Question 1

Recording revenues early overstates current-period income; recording revenues late understates current period income.

Accepted Answer

A) True 
 B)False

Question 2

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Accepted Answer

A) Debit Salaries Payable and credit Salaries Expense. 
B) Debit Unpaid Salaries and credit Salaries Payable. 
C) Debit Cash and credit Salaries Expense. 
D) Debit Salaries Expense and credit Salaries Payable. 
E) Debit Salaries Expense and credit Cash. 
A) Debit Salaries Payable and credit Salaries Expense. 
B) Debit Unpaid Salaries and credit Salaries Payable. 
C) Debit Cash and credit Salaries Expense. 
D) Debit Salaries Expense and credit Salaries Payable. 
E) Debit Salaries Expense and credit Cash.

Question 3

A company's fiscal year must correspond with the calendar year.

Accepted Answer

A) True 
 B)False

Question 4

In accrual accounting, accrued revenues are recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 5

In its first year of operations, Grace Company reports the following: Earned revenues of $60,000 ($52,000 cash received from customers); Incurred expenses of $35,000 ($31,000 cash paid toward them); Prepaid $8,000 cash for costs that will not be expensed until next year. Net income under the cash basis of accounting is:

Accepted Answer

A) $21,000. 
B) $13,000. 
C) $25,000. 
D) $17,000. 
E) None of the above. 
A) $21,000. 
B) $13,000. 
C) $25,000. 
D) $17,000. 
E) None of the above.

Question 6

Since the revenue recognition principle requires that revenues be recorded when earned, there are no unearned revenues in accrual accounting.

Accepted Answer

A) True 
 B)False

Question 7

If Regent Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

Accepted Answer

A) $675 
B) $1,975 
C) $825 
D) $525 
E) $1,250 
A) $675 
B) $1,975 
C) $825 
D) $525 
E) $1,250

Question 8

On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines. Santa Fe debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Santa Fe, Inc. after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?

Accepted Answer

A) $387. 
B) $1,548. 
C) $0. 
D) $516. 
E) $1,161. 
A) $387. 
B) $1,548. 
C) $0. 
D) $516. 
E) $1,161.

Question 9

Financial statements can be prepared directly from the information in the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 10

On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Griffith Publishing Company for the second year of the subscription assuming the company uses a calendar-year reporting period?

Accepted Answer

A) $129. 
B) $430. 
C) $516. 
D) $387. 
E) $0. 
A) $129. 
B) $430. 
C) $516. 
D) $387. 
E) $0.

Question 11

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

Accepted Answer

A) True 
 B)False

Question 12

A salary owed to employees is an example of an accrued expense.

Accepted Answer

A) True 
 B)False

Question 13

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Accepted Answer

A) Natural business year. 
B) Interim period. 
C) Fiscal year. 
D) Accounting period. 
E) Calendar year. 
A) Natural business year. 
B) Interim period. 
C) Fiscal year. 
D) Accounting period. 
E) Calendar year.

Question 14

On September 1, Kennedy Company loaned $100,000, at 12% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?

Accepted Answer

A) Debit Cash, $4,000; credit Interest Revenue, $4,000. 
B) Debit Interest Expense, $4,000; credit Interest Payable, $4,000 
C) Debit Interest Expense, $12,000; credit Interest Payable, $12,000 
D) Debit Interest Receivable, $12,000; credit Cash, $12,000 
E) Debit Interest Receivable, $4,000; credit Interest Revenue, $4,000. 
A) Debit Cash, $4,000; credit Interest Revenue, $4,000. 
B) Debit Interest Expense, $4,000; credit Interest Payable, $4,000 
C) Debit Interest Expense, $12,000; credit Interest Payable, $12,000 
D) Debit Interest Receivable, $12,000; credit Cash, $12,000 
E) Debit Interest Receivable, $4,000; credit Interest Revenue, $4,000.

Question 15

The adjusted trial balance must be prepared before the adjusting entries are made.

Accepted Answer

A) True 
 B)False

Question 16

A roofing company collects fees when jobs are complete. The work for one customer, whose job was bid at $3,000, has been completed as of December 31, but the customer has not yet been billed. Assuming adjustments are only made at year-end, what is the adjusting entry the company would need to make on December 31, the calendar year-end?

Accepted Answer

A) Debit Roofing Fees Revenue, $3,000; credit Accounts Receivable, $3,000 
B) Debit Cash, $3,000; credit Roofing Fees Revenue, $3,000 
C) Debit Roofing Fees Revenue, $3,000; credit Cash, $3,000 
D) Debit Accounts Receivable, $3,000; credit Roofing Fees Revenue, $3,000 
E) No adjustment is required. 
A) Debit Roofing Fees Revenue, $3,000; credit Accounts Receivable, $3,000 
B) Debit Cash, $3,000; credit Roofing Fees Revenue, $3,000 
C) Debit Roofing Fees Revenue, $3,000; credit Cash, $3,000 
D) Debit Accounts Receivable, $3,000; credit Roofing Fees Revenue, $3,000 
E) No adjustment is required.

Question 17

A company issued financial statements for the year ended December 31, but failed to include the following adjusting entries:
A. Accrued interest revenue earned of $1,200.
B. Depreciation expense of $4,000.
C. Portion of prepaid insurance expired (an asset)used $1,100.
D. Accrued taxes of $3,200.
E. Revenues of $5,200, originally recorded as unearned, have been earned by the end of the year. Determine the correct amounts for the December 31 financial statements by completing the following table:
 $\begin{array}{|lcccc|}
\hline & \text { Assets } & \text { Liabilities } & \text { Equity } & \text { Net Income } \
\hline \begin{array}{l}
\text { Reported } \
\text { amounts }
\end{array} & \$ 350,000 & \$ 200,000 & \$ 150,000 & \$ 70,000 \
\hline \text { Add (subtract) to }\\text { correct for item: }\\hline A\
\hline
\end{array}$
 $$\text { Education. }$$ 
 $\begin{array} { l  }
\hline  A\
\hline  B\
\hline  C\
\hline  D\
\hline  E\
\hline \text { Corrected amounts }&\$&\$&\$&\$\
\hline 
\end{array}$

Accepted Answer

The answer of A company issued financial statements for the...

Question 18

Which of the following statements is incorrect?

Accepted Answer

A) Property, plant, and equipment are referred to as plant assets. 
B) Interim financial reports can be based on one-month or three-month accounting periods. 
C) The fiscal year is any 12 consecutive months (or 52 weeks)used by a business as its annual accounting period. 
D) An income statement reports revenues earned less expenses incurred. 
E) An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments. 
A) Property, plant, and equipment are referred to as plant assets. 
B) Interim financial reports can be based on one-month or three-month accounting periods. 
C) The fiscal year is any 12 consecutive months (or 52 weeks)used by a business as its annual accounting period. 
D) An income statement reports revenues earned less expenses incurred. 
E) An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments.

Question 19

On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Griffith Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?

Accepted Answer

A) $387. 
B) $430. 
C) $516. 
D) $129. 
E) $0. 
A) $387. 
B) $430. 
C) $516. 
D) $129. 
E) $0.

Question 20

Unearned revenue is reported in the financial statements as:

Accepted Answer

A) A liability on the balance sheet. 
B) A financing activity on the statement of cash flows. 
C) A revenue on the balance sheet. 
D) An asset on the balance sheet. 
E) An unearned revenue on the income statement. 
A) A liability on the balance sheet. 
B) A financing activity on the statement of cash flows. 
C) A revenue on the balance sheet. 
D) An asset on the balance sheet. 
E) An unearned revenue on the income statement.

Recording revenues early overstates current-period income; recording revenues late understates current period income.

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

A company's fiscal year must correspond with the calendar year.

In accrual accounting, accrued revenues are recorded as liabilities.

Since the revenue recognition principle requires that revenues be recorded when earned, there are no unearned revenues in accrual accounting.

If Regent Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

Financial statements can be prepared directly from the information in the adjusted trial balance.

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

A salary owed to employees is an example of an accrued expense.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

The adjusted trial balance must be prepared before the adjusting entries are made.

Which of the following statements is incorrect?

Unearned revenue is reported in the financial statements as:

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters

Exam 3: Adjusting Accounts and Preparing Financial Statements

Recording revenues early overstates current-period income; recording revenues late understates current period income.

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

A company's fiscal year must correspond with the calendar year.

In accrual accounting, accrued revenues are recorded as liabilities.

Since the revenue recognition principle requires that revenues be recorded when earned, there are no unearned revenues in accrual accounting.

If Regent Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

Financial statements can be prepared directly from the information in the adjusted trial balance.

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

A salary owed to employees is an example of an accrued expense.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

The adjusted trial balance must be prepared before the adjusting entries are made.

Which of the following statements is incorrect?

Unearned revenue is reported in the financial statements as:

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters