Question 1

Accumulated Depreciation is a liability account and has a normal credit account balance.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following is not an application of revenue recognition?

Accepted Answer

A)  Recording revenue as an adjusting entry on the last day of the accounting period. 
B)  Accepting cash from an established customer for services to be performed over the next three months. 
C)  Billing customers on June 30 for services completed during June. 
D)  Receiving cash for services performed. 
A)  Recording revenue as an adjusting entry on the last day of the accounting period. 
B)  Accepting cash from an established customer for services to be performed over the next three months. 
C)  Billing customers on June 30 for services completed during June. 
D)  Receiving cash for services performed.

Question 3

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Accepted Answer

A)  Debit Cash and credit Unearned Service Revenue 
B)  Debit Accounts Receivable and credit Unearned Service Revenue 
C)  Debit Accounts Receivable and credit Service Revenue 
D)  Debit Unearned Service Revenue and credit Service Revenue 
A)  Debit Cash and credit Unearned Service Revenue 
B)  Debit Accounts Receivable and credit Unearned Service Revenue 
C)  Debit Accounts Receivable and credit Service Revenue 
D)  Debit Unearned Service Revenue and credit Service Revenue

Question 4

Pixies Inc. pays its rent of $54,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

Accepted Answer

A)  Failure to make the adjustment does not affect the February financial statements. 
B)  Expenses will be overstated by $4,500 and net income and stockholders' equity will be understated by $4,500. 
C)  Assets will be overstated by $9,000 and net income and stockholders' equity will be understated by $9,000. 
D)  Assets will be overstated by $4,500 and net income and stockholders' equity will be overstated by $4,500. 
A)  Failure to make the adjustment does not affect the February financial statements. 
B)  Expenses will be overstated by $4,500 and net income and stockholders' equity will be understated by $4,500. 
C)  Assets will be overstated by $9,000 and net income and stockholders' equity will be understated by $9,000. 
D)  Assets will be overstated by $4,500 and net income and stockholders' equity will be overstated by $4,500.

Question 5

Soundgarden Company collected $18,200 in May of 2015 for 5 months of service which would take place from October of 2015 through February of 2016. The revenue reported from this transaction during 2015 would be

Accepted Answer

A)  $0. 
B)  $7,280. 
C)  $10,920. 
D)  $18,200. 
A)  $0. 
B)  $7,280. 
C)  $10,920. 
D)  $18,200.

Question 6

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the

Accepted Answer

A)  market value of the asset. 
B)  blue book value of the asset. 
C)  book value of the asset. 
D)  depreciated difference of the asset. 
A)  market value of the asset. 
B)  blue book value of the asset. 
C)  book value of the asset. 
D)  depreciated difference of the asset.

Question 7

The expense recognition principle requires that efforts be matched with accomplishments.

Accepted Answer

A) True 
 B)False

Question 8

On January 1, 2014, Doolittle Company purchased furniture for $7,560. The company expects to use the furniture for 3 years. The asset has no salvage value. The book value of the furniture at December 31, 2015 is

Accepted Answer

A)  $0. 
B)  $2,520. 
C)  $5,040. 
D)  $7,560. 
A)  $0. 
B)  $2,520. 
C)  $5,040. 
D)  $7,560.

Question 9

Ultramega Company collected $19,600 in May of 2015 for 4 months of service which would take place from October of 2015 through January of 2016. The revenue reported from this transaction during 2015 would be

Accepted Answer

A)  0. 
B)  $4,900. 
C)  $14,700. 
D)  $19,600. 
A)  0. 
B)  $4,900. 
C)  $14,700. 
D)  $19,600.

Question 10

The expense recognition principle matches

Accepted Answer

A)  customers with businesses. 
B)  expenses with revenues. 
C)  assets with liabilities. 
D)  creditors with businesses. 
A)  customers with businesses. 
B)  expenses with revenues. 
C)  assets with liabilities. 
D)  creditors with businesses.

Question 11

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

Accepted Answer

A) True 
 B)False

Question 12

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: Depreciation Expense $\quad$900
Cash$\quad$$\quad$900 The effect of this entry is to

Accepted Answer

A)  adjust the accounts to their proper amounts on December 31. 
B)  understate total assets on the balance sheet as of December 31. 
C)  overstate the book value of the depreciable assets at December 31. 
D)  understate the book value of the depreciable assets as of December 31. 
A)  adjust the accounts to their proper amounts on December 31. 
B)  understate total assets on the balance sheet as of December 31. 
C)  overstate the book value of the depreciable assets at December 31. 
D)  understate the book value of the depreciable assets as of December 31.

Question 13

An adjusting entry

Accepted Answer

A)  affects two balance sheet accounts. 
B)  affects two income statement accounts. 
C)  affects a balance sheet account and an income statement account. 
D)  is always a compound entry. 
A)  affects two balance sheet accounts. 
B)  affects two income statement accounts. 
C)  affects a balance sheet account and an income statement account. 
D)  is always a compound entry.

