Question 1

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

Accepted Answer

A) all revenue and expense accounts have zero balances. 
B) the Retained earnings account is debited for the amount of the net loss for the period. 
C) the income summary account is debited for the amount of net income for the period. 
D) all balance sheet accounts have zero balances. 
E) only permanent accounts appear on the post-closing trial balance. 
A) all revenue and expense accounts have zero balances. 
B) the Retained earnings account is debited for the amount of the net loss for the period. 
C) the income summary account is debited for the amount of net income for the period. 
D) all balance sheet accounts have zero balances. 
E) only permanent accounts appear on the post-closing trial balance.

Question 2

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Accepted Answer

A) Accrual basis accounting. 
B) Operating cycle accounting. 
C) Cash basis accounting. 
D) Revenue recognition accounting. 
E) Current basis accounting. 
A) Accrual basis accounting. 
B) Operating cycle accounting. 
C) Cash basis accounting. 
D) Revenue recognition accounting. 
E) Current basis accounting.

Question 3

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Permanent accounts include all of the following except:

Accepted Answer

A) Accumulated Depreciation-Equipment. 
B) Prepaid Insurance. 
C) Unearned Revenue. 
D) Accounts Receivable. 
E) Depreciation Expense-Equipment. 
A) Accumulated Depreciation-Equipment. 
B) Prepaid Insurance. 
C) Unearned Revenue. 
D) Accounts Receivable. 
E) Depreciation Expense-Equipment.

Question 6

The adjusting entry to record an accrued expense is:

Accepted Answer

A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability. 
A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability.

Question 7

The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000.
-What is the correct closing entry for the revenue accounts?

Accepted Answer

A) Debit Income Summary $55,200; credit Revenue accounts $55,200. 
B) Debit Revenue accounts $37,000; credit Retained earnings $37,000. 
C) Debit Revenue accounts $55,200; credit Retained earnings $37,000. 
D) Debit Revenue accounts $55,200; credit Income Summary $55,200. 
E) Debit Income Summary $37,000; credit Retained earnings $37,000. 
A) Debit Income Summary $55,200; credit Revenue accounts $55,200. 
B) Debit Revenue accounts $37,000; credit Retained earnings $37,000. 
C) Debit Revenue accounts $55,200; credit Retained earnings $37,000. 
D) Debit Revenue accounts $55,200; credit Income Summary $55,200. 
E) Debit Income Summary $37,000; credit Retained earnings $37,000.

Question 8

The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

Accepted Answer

A) True 
 B)False

Question 9

A benefit of using a work sheet is that it aids in the preparation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 10

Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

Accepted Answer

A) True 
 B)False

Question 11

________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

Accepted Answer

The answer of ________ expenses are those costs that are...

Question 12

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) $17,000. 
B) $21,000. 
C) $13,000. 
D) $25,000. 
E) None of the answer choices is correct. 
A) $17,000. 
B) $21,000. 
C) $13,000. 
D) $25,000. 
E) None of the answer choices is correct.

Question 13

Adjusting entries are designed primarily to correct accounting errors.

Accepted Answer

A) True 
 B)False

Question 14

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?

Accepted Answer

A) Debit Income Summary $13,000; credit Retained earnings $13,000. 
B) Debit Income Summary $75,000; credit Revenues $75,000. 
C) Debit Revenues $75,000; credit Income Summary $75,000. 
D) Debit Income Summary $62,000,credit Expenses $62,000. 
E) Debit Retained earnings $8,000,credit Dividends $8,000. 
A) Debit Income Summary $13,000; credit Retained earnings $13,000. 
B) Debit Income Summary $75,000; credit Revenues $75,000. 
C) Debit Revenues $75,000; credit Income Summary $75,000. 
D) Debit Income Summary $62,000,credit Expenses $62,000. 
E) Debit Retained earnings $8,000,credit Dividends $8,000.

Question 15

The unadjusted trial balance and the adjustment data for Porter Business Institute are shown below along with adjusting entry information.What is the impact of the adjusting entries on the balance sheet? Show the calculation for total assets,total liabilities,and equity without the adjustments; show the calculation for total assets,total liabilities,and equity with the adjustments.Which one provides the most accurate presentation of the balance sheet?
 
Additional information items:
a.The Prepaid Insurance account consists of a payment for a 1 year policy.An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end.
b.A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent.
c.Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Accepted Answer

@#IMG-DLM& The accrual basis gives the most accura

Question 16

For the year ended December 31,a company has revenues of $317,000 and expenses of $196,000.The company paid $50,000 in dividends during the year.The balance in the Retained earnings account before closing is $81,000.Which of the following entries would be used to close the dividends account?

Accepted Answer

A) Debit Income Summary $50,000; credit Retained earnings $50,000. 
B) Debit Retained earnings $50,000; credit Dividends $50,000. 
C) Debit Retained earnings $81,000; credit Income Summary $81,000. 
D) Debit Income Summary $81,000,credit Dividends $81,000. 
E) Debit Dividends $50,000; credit Retained earnings $50,000. 
A) Debit Income Summary $50,000; credit Retained earnings $50,000. 
B) Debit Retained earnings $50,000; credit Dividends $50,000. 
C) Debit Retained earnings $81,000; credit Income Summary $81,000. 
D) Debit Income Summary $81,000,credit Dividends $81,000. 
E) Debit Dividends $50,000; credit Retained earnings $50,000.

Question 17

Accrual accounting and the adjusting process rely on two principles: the ________ principle and the ________ principle.

Accepted Answer

revenue recognition;

Question 18

Explain how a company uses the accrual basis of accounting.

Accepted Answer

Financial information is more comparable

Question 19

The Dividends account is normally closed by debiting it.

Accepted Answer

A) True 
 B)False

Question 20

Permanent accounts carry their balances into the next accounting period.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting Accounts for Financial Statements

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

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

Permanent accounts include all of the following except:

The adjusting entry to record an accrued expense is:

The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000. -What is the correct closing entry for the revenue accounts?

The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

A benefit of using a work sheet is that it aids in the preparation of the financial statements.

Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

Adjusting entries are designed primarily to correct accounting errors.

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?

For the year ended December 31,a company has revenues of $317,000 and expenses of $196,000.The company paid $50,000 in dividends during the year.The balance in the Retained earnings account before closing is $81,000.Which of the following entries would be used to close the dividends account?

Accrual accounting and the adjusting process rely on two principles: the ________ principle and the ________ principle.

Explain how a company uses the accrual basis of accounting.

The Dividends account is normally closed by debiting it.

Permanent accounts carry their balances into the next accounting period.

Accounting in Business

Accounting for Business Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

Accrual accounting and the adjusting process rely on two principles: the principle and the principle.