Question 1

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Accepted Answer

A) True 
 B)False

Question 2

Under the accrual basis of accounting, the accounting records are normally updated after the preparation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 3

The reduction in the ability of a fixed asset to provide service over time is called:

Accepted Answer

A)  deferral recognition. 
B)  depreciation. 
C)  consolidation. 
D)  accumulation. 
A)  deferral recognition. 
B)  depreciation. 
C)  consolidation. 
D)  accumulation.

Question 4

When an entry is made to adjust the supplies account and recognize supplies expense for the period, which section of the statement of cash flows is affected?

Accepted Answer

A)  Cash Flow from Operating Activities 
B)  Cash Flow from Investing Activities 
C)  Cash Flow from Financing Activities 
D)  There is no effect on the statement of cash flows. 
A)  Cash Flow from Operating Activities 
B)  Cash Flow from Investing Activities 
C)  Cash Flow from Financing Activities 
D)  There is no effect on the statement of cash flows.

Question 5

Deferred revenue is initially recorded as:

Accepted Answer

A)  revenue but becomes a liability over time. 
B)  an asset but becomes revenue over time. 
C)  a liability but becomes revenue over time. 
D)  revenue but becomes an asset over time. 
A)  revenue but becomes a liability over time. 
B)  an asset but becomes revenue over time. 
C)  a liability but becomes revenue over time. 
D)  revenue but becomes an asset over time.

Question 6

Which of the following is true of an accrual?

Accepted Answer

A)  It is normally the result of cash being received or paid before the revenue is earned or the expense is incurred. 
B)  It is initially recorded as an asset but becomes an expense over time. 
C)  It is initially recorded as a liability but become revenue over time. 
D)  It is normally the result of cash being received or paid after revenue has been earned or an expense has been incurred. 
A)  It is normally the result of cash being received or paid before the revenue is earned or the expense is incurred. 
B)  It is initially recorded as an asset but becomes an expense over time. 
C)  It is initially recorded as a liability but become revenue over time. 
D)  It is normally the result of cash being received or paid after revenue has been earned or an expense has been incurred.

Question 7

Receiving cash in advance of performing a service creates a liability for the company.

Accepted Answer

A) True 
 B)False

Question 8

The following assets are included in Fortible Auto Parts, Inc.'s December 31, 2016, balance sheet. $\begin{array}{lr}
\text { Accounts Receivable } & \$ 65,000 \
\text { (net of Allowance for Uncollectible Accounts) } & \
\text { Accumulated Depreciation, Building } & 32,000 \
\text { Building } & 150,000 \
\text { Cash } & 80,000 \
\text { Land } & 160,000 \
\text { Merchandise Inventory } & 90,000 \
\text { Trademark } & 125,500
\end{array}$ The total dollar amount of assets classified as property, plant, and equipment on Fortible Auto Part's December 31, 2016, classified balance sheet is:

Accepted Answer

A)  $250,000. 
B)  $310,000. 
C)  $278,000. 
D)  $375,000. 
A)  $250,000. 
B)  $310,000. 
C)  $278,000. 
D)  $375,000.

Question 9

Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 10

​Which of the following is the effect of issue of additional common stock by a company on its liquidity and profitability metrics?

Accepted Answer

A)  ​Its profitability increases. 
B)  ​Its profitability and liquidity increase. 
C)  ​Its profitability and liquidity remain unaffected. 
D)  ​Its liquidity increases. 
A)  ​Its profitability increases. 
B)  ​Its profitability and liquidity increase. 
C)  ​Its profitability and liquidity remain unaffected. 
D)  ​Its liquidity increases.

Question 11

Unearned interest is categorized as:

Accepted Answer

A)  a fixed asset. 
B)  stockholders' equity. 
C)  an intangible asset. 
D)  a liability. 
A)  a fixed asset. 
B)  stockholders' equity. 
C)  an intangible asset. 
D)  a liability.

Question 12

Which of the following is true about quick ratio?

Accepted Answer

A)  It is computed as quick assets multiplied by current liabilities. 
B)  It includes cash, inventory, and short-term investments. 
C)  If it is less than 1.0, it raises liquidity concerns for creditors. 
D)  It is a suitable measure to derive the profitability of the company. 
A)  It is computed as quick assets multiplied by current liabilities. 
B)  It includes cash, inventory, and short-term investments. 
C)  If it is less than 1.0, it raises liquidity concerns for creditors. 
D)  It is a suitable measure to derive the profitability of the company.

