Question 1

Unearned revenue on the books of Chocolate Company, the landlord, can be a prepaid asset on the statement of financial position of its tenant, Cupcake, Inc.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Accrued revenues are revenues that have been earned and received before financial statements have been prepared.

Accepted Answer

A) True 
 B)False

Question 4

The expense recognition principle requires that efforts be matched with accomplishments.

Accepted Answer

A) True 
 B)False

Question 5

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Accepted Answer

A) assets to be understated. 
B) assets to be overstated. 
C) expenses to be understated. 
D) contra-expenses to be overstated. 
A) assets to be understated. 
B) assets to be overstated. 
C) expenses to be understated. 
D) contra-expenses to be overstated.

Question 6

Which of the following statements is false regarding adjusting entries?

Accepted Answer

A) Cash is neither debited nor credited as a result of adjusting entries. 
B) Each adjusting entry affects one statement of financial position account and one income statement account. 
C) Each adjusting entry affects one revenue account and one expense account. 
D) Adjusting entries involve accruals or deferrals. 
A) Cash is neither debited nor credited as a result of adjusting entries. 
B) Each adjusting entry affects one statement of financial position account and one income statement account. 
C) Each adjusting entry affects one revenue account and one expense account. 
D) Adjusting entries involve accruals or deferrals.

Question 7

An adjusted trial balance

Accepted Answer

A) is prepared after the financial statements are completed. 
B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. 
C) is a required financial statement under IFRS. 
D) cannot be used to prepare financial statements. 
A) is prepared after the financial statements are completed. 
B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. 
C) is a required financial statement under IFRS. 
D) cannot be used to prepare financial statements.

Question 8

The adjusted trial balance is prepared

Accepted Answer

A) after financial statements are prepared. 
B) before the trial balance. 
C) to prove the equality of total assets and total liabilities. 
D) after adjusting entries have been journalized and posted. 
A) after financial statements are prepared. 
B) before the trial balance. 
C) to prove the equality of total assets and total liabilities. 
D) after adjusting entries have been journalized and posted.

Question 9

The Accumulated Depreciation account is a contra asset account that is reported on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 10

International Financial Reporting Standards (IFRS) include a revenue recognition principle that states that "let the revenues follow the expenses."

Accepted Answer

A) True 
 B)False

Question 11

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Accepted Answer

A) True 
 B)False

Question 12

Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period.What adjusting entry must Betty make?

Accepted Answer

A) Debit Cash and credit Unearned Revenue 
B) Debit Accounts Receivable and credit Unearned Revenue 
C) Debit Accounts Receivable and credit Service Revenue 
D) Debit Unearned Revenue and credit Service Revenue 
A) Debit Cash and credit Unearned Revenue 
B) Debit Accounts Receivable and credit Unearned Revenue 
C) Debit Accounts Receivable and credit Service Revenue 
D) Debit Unearned Revenue and credit Service Revenue

Question 13

The time period assumption is also referred to as the

Accepted Answer

A) calendar assumption. 
B) cyclicity assumption. 
C) periodicity assumption. 
D) fiscal assumption. 
A) calendar assumption. 
B) cyclicity assumption. 
C) periodicity assumption. 
D) fiscal assumption.

Question 14

Accounting time periods that are one year in length are referred to as interim periods.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following reflect the balances of prepayment accounts prior to adjustment?

Accepted Answer

A) Statement of financial position accounts are understated and income statement accounts are understated. 
B) Statement of financial position accounts are overstated and income statement accounts are overstated. 
C) Statement of financial position accounts are overstated and income statement accounts are understated. 
D) Statement of financial position accounts are understated and income statement accounts are overstated. 
A) Statement of financial position accounts are understated and income statement accounts are understated. 
B) Statement of financial position accounts are overstated and income statement accounts are overstated. 
C) Statement of financial position accounts are overstated and income statement accounts are understated. 
D) Statement of financial position accounts are understated and income statement accounts are overstated.

Question 16

A law firm received $2,000 cash for legal services to be rendered in the future.The full amount was credited to the liability account Unearned Legal Fees.If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

Accepted Answer

A) expenses to be overstated. 
B) net income to be overstated. 
C) liabilities to be understated. 
D) revenues to be understated. 
A) expenses to be overstated. 
B) net income to be overstated. 
C) liabilities to be understated. 
D) revenues to be understated.

