Question 1

Unearned revenue is reported on the income statement whereas deferred revenue is reported on the statement of financial position.

Accepted Answer

A) True 
 B)False  False

Question 2

On January 1, 2011, Masters and Masters Company purchased equipment for € 30,000.The company is depreciating the equipment at the rate of € 700 per month.The book value of the equipment at December 31, 2011 is

Accepted Answer

A) € 0. 
B) € 8,400. 
C) € 21,600. 
D) € 30,000. 
A) € 0. 
B) € 8,400. 
C) € 21,600. 
D) € 30,000. C

Question 3

A contra account found on the statement of financial position behaves contrary to accounting rules by being debited on the right and credited on the left.

Accepted Answer

A) True 
 B)False  False

Question 4

If a company fails to make an adjusting entry to record supplies expense, then

Accepted Answer

A) equity will be understated. 
B) expense will be understated. 
C) assets will be understated. 
D) net income will be understated. 
A) equity will be understated. 
B) expense will be understated. 
C) assets will be understated. 
D) net income will be understated.

Question 5

Accrued revenues are

Accepted Answer

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

Question 6

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

Accepted Answer

A) liabilities to be overstated. 
B) revenues to be understated. 
C) revenues to be overstated. 
D) accounts receivable to be overstated. 
A) liabilities to be overstated. 
B) revenues to be understated. 
C) revenues to be overstated. 
D) accounts receivable to be overstated.

Question 7

Which statement is correct?

Accepted Answer

A) As long as a company consistently uses the cash basis of accounting, IFRS allow its use. 
B) The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. 
C) The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. 
D) As long as management is ethical, there are no problems with using the cash basis of accounting. 
A) As long as a company consistently uses the cash basis of accounting, IFRS allow its use. 
B) The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. 
C) The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. 
D) As long as management is ethical, there are no problems with using the cash basis of accounting.

Question 8

Cara, Inc.purchased supplies costing ₤2,500 on January 1, 2011 and recorded the transaction by increasing assets.At the end of the year ₤1,300 of the supplies are still on hand.If Cara, Inc.does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2011?

Accepted Answer

A) Assets overstated by ₤ 1,200. 
B) Equity understated by ₤ 1,200. 
C) Equity overstated by ₤ 1,300. 
D) Assets overstated by ₤ 1,300. 
A) Assets overstated by ₤ 1,200. 
B) Equity understated by ₤ 1,200. 
C) Equity overstated by ₤ 1,300. 
D) Assets overstated by ₤ 1,300.

Question 9

A flower shop makes a large sale for $1,000 on November 30.The customer is sent a statement on December 5 and a check is received on December 10.The flower shop follows IFRS and applies the revenue recognition principle.When is the $1,000 considered to be earned?

Accepted Answer

A) December 5. 
B) December 10. 
C) November 30. 
D) December 1. 
A) December 5. 
B) December 10. 
C) November 30. 
D) December 1.

Question 10

From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

Accepted Answer

A) accrual of expense. 
B) accrual of revenue. 
C) accrual of unearned revenue. 
D) prepayment for services. 
A) accrual of expense. 
B) accrual of revenue. 
C) accrual of unearned revenue. 
D) prepayment for services.

Question 11

A company usually determines the amount of supplies used during a period by

Accepted Answer

A) adding the supplies on hand to the balance of the Supplies account. 
B) summing the amount of supplies purchased during the period. 
C) taking the difference between the supplies purchased and the supplies paid for during the period. 
D) taking the difference between the balance of the Supplies account and the cost of supplies on hand. 
A) adding the supplies on hand to the balance of the Supplies account. 
B) summing the amount of supplies purchased during the period. 
C) taking the difference between the supplies purchased and the supplies paid for during the period. 
D) taking the difference between the balance of the Supplies account and the cost of supplies on hand.

Question 12

Expenses paid and recorded in an asset account before they are used or consumed are called ______________.Revenue received and recorded as a liability before it is earned is referred to as ______________.

Accepted Answer

prepaid ex

Question 13

Which of the following time periods would not be referred to as an interim period?

Accepted Answer

A) Monthly 
B) Quarterly 
C) Semi-annually 
D) Annually 
A) Monthly 
B) Quarterly 
C) Semi-annually 
D) Annually

Question 14

Which of the following would not result in unearned revenue?

Accepted Answer

A) Rent collected in advance from tenants 
B) Services performed on account 
C) Sale of season tickets to football games 
D) Sale of two-year magazine subscriptions 
A) Rent collected in advance from tenants 
B) Services performed on account 
C) Sale of season tickets to football games 
D) Sale of two-year magazine subscriptions

Question 15

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

Accepted Answer

A) True 
 B)False

Question 16

Bread Basket provides baking supplies to restaurants and grocery stores.During December 2011, Bread Basket's employees worked 2,400 hours at an average rate of €10 per hour.At December 31, 2011, Bread Basket has paid €11,000 of salary expense.If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2011 statement of financial position?

