Question 1

If a company is using the accrual method of accounting, when is revenue recorded?

Accepted Answer

A) When cash is received, before the completion of the services 
B) When cash is received, 30 days after the completion of the services 
C) When cash is received, even though services may be rendered at a later date 
D) When services are rendered, even though cash may be received at a later date 
A) When cash is received, before the completion of the services 
B) When cash is received, 30 days after the completion of the services 
C) When cash is received, even though services may be rendered at a later date 
D) When services are rendered, even though cash may be received at a later date

Question 2

The Accumulated depreciation account is:

Accepted Answer

A) a contra account to the asset being depreciated. 
B) an expense account. 
C) a record of the sum of all the depreciation recorded. 
D) both a record of the sum of all the depreciation recorded and a contra account to the asset being depreciated. 
A) a contra account to the asset being depreciated. 
B) an expense account. 
C) a record of the sum of all the depreciation recorded. 
D) both a record of the sum of all the depreciation recorded and a contra account to the asset being depreciated.

Question 3

In the case of Unearned revenue, the cash is received first, and the revenue is earned later.

Accepted Answer

A) True 
 B)False

Question 4

What type of account is Accumulated depreciation and what is its normal balance?

Accepted Answer

A) Liability and credit 
B) Expense and debit 
C) Contra asset and credit 
D) Revenue and debit 
A) Liability and credit 
B) Expense and debit 
C) Contra asset and credit 
D) Revenue and debit

Question 5

Entries that record cash paid out before the expense is incurred are:

Accepted Answer

A) unearned revenues. 
B) prepaid expenses. 
C) accrued revenues. 
D) accrued expenses. 
A) unearned revenues. 
B) prepaid expenses. 
C) accrued revenues. 
D) accrued expenses.

Question 6

Contra asset accounts like Accumulated depreciation have normal debit balances.

Accepted Answer

A) True 
 B)False

Question 7

What type of account is Unearned revenue and what is its normal balance?

Accepted Answer

A) Liability and credit 
B) Asset and debit 
C) Asset and credit 
D) Revenue and debit 
A) Liability and credit 
B) Asset and debit 
C) Asset and credit 
D) Revenue and debit

Question 8

In the case of Unearned revenue, the adjusting entry at the end of the period includes a credit to Service revenue.

Accepted Answer

A) True 
 B)False

Question 9

What is the term for the difference between the Equipment account and the Accumulated depreciation account?

Accepted Answer

A) Market value 
B) Carrying value 
C) Contra asset 
D) Historical cost 
A) Market value 
B) Carrying value 
C) Contra asset 
D) Historical cost

Question 10

A business pays salaries of $140 000 on the first and fifteenth day of every month. Which of the following is the adjusting entry required on 30 June 2014?

Accepted Answer

A) A debit of $140 000 to Salaries expense and a credit of $140 000 to Salaries receivable. 
B) A debit of $140 000 to Salaries expense and a credit of $140 000 to Salaries payable. 
C) A debit of $140 000 to Salaries receivable and a credit of $140 000 to Salaries payable. 
D) No adjusting entry is required. 
A) A debit of $140 000 to Salaries expense and a credit of $140 000 to Salaries receivable. 
B) A debit of $140 000 to Salaries expense and a credit of $140 000 to Salaries payable. 
C) A debit of $140 000 to Salaries receivable and a credit of $140 000 to Salaries payable. 
D) No adjusting entry is required.

Question 11

The end- of- period process starts with the:

Accepted Answer

A) balance sheet. 
B) unadjusted trial balance. 
C) income statement. 
D) adjusted trial balance. 
A) balance sheet. 
B) unadjusted trial balance. 
C) income statement. 
D) adjusted trial balance.

Question 12

A business acquires equipment for $140 000 on 1 July 2013. The equipment depreciation will be $20 000 each year for the seven years of the asset's expected life. The business records depreciation once a year on 30 June. Which of the following is the adjusting entry required on 30 June 2014?

Accepted Answer

A) A debit of $20 000 to Depreciation expense and a credit of $20 000 to Equipment. 
B) A debit of $20 000 to Depreciation expense and a credit of $20 000 to Accumulated depreciation. 
C) A debit of $140 000 to Equipment and a credit of $140 000 to Cash. 
D) A debit of $140 000 to Depreciation expense and a credit of $140 000 to Accumulated depreciation. 
A) A debit of $20 000 to Depreciation expense and a credit of $20 000 to Equipment. 
B) A debit of $20 000 to Depreciation expense and a credit of $20 000 to Accumulated depreciation. 
C) A debit of $140 000 to Equipment and a credit of $140 000 to Cash. 
D) A debit of $140 000 to Depreciation expense and a credit of $140 000 to Accumulated depreciation.

Question 13

Pattie's Event Planning Service collects the fees from their customers in advance. At 1 January 2014, the balance of her Unearned revenue account was a credit of $4 000. During January and February, she collected $2 000 and $1 000 respectively. During the two- month period, she rendered services of $5 500. At the end of February, her adjusted trial balance will show what balance in Unearned revenues?