Question 17

A small company may be able to justify using a cash basis of accounting if they have

Accepted Answer

A) sales under $1,000,000. 
B) no accountants on staff. 
C) few receivables and payables. 
D) all sales and purchases on account. 
A) sales under $1,000,000. 
B) no accountants on staff. 
C) few receivables and payables. 
D) all sales and purchases on account.

Question 18

Similarities between International Financial Reporting Standards (IFRS) and U.S.GAAP include all of the following except

Accepted Answer

A) Cash-basis accounting is not in accordance with either IFRS or U.S.GAAP. 
B) Both IFRS and U.S.GAAP allow revaluation of item such as land and building to fair value. 
C) Both IFRS and U.S.GAAP divide the economic life of companies into artificial time periods. 
D) The form and content of financial statements are very similar under IFRS and U.S.GAAP. 
A) Cash-basis accounting is not in accordance with either IFRS or U.S.GAAP. 
B) Both IFRS and U.S.GAAP allow revaluation of item such as land and building to fair value. 
C) Both IFRS and U.S.GAAP divide the economic life of companies into artificial time periods. 
D) The form and content of financial statements are very similar under IFRS and U.S.GAAP.

Question 19

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.The asset is reported on the December 31, 2011 statement of financial position at ₤ 450,000.What was the impact of the adjusting entry recorded by Cara, Inc.?

Accepted Answer

A) Decreased Equity ₤ 50,000. 
B) Increased Liabilities ₤ 50,000. 
C) Increased Assets ₤ 50,000. 
D) All of the choices are correct regarding the impact of Cara, Inc.'s adjusting entry at December 31, 2011. 
A) Decreased Equity ₤ 50,000. 
B) Increased Liabilities ₤ 50,000. 
C) Increased Assets ₤ 50,000. 
D) All of the choices are correct regarding the impact of Cara, Inc.'s adjusting entry at December 31, 2011.

Question 20

Under accrual-basis 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 IFRS. 
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 IFRS.

Unearned revenue on the books of Chocolate Company, the landlord, can be a prepaid asset on the statement of financial position of its tenant, Cupcake, Inc.

Which of the statements below is not true?

Accrued revenues are revenues that have been earned and received before financial statements have been prepared.

The expense recognition principle requires that efforts be matched with accomplishments.

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Which of the following statements is false regarding adjusting entries?

An adjusted trial balance

The adjusted trial balance is prepared

The Accumulated Depreciation account is a contra asset account that is reported on the statement of financial position.

International Financial Reporting Standards (IFRS) include a revenue recognition principle that states that "let the revenues follow the expenses."

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period.What adjusting entry must Betty make?

The time period assumption is also referred to as the

Accounting time periods that are one year in length are referred to as interim periods.

Which of the following reflect the balances of prepayment accounts prior to adjustment?

A law firm received $2,000 cash for legal services to be rendered in the future.The full amount was credited to the liability account Unearned Legal Fees.If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

A small company may be able to justify using a cash basis of accounting if they have

Similarities between International Financial Reporting Standards (IFRS) and U.S.GAAP include all of the following except

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.The asset is reported on the December 31, 2011 statement of financial position at ₤ 450,000.What was the impact of the adjusting entry recorded by Cara, Inc.?

Under accrual-basis accounting

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 on the books of Chocolate Company, the landlord, can be a prepaid asset on the statement of financial position of its tenant, Cupcake, Inc.

Which of the statements below is not true?

Accrued revenues are revenues that have been earned and received before financial statements have been prepared.

The expense recognition principle requires that efforts be matched with accomplishments.

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

Which of the following statements is false regarding adjusting entries?

An adjusted trial balance

The adjusted trial balance is prepared

The Accumulated Depreciation account is a contra asset account that is reported on the statement of financial position.

International Financial Reporting Standards (IFRS) include a revenue recognition principle that states that "let the revenues follow the expenses."

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period.What adjusting entry must Betty make?

The time period assumption is also referred to as the

Accounting time periods that are one year in length are referred to as interim periods.

Which of the following reflect the balances of prepayment accounts prior to adjustment?

A law firm received $2,000 cash for legal services to be rendered in the future.The full amount was credited to the liability account Unearned Legal Fees.If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

A small company may be able to justify using a cash basis of accounting if they have

Similarities between International Financial Reporting Standards (IFRS) and U.S.GAAP include all of the following except

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.The asset is reported on the December 31, 2011 statement of financial position at ₤ 450,000.What was the impact of the adjusting entry recorded by Cara, Inc.?

Under accrual-basis accounting

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