Question 14

The two fundamental qualities of useful information are

Accepted Answer

A)  verifiability and timeliness. 
B)  relevance and faithful representation. 
C)  comparability and flexibility. 
D)  understandability and consistency. 
A)  verifiability and timeliness. 
B)  relevance and faithful representation. 
C)  comparability and flexibility. 
D)  understandability and consistency.

Question 15

A flower shop makes a large sale for $1,200 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 $1,200 considered to be recognized?

Accepted Answer

A)  December 5. 
B)  December 10. 
C)  November 30. 
D)  December 1. 
A)  December 5. 
B)  December 10. 
C)  November 30. 
D)  December 1.

Question 16

Under IFRS, income is defined as

Accepted Answer

A)  revenue less expenses. 
B)  revenues and gains, less expenses and losses. 
C)  revenues and gains. 
D)  revenues, gains, and contributions by owners. 
A)  revenue less expenses. 
B)  revenues and gains, less expenses and losses. 
C)  revenues and gains. 
D)  revenues, gains, and contributions by owners.

Question 17

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 18

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

Accepted Answer

A) True 
 B)False

Question 19

Uncle Tupelo's Gifts signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $75,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

Accepted Answer

A) Interest Expense. $\quad$1,500 
Interest Payable$\quad$$\quad$1,500 
B) Interest Expense $\quad$2,250
Interest Payable$\quad$2,250 
C) Interest Expense$\quad$1,500
Cash$\quad$1,500 
D) Interest Expense$\quad$1,500
Notes Payable$\quad$1,500 
A) Interest Expense. $\quad$1,500 
Interest Payable$\quad$$\quad$1,500 
B) Interest Expense $\quad$2,250
Interest Payable$\quad$2,250 
C) Interest Expense$\quad$1,500
Cash$\quad$1,500 
D) Interest Expense$\quad$1,500
Notes Payable$\quad$1,500

Question 20

182. Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2015 is a. Prepaid Insurance$\quad$$\quad$9,000
$\quad$Insurance Expense$\quad$$\quad$9,000
b. Insurance Expense$\quad$$\quad$9,000
$\quad$Prepaid Insurance$\quad$$\quad$9,000
c. Insurance Expense$\quad$$\quad$12,000
$\quad$Prepaid Insurance$\quad$$\quad$12,000
d. Insurance Expense$\quad$$\quad$3,000
$\quad$Prepaid Insurance$\quad$$\quad$3,000

Accepted Answer

Accumulated Depreciation is a liability account and has a normal credit account balance.

Which one of the following is not an application of revenue recognition?

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Pixies Inc. pays its rent of $54,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

Soundgarden Company collected $18,200 in May of 2015 for 5 months of service which would take place from October of 2015 through February of 2016. The revenue reported from this transaction during 2015 would be

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the

The expense recognition principle requires that efforts be matched with accomplishments.

On January 1, 2014, Doolittle Company purchased furniture for $7,560. The company expects to use the furniture for 3 years. The asset has no salvage value. The book value of the furniture at December 31, 2015 is

Ultramega Company collected $19,600 in May of 2015 for 4 months of service which would take place from October of 2015 through January of 2016. The revenue reported from this transaction during 2015 would be

The expense recognition principle matches

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: Depreciation Expense $\quad$ 900 Cash $\quad$ $\quad$ 900 The effect of this entry is to

An adjusting entry

The two fundamental qualities of useful information are

A flower shop makes a large sale for $1,200 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 $1,200 considered to be recognized?

Under IFRS, income is defined as

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

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, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

Exam 3: Adjusting the Accounts

Accumulated Depreciation is a liability account and has a normal credit account balance.

Which one of the following is not an application of revenue recognition?

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Pixies Inc. pays its rent of $54,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

Soundgarden Company collected $18,200 in May of 2015 for 5 months of service which would take place from October of 2015 through February of 2016. The revenue reported from this transaction during 2015 would be

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the

The expense recognition principle requires that efforts be matched with accomplishments.

On January 1, 2014, Doolittle Company purchased furniture for $7,560. The company expects to use the furniture for 3 years. The asset has no salvage value. The book value of the furniture at December 31, 2015 is

Ultramega Company collected $19,600 in May of 2015 for 4 months of service which would take place from October of 2015 through January of 2016. The revenue reported from this transaction during 2015 would be

The expense recognition principle matches

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: Depreciation Expense \quad 900 Cash \quad\quad 900 The effect of this entry is to

An adjusting entry

The two fundamental qualities of useful information are

A flower shop makes a large sale for $1,200 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 $1,200 considered to be recognized?

Under IFRS, income is defined as

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

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, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: Depreciation Expense $\quad$ 900 Cash $\quad$ $\quad$ 900 The effect of this entry is to