Question 1

Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2014 for $7,200. The December 31, 2014 balance sheet would report Prepaid Insurance of:

Accepted Answer

A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $2,800. 
C)  $4,400. 
D)  $7,200. 
A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $2,800. 
C)  $4,400. 
D)  $7,200.

Question 2

Why do generally accepted accounting principles require the application of the revenue recognition principle?

Accepted Answer

A)  Failure to apply the revenue recognition principle could lead to a misstatement of revenue. 
B)  It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. 
C)  Recording revenue when cash is received is an objective application of the revenue recognition principle. 
D)  Accounting software has made the revenue recognition easy to apply. 
A)  Failure to apply the revenue recognition principle could lead to a misstatement of revenue. 
B)  It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. 
C)  Recording revenue when cash is received is an objective application of the revenue recognition principle. 
D)  Accounting software has made the revenue recognition easy to apply.

Question 3

Karcan, Inc. purchased supplies costing ₤2,500 on January 1, 2014 and recorded the transaction by increasing assets. At the end of the year ₤1,100 of the supplies are still on hand. How will the adjusting entry impact Karcan, Inc.'s statement of financial position at December 31, 2014?

Accepted Answer

A)  Decreased assets ₤ 1,100. 
B)  Increased equity ₤ 1,100. 
C)  Increased liabilities ₤ 1,400. 
D)  Decreased assets ₤ 1,400. 
A)  Decreased assets ₤ 1,100. 
B)  Increased equity ₤ 1,100. 
C)  Increased liabilities ₤ 1,400. 
D)  Decreased assets ₤ 1,400.

Question 4

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Accepted Answer

A)  Cost principle. 
B)  Periodicity principle. 
C)  Revenue recognition principle. 
D)  Expense recognition principle. 
A)  Cost principle. 
B)  Periodicity principle. 
C)  Revenue recognition principle. 
D)  Expense recognition principle.

Question 5

The Golden Petting Zoo operates a drive-through tourist attraction in Colorado. 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 buildings are being depreciated at $6,000 per year.
3. The unearned ticket revenue represents tickets sold for future zoo 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 fencing in months.
3. The number of tickets sold on April 1.
(b) Prepare the adjusting entries that were made by the Golden Petting Zoo on April 30.

Accepted Answer

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

Question 6

Fleet Services Company purchased equipment for $9,000 on January 1, 2014. The company expects to use the equipment for 5 years. It has no salvage value. What balance would be reported on the December 31, 2014 balance sheet for Accumulated Depreciation?

Accepted Answer

A)  $0 because Accumulated Depreciation is reported on the Income Statement. 
B)  $1,800 
C)  $7,200 
D)  $9,000 
A)  $0 because Accumulated Depreciation is reported on the Income Statement. 
B)  $1,800 
C)  $7,200 
D)  $9,000

Question 7

The worksheet contains columns for the:

Accepted Answer

A)  statement of retained earnings. 
B)  statement of cash flows. 
C)  post-closing trial balance. 
D)  balance sheet. 
A)  statement of retained earnings. 
B)  statement of cash flows. 
C)  post-closing trial balance. 
D)  balance sheet.

Question 8

The Dividends account is closed to the Income Summary account at the end of each year.

Accepted Answer

A) True 
 B)False

Question 9

Wang Company had the following transactions during 2013: 
-Sales of $10,800 on account
-Collected $4,800 for services to be performed in 2014
-Paid $3,100 cash in salaries for 2013
-Purchased airline tickets for $600 in December for a trip to take place in 2014
What is Wang's 2013 net income using accrual accounting?

Accepted Answer

A)  $8,300 
B)  $13,100 
C)  $12,500 
D)  $7,700 
A)  $8,300 
B)  $13,100 
C)  $12,500 
D)  $7,700

Question 10

An adjusting entry can include a:

Accepted Answer

A)  debit to an asset and a credit to a liability. 
B)  debit to a revenue and a credit to an asset. 
C)  debit to a liability and a credit to a revenue. 
D)  debit to an expense and a credit to a revenue. 
A)  debit to an asset and a credit to a liability. 
B)  debit to a revenue and a credit to an asset. 
C)  debit to a liability and a credit to a revenue. 
D)  debit to an expense and a credit to a revenue.

Question 11

Under the cash basis of accounting:

Accepted Answer

A)  revenue is recognized when services are performed. 
B)  expenses are matched with the revenue that is produced. 
C)  cash must be received before revenue is recognized. 
D)  a promise to pay is sufficient to recognize revenue. 
A)  revenue is recognized when services are performed. 
B)  expenses are matched with the revenue that is produced. 
C)  cash must be received before revenue is recognized. 
D)  a promise to pay is sufficient to recognize revenue.

Question 12

At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account?

