Question 1

The first required step in the accounting cycle is:

Accepted Answer

A)  adjusting entries. 
B)  journalizing transactions. 
C)  analyzing transactions. 
D)  posting transactions. 
A)  adjusting entries. 
B)  journalizing transactions. 
C)  analyzing transactions. 
D)  posting transactions.

Question 2

Adjusting entries can be classified as:

Accepted Answer

A)  postponements and advances. 
B)  accruals and advances. 
C)  deferrals and postponements. 
D)  accruals and deferrals. 
A)  postponements and advances. 
B)  accruals and advances. 
C)  deferrals and postponements. 
D)  accruals and deferrals.

Question 3

Goods purchased for future use in the business, such as supplies, are called:

Accepted Answer

A)  prepaid expenses. 
B)  revenues. 
C)  stockholders' equity. 
D)  liabilities. 
A)  prepaid expenses. 
B)  revenues. 
C)  stockholders' equity. 
D)  liabilities.

Question 4

If a resource has been consumed but a bill has not been received at the end of the accounting period, then:

Accepted Answer

A)  an expense should be recorded when the bill is received. 
B)  an expense should be recorded when the cash is paid out. 
C)  an adjusting entry should be made recognizing the expense. 
D)  it is optional whether to record the expense before the bill is received. 
A)  an expense should be recorded when the bill is received. 
B)  an expense should be recorded when the cash is paid out. 
C)  an adjusting entry should be made recognizing the expense. 
D)  it is optional whether to record the expense before the bill is received.

Question 5

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies:

Accepted Answer

A)  remaining. 
B)  purchased. 
C)  used. 
D)  either used or remaining. 
A)  remaining. 
B)  purchased. 
C)  used. 
D)  either used or remaining.

Question 6

The accounts of a business before an adjusting entry is made to record accrued revenue reflect an:

Accepted Answer

A)  understated liability and an overstated revenue. 
B)  overstated asset and an understated revenue. 
C)  understated expense and an overstated revenue. 
D)  understated asset and an understated revenue. 
A)  understated liability and an overstated revenue. 
B)  overstated asset and an understated revenue. 
C)  understated expense and an overstated revenue. 
D)  understated asset and an understated revenue.

Question 7

The cash basis of accounting is not in accordance with IFRS.

Accepted Answer

A) True 
 B)False

Question 8

The revenue recognition principle and the expense recognition principle are helpful guides used in determining net income or net loss for a period.

Accepted Answer

A) True 
 B)False

Question 9

As a recent graduate in accounting, and the financial director of a political candidate in a current election, you have been asked to explain many questions concerning how governmental accounting differs from corporate accounting.
Required:
(a) Discuss the differences between cash basis and accrual-basis accounting.
(b) Prepare a memo to your candidate explaining why governmental entities favor the cash basis of accounting.

Accepted Answer

(a) The cash basis of accounting recogni

Question 10

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

Accepted Answer

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

Question 11

The only accounts that are closed are temporary accounts.

Accepted Answer

A) True 
 B)False

Question 12

On Friday of each week, Prawn Company pays its personnel weekly wages amounting to $45,000 for a five-day work week.
Instructions:
(a) Prepare the necessary adjusting entry at year end, assuming December 31 falls on Wednesday.
(b) Prepare the journal entry for payment of the week's wages on the payday which is Friday, January 2 of the next year.

Accepted Answer

The answer of On Friday of each week, Prawn Company...

Question 13

The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.

Accepted Answer

A) True 
 B)False

Question 14

The post closing trial balance will have fewer accounts than the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 15

The following ledger accounts are used by the Heartland Race Track:
Accounts Receivable
Prepaid Advertising
Prepaid Rent
Unearned Sales Revenue
Sales Revenue
Advertising Expense
Rent Expense
Instructions:
For each of the following transactions below, prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry, if any, required on November 30, the end of the fiscal year.
(a) On November 1, paid rent on the track facility for three months, $150,000.
(b) On November 1, sold season tickets for admission to the racetrack. The racing season is year-round with 25 racing days each month. Season ticket sales totaled $960,000.
(c) On November 1, borrowed $250,000 from First National Bank by issuing a 6% note payable due in three months.
(d) On November 5, programs for 20 racing days in November, 25 racing days in December and 15 racing days in January were printed for $3,000.
(e) The accountant for the concessions company reported that gross receipts for November were $140,000. Ten percent is due to Heartland and will be remitted by December 10.

