Question 1

Can financial statements be prepared directly from the adjusted trial balance?

Accepted Answer

A)  They cannot. The general ledger must be used. 
B)  Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts. 
C)  No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose. 
D)  They can because that is the only reason that an adjusted trial balance is prepared. 
A)  They cannot. The general ledger must be used. 
B)  Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts. 
C)  No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose. 
D)  They can because that is the only reason that an adjusted trial balance is prepared.

Question 2

Greenstream Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered.   Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:
1. A utility bill for $1,200 was received on the last day of the month for electric and gas service for the month of June.
2. A company insurance salesman sold a life insurance policy to a client for a premium of $10,000. The agency billed the client for the policy and is entitled to a commission of 20%.
3. Supplies on hand at the beginning of the month were $2,500. The agency purchased additional supplies during the month for $1,500 in cash and $1,200 of supplies were on hand at June 30.
4. The agency purchased a new car at the beginning of the month for $24,000 cash. The car will depreciate $6,000 per year.
5. Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on July 5.
Instructions:
Prepare a corrected income statement.

Accepted Answer

The answer of Greenstream Insurance Agency prepares monthly financial statements....

Question 3

Adjusting entries affect at least:

Accepted Answer

A)  one revenue and one expense account. 
B)  one asset and one liability account. 
C)  one revenue and one balance sheet account. 
D)  one income statement account and one balance sheet account. 
A)  one revenue and one expense account. 
B)  one asset and one liability account. 
C)  one revenue and one balance sheet account. 
D)  one income statement account and one balance sheet account.

Question 4

The long-term liability section of Alpha Corporation's Balance Sheet includes the following accounts   Alpha Corporation is an established company and does not experience any financial difficulties or have any cash flow problems. Discuss at least two items that are questionable as long-term liabilities.

Accepted Answer

Salaries and Wages Payable should not be

Question 5

In developing an accounting information system, it is important to establish procedures whereby all transactions that affect the components of the accounting equation are recorded. Why then, is it often necessary to adjust the accounts before financial statements are prepared even in a properly designed accounting system? Identify the major types of adjustments that are frequently made and give a specific example of each.

Accepted Answer

Account balances must be adjusted before

Question 6

Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns.

Accepted Answer

A)  annual, annual 
B)  monthly, annual 
C)  quarterly, monthly 
D)  monthly, monthly 
A)  annual, annual 
B)  monthly, annual 
C)  quarterly, monthly 
D)  monthly, monthly

Question 7

Which statement is correct?

Accepted Answer

A)  Accumulated Depreciation should always have a debit balance in the adjusted trial balance. 
B)  Accumulated Depreciation is added to the long-term liabilities on the balance sheet. 
C)  Accumulated Depreciation, Equipment represents the total cost of equipment that has expired up to the date of the balance sheet. 
D)  Accumulated Depreciation is used to reveal the value of the related asset on the date of the balance sheet. 
A)  Accumulated Depreciation should always have a debit balance in the adjusted trial balance. 
B)  Accumulated Depreciation is added to the long-term liabilities on the balance sheet. 
C)  Accumulated Depreciation, Equipment represents the total cost of equipment that has expired up to the date of the balance sheet. 
D)  Accumulated Depreciation is used to reveal the value of the related asset on the date of the balance sheet.

Question 8

Which of the following is a true statement about closing the books of a corporation?

Accepted Answer

A)  Expenses are closed to the Expense Summary account. 
B)  Only revenues are closed to the Income Summary account. 
C)  Revenues and expenses are closed to the Income Summary account. 
D)  Revenues, expenses, and the Dividends account are closed to the Income Summary account. 
A)  Expenses are closed to the Expense Summary account. 
B)  Only revenues are closed to the Income Summary account. 
C)  Revenues and expenses are closed to the Income Summary account. 
D)  Revenues, expenses, and the Dividends account are closed to the Income Summary account.

Question 9

The primary source used in the preparation of the financial statements is the:

Accepted Answer

A)  trial balance. 
B)  post-closing trial balance. 
C)  general trial balance. 
D)  adjusted trial balance. 
A)  trial balance. 
B)  post-closing trial balance. 
C)  general trial balance. 
D)  adjusted trial balance.

Question 10

Oakville Inc. purchased a 12-month insurance policy on March 1, 2014 for $1,800. At March 31, 2014, the adjusting journal entry to record expiration of this asset will include:

Accepted Answer

A)  a debit to Prepaid Insurance and a credit to Cash for $1,800. 
B)  a debit to Prepaid Insurance and a credit to Insurance Expense for $180. 
C)  a debit to Insurance Expense and a credit to Prepaid Insurance for $150. 
D)  a debit to Insurance Expense and a credit to Cash for $150. 
A)  a debit to Prepaid Insurance and a credit to Cash for $1,800. 
B)  a debit to Prepaid Insurance and a credit to Insurance Expense for $180. 
C)  a debit to Insurance Expense and a credit to Prepaid Insurance for $150. 
D)  a debit to Insurance Expense and a credit to Cash for $150.

Question 11

Which of the following steps in the accounting cycle usually occurs only at the end of a company's annual accounting period?

Accepted Answer

A)  Step 3: Post to the ledger accounts. 
B)  Step 7: Prepare financial statements. 
C)  Step 6: Prepare adjusting trial balance. 
D)  Step 9: Prepare a post-closing trial balance. 
A)  Step 3: Post to the ledger accounts. 
B)  Step 7: Prepare financial statements. 
C)  Step 6: Prepare adjusting trial balance. 
D)  Step 9: Prepare a post-closing trial balance.