Accepted Answer

A) Credit balance of $3 000 
B) Debit balance of $2 300 
C) Debit balance of $3 000 
D) Credit balance of $1 500 
A) Credit balance of $3 000 
B) Debit balance of $2 300 
C) Debit balance of $3 000 
D) Credit balance of $1 500

Question 14

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. What is the effect of this error on total assets?

Accepted Answer

A) Total assets are understated. 
B) Total assets are overstated. 
C) Total assets are not affected. 
D) There is not enough information presented to answer the question. 
A) Total assets are understated. 
B) Total assets are overstated. 
C) Total assets are not affected. 
D) There is not enough information presented to answer the question.

Question 15

A contra account has two characteristics: (1)a contra account is paired with its related account, and
(2)a contra account's normal balance is the same as that of the related account.

Accepted Answer

A) True 
 B)False

Question 16

An entry that reflects the using up of a portion of a fixed asset's value would be a(n) entry.

Accepted Answer

A) prepaid expense 
B) depreciation 
C) accrued expense 
D) accrued revenue 
A) prepaid expense 
B) depreciation 
C) accrued expense 
D) accrued revenue

Question 17

Entries that record cash collected before the revenues are earned are:

Accepted Answer

A) accrued revenues. 
B) unearned revenues. 
C) prepaid expenses. 
D) accrued expenses. 
A) accrued revenues. 
B) unearned revenues. 
C) prepaid expenses. 
D) accrued expenses.

Question 18

On 1 March 2013, Joy Company paid $4 000 in advance for an 8- month rental space covering the period of March 2013 to October 2013. The business makes adjusting entries once a year on 30 June. The adjusting entry at 30 June 2013 would include a:

Accepted Answer

A) credit of $2 000 to Rent expense on 30 June 2013. 
B) debit of $2 000 to Rent expense on 30 June 2013. 
C) debit of $4 000 to Prepaid rent expense on 30 June 2013. 
D) debit of $2 000 to Prepaid rent expense on 30 June 2013. 
A) credit of $2 000 to Rent expense on 30 June 2013. 
B) debit of $2 000 to Rent expense on 30 June 2013. 
C) debit of $4 000 to Prepaid rent expense on 30 June 2013. 
D) debit of $2 000 to Prepaid rent expense on 30 June 2013.

Question 19

At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is one of the effects of this error?

Accepted Answer

A) Liabilities are overstated. 
B) Profit is understated. 
C) Expenses are overstated. 
D) Profit is overstated. 
A) Liabilities are overstated. 
B) Profit is understated. 
C) Expenses are overstated. 
D) Profit is overstated.

Question 20

Which of the following is TRUE?

Accepted Answer

A) Accrual accounting records expenses when incurred. Cash- basis accounting records expenses when cash is paid. 
B) Accrual accounting records revenue when services are rendered. Cash- basis accounting records revenue when cash is received. 
C) Accrual accounting is required by Australian accounting standards. 
D) All of the above are true. 
A) Accrual accounting records expenses when incurred. Cash- basis accounting records expenses when cash is paid. 
B) Accrual accounting records revenue when services are rendered. Cash- basis accounting records revenue when cash is received. 
C) Accrual accounting is required by Australian accounting standards. 
D) All of the above are true.

Exam 3: The Adjusting Process

If a company is using the accrual method of accounting, when is revenue recorded?

The Accumulated depreciation account is:

In the case of Unearned revenue, the cash is received first, and the revenue is earned later.

What type of account is Accumulated depreciation and what is its normal balance?

Entries that record cash paid out before the expense is incurred are:

Contra asset accounts like Accumulated depreciation have normal debit balances.

What type of account is Unearned revenue and what is its normal balance?

In the case of Unearned revenue, the adjusting entry at the end of the period includes a credit to Service revenue.

What is the term for the difference between the Equipment account and the Accumulated depreciation account?

A business pays salaries of $140 000 on the first and fifteenth day of every month. Which of the following is the adjusting entry required on 30 June 2014?

The end- of- period process starts with the:

A business acquires equipment for $140 000 on 1 July 2013. The equipment depreciation will be $20 000 each year for the seven years of the asset's expected life. The business records depreciation once a year on 30 June. Which of the following is the adjusting entry required on 30 June 2014?

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. What is the effect of this error on total assets?

A contra account has two characteristics: (1)a contra account is paired with its related account, and (2)a contra account's normal balance is the same as that of the related account.

An entry that reflects the using up of a portion of a fixed asset's value would be a(n) entry.

Entries that record cash collected before the revenues are earned are:

On 1 March 2013, Joy Company paid $4 000 in advance for an 8- month rental space covering the period of March 2013 to October 2013. The business makes adjusting entries once a year on 30 June. The adjusting entry at 30 June 2013 would include a:

At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is one of the effects of this error?

Which of the following is TRUE?

The Role of Accounting in Business

Recording Business Transactions

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

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