Accepted Answer

A) Equity is overstated by € 11,000. 
B) Equity is understated by € 13,000. 
C) Liabilities are understated by € 13,000. 
D) Liabilities are overstated by € 11,000. 
A) Equity is overstated by € 11,000. 
B) Equity is understated by € 13,000. 
C) Liabilities are understated by € 13,000. 
D) Liabilities are overstated by € 11,000.

Question 17

Niagara Corporation purchased a one-year insurance policy in January 2011 for $54,000.The insurance policy is in effect from March 2011 through February 2012.If the company neglects to make the proper year-end adjustment for the expired insurance

Accepted Answer

A) Net income and assets will be understated by $45,000. 
B) Net income and assets will be overstated by $45,000. 
C) Net income and assets will be understated by $9,000. 
D) Net income and assets will be overstated by $9,000. 
A) Net income and assets will be understated by $45,000. 
B) Net income and assets will be overstated by $45,000. 
C) Net income and assets will be understated by $9,000. 
D) Net income and assets will be overstated by $9,000.

Question 18

Hardwood Supplies Inc.purchased a 12-month insurance policy on March 1, 2011 for ₤ 900.At March 31, 2011, the adjusting journal entry to record expiration of this asset will include a

Accepted Answer

A) debit to Prepaid Insurance and a credit to Cash for ₤ 900. 
B) debit to Prepaid Insurance and a credit to Insurance Expense for ₤ 100. 
C) debit to Insurance Expense and a credit to Prepaid Insurance for ₤ 75 
D) debit to Insurance Expense and a credit to Cash for ₤ 75. 
A) debit to Prepaid Insurance and a credit to Cash for ₤ 900. 
B) debit to Prepaid Insurance and a credit to Insurance Expense for ₤ 100. 
C) debit to Insurance Expense and a credit to Prepaid Insurance for ₤ 75 
D) debit to Insurance Expense and a credit to Cash for ₤ 75.

Question 19

The fiscal year of a business is usually determined by

Accepted Answer

A) a government agency. 
B) a lottery. 
C) the business. 
D) the IASB. 
A) a government agency. 
B) a lottery. 
C) the business. 
D) the IASB.

Question 20

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

Accepted Answer

A) True 
 B)False

Unearned revenue is reported on the income statement whereas deferred revenue is reported on the statement of financial position.

On January 1, 2011, Masters and Masters Company purchased equipment for € 30,000.The company is depreciating the equipment at the rate of € 700 per month.The book value of the equipment at December 31, 2011 is

A contra account found on the statement of financial position behaves contrary to accounting rules by being debited on the right and credited on the left.

If a company fails to make an adjusting entry to record supplies expense, then

Accrued revenues are

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

Which statement is correct?

A flower shop makes a large sale for $1,000 on November 30.The customer is sent a statement on December 5 and a check is received on December 10.The flower shop follows IFRS and applies the revenue recognition principle.When is the $1,000 considered to be earned?

From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

A company usually determines the amount of supplies used during a period by

Expenses paid and recorded in an asset account before they are used or consumed are called .Revenue received and recorded as a liability before it is earned is referred to as .

Which of the following time periods would not be referred to as an interim period?

Which of the following would not result in unearned revenue?

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

Niagara Corporation purchased a one-year insurance policy in January 2011 for $54,000.The insurance policy is in effect from March 2011 through February 2012.If the company neglects to make the proper year-end adjustment for the expired insurance

Hardwood Supplies Inc.purchased a 12-month insurance policy on March 1, 2011 for ₤ 900.At March 31, 2011, the adjusting journal entry to record expiration of this asset will include a

The fiscal year of a business is usually determined by

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

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Other Significant Liabilities

Filters

Exam 3: Adjusting the Accounts

Unearned revenue is reported on the income statement whereas deferred revenue is reported on the statement of financial position.

On January 1, 2011, Masters and Masters Company purchased equipment for € 30,000.The company is depreciating the equipment at the rate of € 700 per month.The book value of the equipment at December 31, 2011 is

A contra account found on the statement of financial position behaves contrary to accounting rules by being debited on the right and credited on the left.

If a company fails to make an adjusting entry to record supplies expense, then

Accrued revenues are

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

Which statement is correct?

A flower shop makes a large sale for $1,000 on November 30.The customer is sent a statement on December 5 and a check is received on December 10.The flower shop follows IFRS and applies the revenue recognition principle.When is the $1,000 considered to be earned?

From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

A company usually determines the amount of supplies used during a period by

Expenses paid and recorded in an asset account before they are used or consumed are called ______________.Revenue received and recorded as a liability before it is earned is referred to as ______________.

Which of the following time periods would not be referred to as an interim period?

Which of the following would not result in unearned revenue?

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

Niagara Corporation purchased a one-year insurance policy in January 2011 for $54,000.The insurance policy is in effect from March 2011 through February 2012.If the company neglects to make the proper year-end adjustment for the expired insurance

Hardwood Supplies Inc.purchased a 12-month insurance policy on March 1, 2011 for ₤ 900.At March 31, 2011, the adjusting journal entry to record expiration of this asset will include a

The fiscal year of a business is usually determined by

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

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Other Significant Liabilities

Filters

Expenses paid and recorded in an asset account before they are used or consumed are called .Revenue received and recorded as a liability before it is earned is referred to as .