Accepted Answer

A)  $1,500 
B)  $1,600 
C)  $2,800 
D)  $2,900 
A)  $1,500 
B)  $1,600 
C)  $2,800 
D)  $2,900

Question 13

The Downtown Company accumulates the following adjustment data at December 31.
1. Revenue of $1,100 collected in advance has been recognized.
2. Salaries of $600 are unpaid.
3. Prepaid rent totaling $400 has expired.
4. Supplies of $550 have been used.
5. Revenue recognized but unbilled totals $750.
6. Utility expenses of $300 are unpaid.
7. Interest of $250 has accrued on a note payable.
Instructions:
(a) For each of the above items indicate:
1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
2. The account relationship (asset/liability, liability/revenue, etc.).
3. The status of account balances before adjustment (understatement or overstatement).
4. The adjusting entry.
(b) Assume net income before the adjustments listed above was $22,500. What is the adjusted net income?
Prepare your answer in the tabular form presented below.

Accepted Answer

The answer of The Downtown Company accumulates the following adjustment...

Question 14

River Ridge Music School borrowed $30,000 from the bank signing a 6%, 6-month note on November 1. Principal and interest are payable to the bank on May 1. If the company prepares monthly financial statements, what adjusting entry should the company make at November 30 with regard to the note (round answer to the nearest dollar)?

Accepted Answer

Interest Expense (30

Question 15

After all closing entries are journalized and posted, a _________________ trial balance is prepared from the ledger.

Accepted Answer

The answer of After all closing entries are journalized and...

Question 16

An adjusting entry can include a:

Accepted Answer

A)  debit to an asset and a credit to a revenue. 
B)  debit to a revenue and a credit to an asset. 
C)  credit to an expense and a debit to a revenue. 
D)  debit to an expense and a credit to a revenue. 
A)  debit to an asset and a credit to a revenue. 
B)  debit to a revenue and a credit to an asset. 
C)  credit to an expense and a debit to a revenue. 
D)  debit to an expense and a credit to a revenue.

Question 17

Identify the impact on the balance sheet for that month if the following information is not used to adjust the accounts.
1. Supplies consumed during the month totalled $3,000.
2. Interest accrues on notes payable at the rate of $200 per month.
3. Insurance of $450 expired during the month.
4. Plant and equipment are depreciated at the rate of $1,200 per month.

Accepted Answer

1. Assets overstated and Stockholders' E

Question 18

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

Accepted Answer

A) True 
 B)False

Question 19

In addition to updating Retained Earnings, ______________ entries produce a zero balance in each ______________ account.

Accepted Answer

The answer of In addition to updating Retained Earnings, ______________...

Question 20

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Accepted Answer

A)  Failure to make an adjustment does not affect the financial statements. 
B)  Expenses will be overstated and net income and stockholders' equity will be under- stated. 
C)  Assets will be overstated and net income and stockholders' equity will be understated. 
D)  Assets will be overstated and net income and stockholders' equity will be overstated. 
A)  Failure to make an adjustment does not affect the financial statements. 
B)  Expenses will be overstated and net income and stockholders' equity will be under- stated. 
C)  Assets will be overstated and net income and stockholders' equity will be understated. 
D)  Assets will be overstated and net income and stockholders' equity will be overstated.

Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2014 for $7,200. The December 31, 2014 balance sheet would report Prepaid Insurance of:

Why do generally accepted accounting principles require the application of the revenue recognition principle?

Karcan, Inc. purchased supplies costing ₤2,500 on January 1, 2014 and recorded the transaction by increasing assets. At the end of the year ₤1,100 of the supplies are still on hand. How will the adjusting entry impact Karcan, Inc.'s statement of financial position at December 31, 2014?

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Fleet Services Company purchased equipment for $9,000 on January 1, 2014. The company expects to use the equipment for 5 years. It has no salvage value. What balance would be reported on the December 31, 2014 balance sheet for Accumulated Depreciation?

The worksheet contains columns for the:

The Dividends account is closed to the Income Summary account at the end of each year.

An adjusting entry can include a:

Under the cash basis of accounting:

At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account?

After all closing entries are journalized and posted, a _________________ trial balance is prepared from the ledger.

An adjusting entry can include a:

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

In addition to updating Retained Earnings, entries produce a zero balance in each account.

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters

Exam 4: Accrual Accounting Concepts

Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2014 for $7,200. The December 31, 2014 balance sheet would report Prepaid Insurance of:

Why do generally accepted accounting principles require the application of the revenue recognition principle?

Karcan, Inc. purchased supplies costing ₤2,500 on January 1, 2014 and recorded the transaction by increasing assets. At the end of the year ₤1,100 of the supplies are still on hand. How will the adjusting entry impact Karcan, Inc.'s statement of financial position at December 31, 2014?

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Fleet Services Company purchased equipment for $9,000 on January 1, 2014. The company expects to use the equipment for 5 years. It has no salvage value. What balance would be reported on the December 31, 2014 balance sheet for Accumulated Depreciation?

The worksheet contains columns for the:

The Dividends account is closed to the Income Summary account at the end of each year.

An adjusting entry can include a:

Under the cash basis of accounting:

At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account?

After all closing entries are journalized and posted, a _________________ trial balance is prepared from the ledger.

An adjusting entry can include a:

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

In addition to updating Retained Earnings, ______________ entries produce a zero balance in each ______________ account.

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters

In addition to updating Retained Earnings, entries produce a zero balance in each account.