Question 1

Expense recognition is tied to revenue recognition.

Accepted Answer

A) True 
 B)False

Question 2

Daly Investments purchased an 18-month insurance policy on May 31, 2011 for $4,500.The December 31, 2011 statement of financial position would report Prepaid Insurance of

Accepted Answer

A) $0 because Prepaid Insurance is reported on the Income Statement. 
B) $1,750. 
C) $2,750. 
D) $4,500. 
A) $0 because Prepaid Insurance is reported on the Income Statement. 
B) $1,750. 
C) $2,750. 
D) $4,500.

Question 3

Which is not an application of revenue recognition?

Accepted Answer

A) Recording revenue as an adjusting entry on the last day of the accounting period. 
B) Accepting cash from an established customer for services to be performed over the next three months. 
C) Billing customers on June 30 for services completed during June. 
D) Receiving cash for services performed. 
A) Recording revenue as an adjusting entry on the last day of the accounting period. 
B) Accepting cash from an established customer for services to be performed over the next three months. 
C) Billing customers on June 30 for services completed during June. 
D) Receiving cash for services performed.

Question 4

An adjusted trial balance should be prepared before the adjusting entries are made.

Accepted Answer

A) True 
 B)False

Question 5

If business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit

Accepted Answer

A) cash. 
B) prepaid rent. 
C) unearned rent revenue. 
D) accrued rent revenue. 
A) cash. 
B) prepaid rent. 
C) unearned rent revenue. 
D) accrued rent revenue.

Question 6

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.What impact will the appropriate adjusting entry at December 31, 2011 have on its statement of financial position at December 31, 2011?

Accepted Answer

A) Increased Equity ₤ 50,000. 
B) Increased Liabilities ₤ 50,000. 
C) Decreased Assets ₤ 50,000. 
D) Since the adjusting entry has offsetting debits and credits, there is no impact on the statement of financial position. 
A) Increased Equity ₤ 50,000. 
B) Increased Liabilities ₤ 50,000. 
C) Decreased Assets ₤ 50,000. 
D) Since the adjusting entry has offsetting debits and credits, there is no impact on the statement of financial position.

Question 7

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

Accepted Answer

A) True 
 B)False

Question 8

Management usually desires ________ 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 9

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

Accepted Answer

A) True 
 B)False

Question 10

A company must make adjusting entries

Accepted Answer

A) To ensure that the revenue recognition and expense recognition principles are followed. 
B) Each time it prepares an income statement and a statement of financial position. 
C) To account for accruals or deferrals. 
D) All of the choices are correct regarding adjusting entries. 
A) To ensure that the revenue recognition and expense recognition principles are followed. 
B) Each time it prepares an income statement and a statement of financial position. 
C) To account for accruals or deferrals. 
D) All of the choices are correct regarding adjusting entries.

Question 11

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.How will the adjusting entry impact Cara, Inc.'s statement of financial position at December 31, 2011?

Accepted Answer

A) Decreased Assets ₤ 1,300. 
B) Increased Equity ₤ 1,300. 
C) Increased Liabilities ₤ 1,200. 
D) Decreased Assets ₤ 1,200. 
A) Decreased Assets ₤ 1,300. 
B) Increased Equity ₤ 1,300. 
C) Increased Liabilities ₤ 1,200. 
D) Decreased Assets ₤ 1,200.

Question 12

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

Accepted Answer

A) True 
 B)False

Question 13

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

Accepted Answer

A) a fiscal year. 
B) an interim period. 
C) the time period assumption. 
D) a reporting period. 
A) a fiscal year. 
B) an interim period. 
C) the time period assumption. 
D) a reporting period.

Question 14

Many business transactions affect more than one time period.

