CPA Unit 10
Lyle Inc. is preparing its financial statements for the year ended December 31, Year 3. Accounts
payable amounted to $360,000 before any necessary year-end adjustment related to the
following:
At December 31, Year 3, Lyle has an $50,000 debit balance in its accounts payable to Ross, a
supplier, resulting from a $50,000 advance payment for goods to be manufactured to Lyle's
specifications
Checks in the amount of $100,000 were written to vendors and recorded on December 29, Year
3. The checks were mailed on January 5, Year 4.
What amount should Lyle report as accounts payable in its December 31, Year 3, balance
sheet? ✔✔$510,000
=360+50
In its Year 4 financial statement, Cris Co. reported interest expense of $85,000 in its income
statement and cash paid for interest of $68,000 in its cash flow statement. There was no
prepaid interest or interest capitalization at either the beginning or the end of Year 4. Accrued
interest at December 31, Year 3 was $15,000. What amount should Cris report as accrued
interest payable in its December 31, Year 4, balance sheet? ✔✔Interest paid $68
Including the $15,000 for year 3
Cash paid for interest related to Year 4: $53,000 ($68-$15)
Interest payable is $32,000
On December 31, Year 4, Deal Inc. failed to accrue the December Year 4 sales salaries that were
payable on January 6, Year 5. What is the effect of the failure to accrue sales salaries on
working capital and cash flows from operation activities in Deal's Year 4 financial statements?
✔✔Working Capital: Overstated
Cash Flows from Operating Activities: No Effect
Lime Co.'s payroll for the month ended January 31, Year 4, is summarized as follows:
Lyle Inc. is preparing its financial statements for the year ended December 31, Year 3. Accounts
payable amounted to $360,000 before any necessary year-end adjustment related to the
following:
At December 31, Year 3, Lyle has an $50,000 debit balance in its accounts payable to Ross, a
supplier, resulting from a $50,000 advance payment for goods to be manufactured to Lyle's
specifications
Checks in the amount of $100,000 were written to vendors and recorded on December 29, Year
3. The checks were mailed on January 5, Year 4.
What amount should Lyle report as accounts payable in its December 31, Year 3, balance
sheet? ✔✔$510,000
=360+50
In its Year 4 financial statement, Cris Co. reported interest expense of $85,000 in its income
statement and cash paid for interest of $68,000 in its cash flow statement. There was no
prepaid interest or interest capitalization at either the beginning or the end of Year 4. Accrued
interest at December 31, Year 3 was $15,000. What amount should Cris report as accrued
interest payable in its December 31, Year 4, balance sheet? ✔✔Interest paid $68
Including the $15,000 for year 3
Cash paid for interest related to Year 4: $53,000 ($68-$15)
Interest payable is $32,000
On December 31, Year 4, Deal Inc. failed to accrue the December Year 4 sales salaries that were
payable on January 6, Year 5. What is the effect of the failure to accrue sales salaries on
working capital and cash flows from operation activities in Deal's Year 4 financial statements?
✔✔Working Capital: Overstated
Cash Flows from Operating Activities: No Effect
Lime Co.'s payroll for the month ended January 31, Year 4, is summarized as follows:
