23 45 Trailers were purchased by Toland Trucking on January 1, 2017, for $210,000. Toland's policy is to adjust its accounts at year-end. Which is the appropriate adjustment to record depreciation at year- end if the company expects to use equipment consistently for three years? Decrease Accumulated Depreciation $70,000 Decrease Trailers $70,000 Increase Depreciation Expense $70,000 Increase Trailers $70,000 Decrease Accumulated Depreciation $70,000 Decrease Depreciation Expense $70,000 Increase Depreciation Expense $70,000 Increase Accumulated Depreciation $70,000 24 45 In a service-type business that uses accrual accounting, revenue is recognized: when the service is performed. O when cash is received. at the end of the year. at the end of the month. 25 45 Using accrual accounting, expenses are recorded and reported only: if they are paid before they are incurred. when they are incurred and paid at the same time. if they are paid after they are incurred. when they are incurred whether or not cash is paid. 26 49 The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: cash payments should be matched with cash receipts. dividends should be matched with stockholder investments. assets should be matched with liabilities. efforts should be matched with accomplishments. 27 49 A flower shop issues monthly financial statements and sells $1,000 of flowers on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? December 1 December 10 December 5 O November 30 28 4 The following is selected information from L Corporation for the fiscal year ending October 31, 2018. Cash received from customers Revenue recognized Cash paid for expenses $300,000 440,000 170,000 Cash paid for computers on November 1, 2017, that will be used for 3 years 48,000 Expenses incurred including any depreciation 216,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000 Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2018? $270,000 $254,000 $208,000 $224,000 1290 29 45 La More Company had the following transactions during 2018: Sales of $4,500 on account Collected $2,000 for services to be performed in 2019 Paid $1,875 cash in salaries for 2018 Purchased airline tickets for $250 in December for a trip to take place in 2019 What is La More's 2018 net income using accrual accounting? $2,625 $2,875 $4,625 $4,875 30 49 Eaton Company's senior vice president prepares a bank reconciliation on a monthly basis. Which internal control principle did Eaton Company satisfy? Independent internal verificiation Establishment of responsibility Eaton Company violated the independent internal verification principle. Physical controls