Accepted Answer

A) True 
 B)False

Question 15

Speedy Clean Laundry purchased € 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset.On June 30, an inventory of the laundry supplies indicated only € 1,500 on hand.The adjusting entry that should be made by the company on June 30 is

Accepted Answer

A) Debit Laundry Supplies Expense, € 1,500; Credit Laundry Supplies, € 1,500. 
B) Debit Laundry Supplies, € 1,500; Credit Laundry Supplies Expense, € 1,500. 
C) Debit Laundry Supplies, € 5,000; Credit Laundry Supplies Expense, € 5,000. 
D) Debit Laundry Supplies Expense, € 5,000; Credit Laundry Supplies, € 5,000. 
A) Debit Laundry Supplies Expense, € 1,500; Credit Laundry Supplies, € 1,500. 
B) Debit Laundry Supplies, € 1,500; Credit Laundry Supplies Expense, € 1,500. 
C) Debit Laundry Supplies, € 5,000; Credit Laundry Supplies Expense, € 5,000. 
D) Debit Laundry Supplies Expense, € 5,000; Credit Laundry Supplies, € 5,000.

Question 16

Wave Inn is a resort located in Canada.Wave Inn collects cash when guests make a reservation.During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing revenue.By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012.The adjusting entry required at December 31, 2011 would impact the statement of financial position by

Accepted Answer

A) Decreased Equity $40,000. 
B) Decreased Liabilities $40,000. 
C) Increased Assets $60,000. 
D) Increased Equity $20,000. 
A) Decreased Equity $40,000. 
B) Decreased Liabilities $40,000. 
C) Increased Assets $60,000. 
D) Increased Equity $20,000.

Question 17

Under International Financial Reporting Standards (IFRS)

Accepted Answer

A) The cash-basis method of accounting is accepted. 
B) Events are recorded in the period in which the event occurs. 
C) Interim period financial statements are either a calendar year or a fiscal year. 
D) A fiscal year is an accounting time period encompassing less than 12 months. 
A) The cash-basis method of accounting is accepted. 
B) Events are recorded in the period in which the event occurs. 
C) Interim period financial statements are either a calendar year or a fiscal year. 
D) A fiscal year is an accounting time period encompassing less than 12 months.

Question 18

Which one of the following is not a justification for adjusting entries?

Accepted Answer

A) Adjusting entries are necessary to ensure that revenue recognition principles are followed. 
B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with IFRS. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget. 
A) Adjusting entries are necessary to ensure that revenue recognition principles are followed. 
B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with IFRS. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Question 19

Adjusting entries are required

Accepted Answer

A) yearly. 
B) quarterly. 
C) monthly. 
D) every time financial statements are prepared. 
A) yearly. 
B) quarterly. 
C) monthly. 
D) every time financial statements are prepared.

Question 20

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.

Expense recognition is tied to revenue recognition.

Daly Investments purchased an 18-month insurance policy on May 31, 2011 for $4,500.The December 31, 2011 statement of financial position would report Prepaid Insurance of

Which is not an application of revenue recognition?

An adjusted trial balance should be prepared before the adjusting entries are made.

If business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.What impact will the appropriate adjusting entry at December 31, 2011 have on its statement of financial position at December 31, 2011?

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

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

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

A company must make adjusting entries

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.How will the adjusting entry impact Cara, Inc.'s statement of financial position at December 31, 2011?

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

Many business transactions affect more than one time period.

Speedy Clean Laundry purchased € 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset.On June 30, an inventory of the laundry supplies indicated only € 1,500 on hand.The adjusting entry that should be made by the company on June 30 is

Under International Financial Reporting Standards (IFRS)

Which one of the following is not a justification for adjusting entries?

Adjusting entries are required

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

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

Expense recognition is tied to revenue recognition.

Daly Investments purchased an 18-month insurance policy on May 31, 2011 for $4,500.The December 31, 2011 statement of financial position would report Prepaid Insurance of

Which is not an application of revenue recognition?

An adjusted trial balance should be prepared before the adjusting entries are made.

If business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit

Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.What impact will the appropriate adjusting entry at December 31, 2011 have on its statement of financial position at December 31, 2011?

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

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

Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS).

A company must make adjusting entries

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.How will the adjusting entry impact Cara, Inc.'s statement of financial position at December 31, 2011?

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

Many business transactions affect more than one time period.

Speedy Clean Laundry purchased € 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset.On June 30, an inventory of the laundry supplies indicated only € 1,500 on hand.The adjusting entry that should be made by the company on June 30 is

Under International Financial Reporting Standards (IFRS)

Which one of the following is not a justification for adjusting entries?

Adjusting entries are required

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

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

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