Accepted Answer

The answer of The following ledger accounts are used by...

Question 16

Unearned revenues are:

Accepted Answer

A)  received and recorded as liabilities before they are recognized. 
B)  recognized and recorded as liabilities before they are received. 
C)  recognized but not yet received or recorded. 
D)  recognized and already received and recorded. 
A)  received and recorded as liabilities before they are recognized. 
B)  recognized and recorded as liabilities before they are received. 
C)  recognized but not yet received or recorded. 
D)  recognized and already received and recorded.

Question 17

Which of the statements below is not true?

Accepted Answer

A)  An adjusted trial balance should show ledger account balances. 
B)  An adjusted trial balance can be used to prepare financial statements. 
C)  An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. 
D)  An adjusted trial balance is prepared before all transactions have been journalized. 
A)  An adjusted trial balance should show ledger account balances. 
B)  An adjusted trial balance can be used to prepare financial statements. 
C)  An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. 
D)  An adjusted trial balance is prepared before all transactions have been journalized.

Question 18

A revenue-asset relationship exists with:

Accepted Answer

A)  prepaid expense adjusting entries. 
B)  accrued expense adjusting entries. 
C)  unearned revenue adjusting entries. 
D)  accrued revenue adjusting entries. 
A)  prepaid expense adjusting entries. 
B)  accrued expense adjusting entries. 
C)  unearned revenue adjusting entries. 
D)  accrued revenue adjusting entries.

Question 19

Under the accrual basis of accounting:

Accepted Answer

A)  cash must be received before revenue is recognized. 
B)  net income is calculated by matching cash outflows against cash inflows. 
C)  events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. 
D)  the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. 
A)  cash must be received before revenue is recognized. 
B)  net income is calculated by matching cash outflows against cash inflows. 
C)  events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. 
D)  the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

Question 20

The trial balance for Greenway Corporation appears as follows:   If, on December 31, 2014, supplies on hand were $20, the adjusting entry would contain a:

Accepted Answer

A)  debit to Supplies for $20. 
B)  credit to Supplies for $20. 
C)  debit to Supplies Expense for $120. 
D)  credit to Supplies Expense for $120. 
A)  debit to Supplies for $20. 
B)  credit to Supplies for $20. 
C)  debit to Supplies Expense for $120. 
D)  credit to Supplies Expense for $120.

The first required step in the accounting cycle is:

Adjusting entries can be classified as:

Goods purchased for future use in the business, such as supplies, are called:

If a resource has been consumed but a bill has not been received at the end of the accounting period, then:

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies:

The accounts of a business before an adjusting entry is made to record accrued revenue reflect an:

The cash basis of accounting is not in accordance with IFRS.

The revenue recognition principle and the expense recognition principle are helpful guides used in determining net income or net loss for a period.

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

The only accounts that are closed are temporary accounts.

The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.

The post closing trial balance will have fewer accounts than the adjusted trial balance.

Unearned revenues are:

Which of the statements below is not true?

A revenue-asset relationship exists with:

Under the accrual basis of accounting:

The trial balance for Greenway Corporation appears as follows: If, on December 31, 2014, supplies on hand were $20, the adjusting entry would contain a:

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

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Exam 4: Accrual Accounting Concepts

The first required step in the accounting cycle is:

Adjusting entries can be classified as:

Goods purchased for future use in the business, such as supplies, are called:

If a resource has been consumed but a bill has not been received at the end of the accounting period, then:

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies:

The accounts of a business before an adjusting entry is made to record accrued revenue reflect an:

The cash basis of accounting is not in accordance with IFRS.

The revenue recognition principle and the expense recognition principle are helpful guides used in determining net income or net loss for a period.

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

The only accounts that are closed are temporary accounts.

The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.

The post closing trial balance will have fewer accounts than the adjusted trial balance.

Unearned revenues are:

Which of the statements below is not true?

A revenue-asset relationship exists with:

Under the accrual basis of accounting:

The trial balance for Greenway Corporation appears as follows: If, on December 31, 2014, supplies on hand were $20, the adjusting entry would contain a:

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