Question 1

Accrual-basis accounting:

Accepted Answer

A)  is not consistent with the GAAP conceptual frame work. 
B)  has been eliminated as a result of the IASB/FASB joint project on revenue recognition. 
C)  results in companies recording transactions that change a company's financial statements. 
D)  is optional under GAAP. 
A)  is not consistent with the GAAP conceptual frame work. 
B)  has been eliminated as a result of the IASB/FASB joint project on revenue recognition. 
C)  results in companies recording transactions that change a company's financial statements. 
D)  is optional under GAAP.

Question 2

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

Accepted Answer

A) True 
 B)False

Question 3

The statements of financial position of Claude Company include the following:

Accepted Answer

The answer of The statements of financial position of Claude...

Question 4

A company spends $10 million dollars for an office building. Over what period should the cost be written off?

Accepted Answer

A)  When the $10 million is expended in cash. 
B)  All in the first year. 
C)  Over the useful life of the building. 
D)  After $10 million in revenue is earned. 
A)  When the $10 million is expended in cash. 
B)  All in the first year. 
C)  Over the useful life of the building. 
D)  After $10 million in revenue is earned.

Question 5

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

Accepted Answer

A)  expenses to be overstated. 
B)  net income to be overstated. 
C)  liabilities to be understated. 
D)  revenues to be understated. 
A)  expenses to be overstated. 
B)  net income to be overstated. 
C)  liabilities to be understated. 
D)  revenues to be understated.

Question 6

Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5. Ron receives the check in the mail on August 6. When should Ron show that the revenue was earned?

Accepted Answer

A)  July 31 
B)  August 1 
C)  August 5 
D)  August 6 
A)  July 31 
B)  August 1 
C)  August 5 
D)  August 6

Question 7

An adjusting entry that increases an expense on the income statement and decreases an asset on the statement of financial position is the result of prepaid expenses that expire with the passage of time.

Accepted Answer

A) True 
 B)False

Question 8

CHS Company purchased a truck from JLS Corp. by issuing a 6-month, 8% note payable for $45,000 on November 1. On December 31, the accrued expense adjusting entry is

Accepted Answer

The answer of CHS Company purchased a truck from JLS...

Question 9

Under International Financial Reporting Standards (IFRS)

Accepted Answer

A)  the cash-basis method of accounting is accepted. 
B)  events are recorded in the period in which the event occurs. 
C)  interim period financial statements are either a calendar year or a fiscal year. 
D)  a fiscal year is an accounting time period encompassing less than 12 months. 
A)  the cash-basis method of accounting is accepted. 
B)  events are recorded in the period in which the event occurs. 
C)  interim period financial statements are either a calendar year or a fiscal year. 
D)  a fiscal year is an accounting time period encompassing less than 12 months.

Question 10

Cindi's Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $900 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?

Accepted Answer

The answer of Cindi's Candies paid employee wages on and...

Question 11

Unearned revenue is classified as

Accepted Answer

A)  an asset account. 
B)  a revenue account. 
C)  a contra-revenue account. 
D)  a liability account. 
A)  an asset account. 
B)  a revenue account. 
C)  a contra-revenue account. 
D)  a liability account.

Question 12

On July 1, Runner's Sports Store paid $12,000 to Acme Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

Accepted Answer

A)  Debit Rent Expense, $12,000; Credit Prepaid Rent, $3,000. 
B)  Debit Prepaid Rent, $3,000; Credit Rent Expense, $3,000. 
C)  Debit Rent Expense, $3,000; Credit Prepaid Rent, $3,000. 
D)  Debit Rent Expense, $12,000; Credit Prepaid Rent, $12,000. 
A)  Debit Rent Expense, $12,000; Credit Prepaid Rent, $3,000. 
B)  Debit Prepaid Rent, $3,000; Credit Rent Expense, $3,000. 
C)  Debit Rent Expense, $3,000; Credit Prepaid Rent, $3,000. 
D)  Debit Rent Expense, $12,000; Credit Prepaid Rent, $12,000.

Question 13

Before month-end adjustments are made, the February 28 trial balance of Alice's Adventures contains revenue of $7,000 and expenses of $3,900. Adjustments are necessary for the following items:
$\bullet$Depreciation for February is $1,500.
$\bullet$Revenue earned but not yet billed is $2,300.
$\bullet$Accrued interest expense is $700.
$\bullet$Revenue collected in advance that is now earned is $3,500.
$\bullet$Portion of prepaid insurance expired during February is $600.
Instructions
Calculate the correct net income for Alice's Income Statement for February.

Accepted Answer

The answer of Before month-end adjustments are made, the February...

