Question 1

When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

Accepted Answer

A) True 
 B)False

Question 2

If a company fails to make an adjusting entry to record supplies expense, then

Accepted Answer

A)  stockholders' equity will be understated. 
B)  expense will be understated. 
C)  assets will be understated. 
D)  net income will be understated. 
A)  stockholders' equity will be understated. 
B)  expense will be understated. 
C)  assets will be understated. 
D)  net income will be understated.

Question 3

Financial statements can be prepared from the information provided by an adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 4

Revenue recognition fraud is

Accepted Answer

A)  a major issue in the U.S. but not worldwide. 
B)  a major issue internationally, but not in the U.S. 
C)  a major issue in the U.S. and worldwide. 
D)  not a major issue anywhere. 
A)  a major issue in the U.S. but not worldwide. 
B)  a major issue internationally, but not in the U.S. 
C)  a major issue in the U.S. and worldwide. 
D)  not a major issue anywhere.

Question 5

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Accepted Answer

A) True 
 B)False

Question 6

Elliott Smith is a lawyer who requires that his clients pay him in advance of legal services rendered. Elliott routinely credits Service Revenue when his clients pay him in advance. In June Elliott collected $15,000 in advance fees and completed 70% of the work related to these fees. What adjusting entry is required by Elliott's firm at the end of June? a. Unearned Service Revenue$\quad$$\quad$10,500
$\quad$Service Revenue$\quad$$\quad$10,500
b. Unearned Service Revenue$\quad$$\quad$4,500
$\quad$Service Revenue$\quad$$\quad$4,500
c. Cash$\quad$$\quad$15,000
$\quad$Service Revenue$\quad$$\quad$15,000
d. Service Revenue$\quad$$\quad$4,500
$\quad$Unearned Service Revenue$\quad$4,500

Accepted Answer

The answer of Elliott Smith is a lawyer who requires...

Question 7

Every adjusting entry affects one balance sheet account and one income statement account.

Accepted Answer

A) True 
 B)False

Question 8

Depreciation expense for a period is the

Accepted Answer

A)  original cost of an asset - accumulated depreciation. 
B)  book value of the asset ÷ useful life. 
C)  portion of an asset's cost that expired during the period. 
D)  market value of the asset ÷ useful life. 
A)  original cost of an asset - accumulated depreciation. 
B)  book value of the asset ÷ useful life. 
C)  portion of an asset's cost that expired during the period. 
D)  market value of the asset ÷ useful life.

Question 9

The adjusted trial balance is prepared

Accepted Answer

A)  after financial statements are prepared. 
B)  before the trial balance. 
C)  to prove the equality of total assets and total liabilities. 
D)  after adjusting entries have been journalized and posted. 
A)  after financial statements are prepared. 
B)  before the trial balance. 
C)  to prove the equality of total assets and total liabilities. 
D)  after adjusting entries have been journalized and posted.

Question 10

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

Accepted Answer

A)  net income to be overstated. 
B)  an understatement of assets and an understatement of revenues. 
C)  an understatement of revenues and an understatement of liabilities. 
D)  an understatement of revenues and an overstatement of liabilities. 
A)  net income to be overstated. 
B)  an understatement of assets and an understatement of revenues. 
C)  an understatement of revenues and an understatement of liabilities. 
D)  an understatement of revenues and an overstatement of liabilities.

Question 11

The economic entity assumption states that economic events can be identified with a particular unit of accountability.

Accepted Answer

A) True 
 B)False

Question 12

On July 1, Runner's Sports Store paid $14,000 to Corona 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, $14,000; Credit Prepaid Rent, $3,500. 
B)  Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500. 
C)  Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500. 
D)  Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000. 
A)  Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500. 
B)  Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500. 
C)  Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500. 
D)  Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000.

