (i.e. credit)
They include preferred stock
They are decreased by net income (i.e. debit)
They increase when dividends are declared
They are increased with net income (i.e. credit)
Net income increases retained earnings; therefore, net income is considered to be credit. Dividends, once declared, decrease retained earnings. Last, preferred stock is not accounted in retained earnings.
Example Question #6 : Corporations: Dividends, Retained Earnings, And Income Reporting
For the current year, The Echo Company possessed the following income:
In the Echo Company's current year taxable income, how much should be included for dividends received?
This problem is asking us to determine the amount of dividends to be included in the Echo Company's taxable income for the current year. The dividends were received from 20%-owned taxable domestic corporations; therefore, they are eligible for an 80% dividends received deduction. We can compute this value using the following formula:
Example Question #1 : Statement Of Cash Flows
On the statement of cash flows, an increase in inventory would be reported in which of the following sections?
Operating activity
Financing activity
None of these
Investing activity
Operating activity
There are three primary types of cash flow activities and the statement of cash flows has a section for each activity: operating, investing, and financing. Operating activities are defined as changes in current assets and current liabilities. Investing activities are described as changes in long-term assets. Last, financing activities are changes in long-term liabilities and stockholders' equity; therefore, an increase in inventory would be reported as an operating activity.
Example Question #2 : Statement Of Cash Flows
Which of the following are considered to be cash equivalents?
Money market funds
Commercial paper
All of these
Treasury bills
All of these
In order for an asset to be considered as cash equivalent, it needs to be readily convertible into cash; furthermore, they must be near maturity so that they carry little to no risk of value alteration due to changes in interest rates. Generally, cash equivalents include investments with maturities of three months or less from the date of purchase. All of these—Treasury bills, commercial paper, and money market funds—are cash equivalents.
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