Question 1

The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past periods.

Accepted Answer

A) True 
 B)False

Question 2

Using accrual accounting, revenue is recorded and reported only

Accepted Answer

A)  when cash is received without regard to when the services are rendered 
B)  when the services are rendered without regard to when cash is received 
C)  when cash is received at the time services are rendered 
D)  if cash is received after the services are rendered 
A)  when cash is received without regard to when the services are rendered 
B)  when the services are rendered without regard to when cash is received 
C)  when cash is received at the time services are rendered 
D)  if cash is received after the services are rendered

Question 3

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

Accepted Answer

A) True 
 B)False

Question 4

Deferred revenue is revenue that is

Accepted Answer

A)  earned and the cash has been received 
B)  earned but the cash has not been received 
C)  not earned and the cash has not been received 
D)  not earned but the cash has been received 
A)  earned and the cash has been received 
B)  earned but the cash has not been received 
C)  not earned and the cash has not been received 
D)  not earned but the cash has been received

Question 5

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

Accepted Answer

A)  historical cost 
B)  contra asset 
C)  book value 
D)  market value 
A)  historical cost 
B)  contra asset 
C)  book value 
D)  market value

Question 6

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the adjusted trial balance is prepared.

Accepted Answer

A) True 
 B)False

Question 7

The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is

Accepted Answer

A)  prepaid 
B)  deferred 
C)  accrued 
D)  matched 
A)  prepaid 
B)  deferred 
C)  accrued 
D)  matched

Question 8

The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,125.

Accepted Answer

The answer of The balance in the unearned fees account,...

Question 9

Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 10

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

Accepted Answer

A) True 
 B)False

Question 11

The cash basis of accounting records revenues and expenses when the cash is exchanged, while the accrual basis of accounting

Accepted Answer

A)  records revenues when they are earned and expenses when they are paid 
B)  records revenues and expenses when they are incurred 
C)  records revenues when cash is received and expenses when they are incurred 
D)  records revenues and expenses when the company needs to apply for a loan 
A)  records revenues when they are earned and expenses when they are paid 
B)  records revenues and expenses when they are incurred 
C)  records revenues when cash is received and expenses when they are incurred 
D)  records revenues and expenses when the company needs to apply for a loan

Question 12

A company depreciates its equipment $500 a year. The adjusting entry on December 31 is a debit to Depreciation Expense of $500 and a credit to Equipment of $500.

Accepted Answer

A) True 
 B)False

Question 13

The supplies account had a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is

Accepted Answer

A)  $400 
B)  $2,000 
C)  $6,800 
D)  $6,400 
A)  $400 
B)  $2,000 
C)  $6,800 
D)  $6,400

Question 14

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

Accepted Answer

A) True 
 B)False

Question 15

At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?

Accepted Answer

A)  Total assets at the end of the year will be understated. 
B)  Owner's equity at the end of the year will be understated. 
C)  Net income for the year will be overstated. 
D)  Insurance expense will be overstated. 
A)  Total assets at the end of the year will be understated. 
B)  Owner's equity at the end of the year will be understated. 
C)  Net income for the year will be overstated. 
D)  Insurance expense will be overstated.

Question 16

Adjusting entries are

Accepted Answer

A)  the same as correcting entries 
B)  needed to bring accounts up to date and match revenue and expense 
C)  optional under generally accepted accounting principles 
D)  rarely needed in large companies 
A)  the same as correcting entries 
B)  needed to bring accounts up to date and match revenue and expense 
C)  optional under generally accepted accounting principles 
D)  rarely needed in large companies

Question 17

The net book value of a fixed asset is determined by the original cost

Accepted Answer

A)  less accumulated depreciation 
B)  less market value 
C)  less accumulated depreciation plus depreciation expense 
D)  plus accumulated depreciation 
A)  less accumulated depreciation 
B)  less market value 
C)  less accumulated depreciation plus depreciation expense 
D)  plus accumulated depreciation

Question 18

Prepaid expenses have

Accepted Answer

A)  not yet been recorded as expenses but have been paid 
B)  been recorded as expenses and paid 
C)  been incurred and paid 
D)  not yet been recorded as expenses 
A)  not yet been recorded as expenses but have been paid 
B)  been recorded as expenses and paid 
C)  been incurred and paid 
D)  not yet been recorded as expenses

Question 19

For the year ending June 30, Island Clinical Services mistakenly omitted adjusting entries for 
(1) $1,500 of supplies that were used, 
(2) unearned revenue of $4,200 that was earned, and 
(3) insurance of $5,000 that expired. What is the combined effect of these errors on 
(a) revenues, 
(b) expenses, and 
(c) net income for the year ending June 30?

Accepted Answer

(a) Revenues were understated

Question 20

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past periods.

Using accrual accounting, revenue is recorded and reported only

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

Deferred revenue is revenue that is

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the adjusted trial balance is prepared.

The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is

The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,125.

Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

The cash basis of accounting records revenues and expenses when the cash is exchanged, while the accrual basis of accounting

A company depreciates its equipment $500 a year. The adjusting entry on December 31 is a debit to Depreciation Expense of $500 and a credit to Equipment of $500.

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?

Adjusting entries are

The net book value of a fixed asset is determined by the original cost

Prepaid expenses have

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

Introduction to Accounting and Business

Analyzing Transactions

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

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