Question 13

Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for $75,000. The insurance policy is in effect from May 2015 through April 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Accepted Answer

A)  net income and assets will be understated by $50,000. 
B)  net income and assets will be overstated by $50,000. 
C)  net income and assets will be understated by $25,000. 
D)  net income and assets will be overstated by $25,000. 
A)  net income and assets will be understated by $50,000. 
B)  net income and assets will be overstated by $50,000. 
C)  net income and assets will be understated by $25,000. 
D)  net income and assets will be overstated by $25,000.

Question 14

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Accepted Answer

A) True 
 B)False

Question 15

Cash basis accounting is in accordance with

Accepted Answer

A)  GAAP but not IFRS. 
B)  IFRS but not GAAP. 
C)  both IFRS and GAAP. 
D)  neither IFRS nor GAAP. 
A)  GAAP but not IFRS. 
B)  IFRS but not GAAP. 
C)  both IFRS and GAAP. 
D)  neither IFRS nor GAAP.

Question 16

Adjusting entries are

Accepted Answer

A)  not necessary if the accounting system is operating properly. 
B)  usually required before financial statements are prepared. 
C)  made whenever management desires to change an account balance. 
D)  made to balance sheet accounts only. 
A)  not necessary if the accounting system is operating properly. 
B)  usually required before financial statements are prepared. 
C)  made whenever management desires to change an account balance. 
D)  made to balance sheet accounts only.

Question 17

Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

Accepted Answer

A)  is not required. No adjusting entries will be made until the end of the season in November. 
B)  will include a debit to Cash and a credit to Ticket Revenue for $60,000. 
C)  will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $90,000. 
D)  will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $80,000. 
A)  is not required. No adjusting entries will be made until the end of the season in November. 
B)  will include a debit to Cash and a credit to Ticket Revenue for $60,000. 
C)  will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $90,000. 
D)  will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $80,000.

Question 18

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Accepted Answer

A)  stockholders' equity will be overstated by $800. 
B)  expenses will be understated by $750. 
C)  assets will be understated by $250. 
D)  net income will be understated by $800. 
A)  stockholders' equity will be overstated by $800. 
B)  expenses will be understated by $750. 
C)  assets will be understated by $250. 
D)  net income will be understated by $800.

Question 19

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Accepted Answer

A)  net income to be understated. 
B)  an overstatement of assets and an overstatement of liabilities. 
C)  an understatement of expenses and an understatement of liabilities. 
D)  an overstatement of expenses and an overstatement of liabilities. 
A)  net income to be understated. 
B)  an overstatement of assets and an overstatement of liabilities. 
C)  an understatement of expenses and an understatement of liabilities. 
D)  an overstatement of expenses and an overstatement of liabilities.

Question 20

Many business transactions affect more than one time period.

Accepted Answer

A) True 
 B)False

When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

If a company fails to make an adjusting entry to record supplies expense, then

Financial statements can be prepared from the information provided by an adjusted trial balance.

Revenue recognition fraud is

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Every adjusting entry affects one balance sheet account and one income statement account.

Depreciation expense for a period is the

The adjusted trial balance is prepared

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

The economic entity assumption states that economic events can be identified with a particular unit of accountability.

On July 1, Runner's Sports Store paid $14,000 to Corona 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

Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for $75,000. The insurance policy is in effect from May 2015 through April 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Cash basis accounting is in accordance with

Adjusting entries are

Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Many business transactions affect more than one time period.

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

When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

If a company fails to make an adjusting entry to record supplies expense, then

Financial statements can be prepared from the information provided by an adjusted trial balance.

Revenue recognition fraud is

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Every adjusting entry affects one balance sheet account and one income statement account.

Depreciation expense for a period is the

The adjusted trial balance is prepared

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

The economic entity assumption states that economic events can be identified with a particular unit of accountability.

On July 1, Runner's Sports Store paid $14,000 to Corona 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

Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for $75,000. The insurance policy is in effect from May 2015 through April 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Cash basis accounting is in accordance with

Adjusting entries are

Fugazi City College sold season tickets for the 2015 football season for $240,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Many business transactions affect more than one time period.

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