Question 12

Using accrual accounting, expenses are recorded and reported only:

Accepted Answer

A)  when they are incurred whether or not cash is paid. 
B)  when they are incurred and paid at the same time. 
C)  if they are paid before they are incurred. 
D)  if they are paid after they are incurred. 
A)  when they are incurred whether or not cash is paid. 
B)  when they are incurred and paid at the same time. 
C)  if they are paid before they are incurred. 
D)  if they are paid after they are incurred.

Question 13

Which of the following is not generally an accounting time period?

Accepted Answer

A)  A week. 
B)  A month. 
C)  A quarter. 
D)  A year. 
A)  A week. 
B)  A month. 
C)  A quarter. 
D)  A year.

Question 14

Boyce Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Accepted Answer

A)  debit Supplies Expense, $3,200; credit Supplies, $3,200. 
B)  debit Supplies, $1,800; credit Supplies Expense, $1,800. 
C)  debit Supplies Expense, $1,800; credit Supplies, $1,800. 
D)  debit Supplies, $3,200; credit Supplies Expense, $3,200. 
A)  debit Supplies Expense, $3,200; credit Supplies, $3,200. 
B)  debit Supplies, $1,800; credit Supplies Expense, $1,800. 
C)  debit Supplies Expense, $1,800; credit Supplies, $1,800. 
D)  debit Supplies, $3,200; credit Supplies Expense, $3,200.

Question 15

Double-entry Accounting Services begin operations on July 1. It allows its clients 90 days to pay for services received. On the other hand, the company's suppliers require payment for their goods and services within 30 days. Double-entry prepaid its office rent for 12 months on July 1. At the end of the year, December 31, the company had yet to pay its last month's utility bill.
Instructions:
Explain how cash and accrual basis accounting would handle each of the events described above. Use the column heading s shown below.

Accepted Answer

The answer of Double-entry Accounting Services begin operations on July...

Question 16

Sunkan Company prepares monthly financial statements. Below are listed some selected accounts and their balances on the September 30 trial balance before any adjustments have been made for the month of September.   (Note: Debit column does not equal credit column because this is a partial listing of selected account balances.)
An analysis of the account balances by the company's accountant provided the following additional information:
1. A physical count of office supplies revealed $1,000 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for $4,800.
3. Office equipment depreciates $3,000 per year.
4. The amount of rent received in advance that remains unearned at September 30 is $300.
Instructions:
Using the information given, prepare the adjusting entries that should be made by Sunkan Company on September 30.

Accepted Answer

The answer of Sunkan Company prepares monthly financial statements. Below...

Question 17

Asset prepayments become expenses when they expire.

Accepted Answer

A) True 
 B)False

Question 18

Accrued expenses are:

Accepted Answer

A)  paid and recorded in an asset account before they are used or consumed. 
B)  paid and recorded in an asset account after they are used or consumed. 
C)  incurred but not yet paid or recorded. 
D)  incurred and already paid or recorded. 
A)  paid and recorded in an asset account before they are used or consumed. 
B)  paid and recorded in an asset account after they are used or consumed. 
C)  incurred but not yet paid or recorded. 
D)  incurred and already paid or recorded.

Question 19

The trial balance for Greenway Corporation appears as follows:   If, on December 31, 2014, the insurance still unexpired amounted to $10, the adjusting entry would contain a:

Accepted Answer

A)  debit to Prepaid Insurance for $50. 
B)  credit to Prepaid Insurance for $10. 
C)  debit to Insurance Expense for $50. 
D)  debit to Prepaid Insurance for $10. 
A)  debit to Prepaid Insurance for $50. 
B)  credit to Prepaid Insurance for $10. 
C)  debit to Insurance Expense for $50. 
D)  debit to Prepaid Insurance for $10.

Question 20

Revenue received before it is recognized and expenses paid before being used or consumed are both initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Can financial statements be prepared directly from the adjusted trial balance?

Adjusting entries affect at least:

Management usually wants financial statements and the IRS requires all businesses to file _ tax returns.

Which statement is correct?

Which of the following is a true statement about closing the books of a corporation?

The primary source used in the preparation of the financial statements is the:

Oakville Inc. purchased a 12-month insurance policy on March 1, 2014 for $1,800. At March 31, 2014, the adjusting journal entry to record expiration of this asset will include:

Which of the following steps in the accounting cycle usually occurs only at the end of a company's annual accounting period?

Using accrual accounting, expenses are recorded and reported only:

Which of the following is not generally an accounting time period?

Boyce Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Asset prepayments become expenses when they expire.

Accrued expenses are:

The trial balance for Greenway Corporation appears as follows: If, on December 31, 2014, the insurance still unexpired amounted to $10, the adjusting entry would contain a:

Revenue received before it is recognized and expenses paid before being used or consumed are both initially recorded as liabilities.

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

Can financial statements be prepared directly from the adjusted trial balance?

Adjusting entries affect at least:

Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns.

Which statement is correct?

Which of the following is a true statement about closing the books of a corporation?

The primary source used in the preparation of the financial statements is the:

Oakville Inc. purchased a 12-month insurance policy on March 1, 2014 for $1,800. At March 31, 2014, the adjusting journal entry to record expiration of this asset will include:

Which of the following steps in the accounting cycle usually occurs only at the end of a company's annual accounting period?

Using accrual accounting, expenses are recorded and reported only:

Which of the following is not generally an accounting time period?

Boyce Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Asset prepayments become expenses when they expire.

Accrued expenses are:

The trial balance for Greenway Corporation appears as follows: If, on December 31, 2014, the insurance still unexpired amounted to $10, the adjusting entry would contain a:

Revenue received before it is recognized and expenses paid before being used or consumed are both initially recorded as liabilities.

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

Management usually wants financial statements and the IRS requires all businesses to file _ tax returns.