Question 14

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Accepted Answer

A)  assets to be understated. 
B)  assets to be overstated. 
C)  expenses to be understated. 
D)  contra-expenses to be overstated. 
A)  assets to be understated. 
B)  assets to be overstated. 
C)  expenses to be understated. 
D)  contra-expenses to be overstated.

Question 15

Compute the net income for 2014 based on the following amounts presented on the adjusted trial balance of D-Lay Company.

Accepted Answer

The answer of Compute the net income for 2014 based...

Question 16

The Poway Animal Encounters operates a drive through tourist attraction. The company adjusts its accounts at the end of each month. The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30. The adjusted trial balance shows the following:   Other data:
1. Three months' rent had been prepaid on April 1.
2. The equipment is being depreciated at $6,000 per year.
3. The unearned ticket revenue represents tickets sold for future visits. The tickets were sold at $4.00 each on April 1. During April, twenty of the tickets were used by customers.
Instructions
(a) Calculate the following:
1. Monthly rent expense.
2. The age of the equipment in months.
3. The number of tickets sold on April 1.
(b) Prepare the adjusting entries that were made by the Poway Animal Encounters on April 30.

Accepted Answer

(a) 1. $9000. The $18000 balance on the

Question 17

Daly Investments purchased an 18-month insurance policy on May 31, 2014 for $6,300. The December 31, 2014 statement of financial position would report Prepaid Insurance of

Accepted Answer

A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $2,450. 
C)  $3,850. 
D)  $6,300. 
A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $2,450. 
C)  $3,850. 
D)  $6,300.

Question 18

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?

Accepted Answer

A)  Due from Employees. 
B)  Due to Employer. 
C)  Salaries and Wages Payable. 
D)  Salaries and Wages Expense. 
A)  Due from Employees. 
B)  Due to Employer. 
C)  Salaries and Wages Payable. 
D)  Salaries and Wages Expense.

Question 19

An asset-expense relationship exists with

Accepted Answer

A)  liability accounts. 
B)  revenue accounts. 
C)  prepaid expense adjusting entries. 
D)  accrued expense adjusting entries. 
A)  liability accounts. 
B)  revenue accounts. 
C)  prepaid expense adjusting entries. 
D)  accrued expense adjusting entries.

Question 20

O.K.C. Company collected $14,000 in September of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transaction during 2013 would be

Accepted Answer

A)  0. 
B)  $10,500. 
C)  $14,000. 
D)  $3,350. 
A)  0. 
B)  $10,500. 
C)  $14,000. 
D)  $3,350.

Accrual-basis accounting:

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

The statements of financial position of Claude Company include the following:

A company spends $10 million dollars for an office building. Over what period should the cost be written off?

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5. Ron receives the check in the mail on August 6. When should Ron show that the revenue was earned?

An adjusting entry that increases an expense on the income statement and decreases an asset on the statement of financial position is the result of prepaid expenses that expire with the passage of time.

CHS Company purchased a truck from JLS Corp. by issuing a 6-month, 8% note payable for $45,000 on November 1. On December 31, the accrued expense adjusting entry is

Under International Financial Reporting Standards (IFRS)

Unearned revenue is classified as

On July 1, Runner's Sports Store paid $12,000 to Acme Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Compute the net income for 2014 based on the following amounts presented on the adjusted trial balance of D-Lay Company.

Daly Investments purchased an 18-month insurance policy on May 31, 2014 for $6,300. The December 31, 2014 statement of financial position would report Prepaid Insurance of

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?

An asset-expense relationship exists with

O.K.C. Company collected $14,000 in September of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transaction during 2013 would be

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Accounting and Financial Reporting for Contingent Liabilities and Leases

Filters

Exam 3: Adjusting the Accounts

Accrual-basis accounting:

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

The statements of financial position of Claude Company include the following:

A company spends $10 million dollars for an office building. Over what period should the cost be written off?

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5. Ron receives the check in the mail on August 6. When should Ron show that the revenue was earned?

An adjusting entry that increases an expense on the income statement and decreases an asset on the statement of financial position is the result of prepaid expenses that expire with the passage of time.

CHS Company purchased a truck from JLS Corp. by issuing a 6-month, 8% note payable for $45,000 on November 1. On December 31, the accrued expense adjusting entry is

Under International Financial Reporting Standards (IFRS)

Unearned revenue is classified as

On July 1, Runner's Sports Store paid $12,000 to Acme Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Compute the net income for 2014 based on the following amounts presented on the adjusted trial balance of D-Lay Company.

Daly Investments purchased an 18-month insurance policy on May 31, 2014 for $6,300. The December 31, 2014 statement of financial position would report Prepaid Insurance of

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?

An asset-expense relationship exists with

O.K.C. Company collected $14,000 in September of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transaction during 2013 would be

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Accounting and Financial Reporting for Contingent Liabilities and Leases

Filters