Question 13

Perill Co.has a five-day workweek (Monday through Friday).Employees earn $650 per day.If the month ends on Wednesday, and wages will not be paid until Friday, how much wage expense should be accrued on Wednesday?​

Accepted Answer

A)  ​$650 
B)  ​$1,950 
C)  ​$3,250 
D)  ​$1,300 
A)  ​$650 
B)  ​$1,950 
C)  ​$3,250 
D)  ​$1,300

Question 14

QRT Co.received $1,560 advance from Zync Inc.as rent for the use of a building owned by QRT Co.How does this transaction affect QRT's accounts if QRT recognizes a liability on receipt of the rent?

Accepted Answer

A)  Cash is increased, and sales revenue is increased. 
B)  Cash is increased, and rent income is decreased. 
C)  Cash is increased, and unearned rent is increased. 
D)  Cash is increased, and prepaid rent is increased. 
A)  Cash is increased, and sales revenue is increased. 
B)  Cash is increased, and rent income is decreased. 
C)  Cash is increased, and unearned rent is increased. 
D)  Cash is increased, and prepaid rent is increased.

Question 15

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n):

Accepted Answer

A)  asset. 
B)  liability. 
C)  common stock. 
D)  revenue. 
A)  asset. 
B)  liability. 
C)  common stock. 
D)  revenue.

Question 16

​Identify the item that should be treated as a deferred expense by a company. ​

Accepted Answer

A)  Prepaid advertising 
B)  Unpaid wages 
C)  Unearned rent 
D)  Notes receivable 
A)  Prepaid advertising 
B)  Unpaid wages 
C)  Unearned rent 
D)  Notes receivable

Question 17

Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash.

Accepted Answer

A) True 
 B)False

Question 18

Interest receivable is an example of:

Accepted Answer

A)  accrued revenue. 
B)  retained earnings. 
C)  deferred revenue. 
D)  a prepaid expense. 
A)  accrued revenue. 
B)  retained earnings. 
C)  deferred revenue. 
D)  a prepaid expense.

Question 19

Rights that are short-term in nature are called intangible assets.

Accepted Answer

A) True 
 B)False

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Under the accrual basis of accounting, the accounting records are normally updated after the preparation of the financial statements.

The reduction in the ability of a fixed asset to provide service over time is called:

When an entry is made to adjust the supplies account and recognize supplies expense for the period, which section of the statement of cash flows is affected?

Deferred revenue is initially recorded as:

Which of the following is true of an accrual?

Receiving cash in advance of performing a service creates a liability for the company.

Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements.

Which of the following is the effect of issue of additional common stock by a company on its liquidity and profitability metrics?

Unearned interest is categorized as:

Which of the following is true about quick ratio?

Perill Co.has a five-day workweek (Monday through Friday).Employees earn $650 per day.If the month ends on Wednesday, and wages will not be paid until Friday, how much wage expense should be accrued on Wednesday?

QRT Co.received $1,560 advance from Zync Inc.as rent for the use of a building owned by QRT Co.How does this transaction affect QRT's accounts if QRT recognizes a liability on receipt of the rent?

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n):

Identify the item that should be treated as a deferred expense by a company.

Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash.

Interest receivable is an example of:

Rights that are short-term in nature are called intangible assets.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 3: Basic Accounting Systems: Accrual Basis

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Under the accrual basis of accounting, the accounting records are normally updated after the preparation of the financial statements.

The reduction in the ability of a fixed asset to provide service over time is called:

When an entry is made to adjust the supplies account and recognize supplies expense for the period, which section of the statement of cash flows is affected?

Deferred revenue is initially recorded as:

Which of the following is true of an accrual?

Receiving cash in advance of performing a service creates a liability for the company.

Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements.

​Which of the following is the effect of issue of additional common stock by a company on its liquidity and profitability metrics?

Unearned interest is categorized as:

Which of the following is true about quick ratio?

Perill Co.has a five-day workweek (Monday through Friday).Employees earn $650 per day.If the month ends on Wednesday, and wages will not be paid until Friday, how much wage expense should be accrued on Wednesday?​

QRT Co.received $1,560 advance from Zync Inc.as rent for the use of a building owned by QRT Co.How does this transaction affect QRT's accounts if QRT recognizes a liability on receipt of the rent?

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n):

​Identify the item that should be treated as a deferred expense by a company. ​

Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash.

Interest receivable is an example of:

Rights that are short-term in nature are called intangible assets.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Which of the following is the effect of issue of additional common stock by a company on its liquidity and profitability metrics?

Perill Co.has a five-day workweek (Monday through Friday).Employees earn $650 per day.If the month ends on Wednesday, and wages will not be paid until Friday, how much wage expense should be accrued on Wednesday?

Identify the item that should be treated as a deferred expense by a company.