Question 1

Recording the amount of earned revenue from an account that was originally recorded as unearned revenue is an example of:

Accepted Answer

A)  the accounting period concept. 
B)  the revenue concept. 
C)  the matching principle. 
D)  all of the above. 
A)  the accounting period concept. 
B)  the revenue concept. 
C)  the matching principle. 
D)  all of the above. D

Question 2

A prepaid expense is an expense that:

Accepted Answer

A)  has been paid and incurred. 
B)  the business has paid, but not yet incurred . 
C)  the business has incurred, but not yet paid. 
D)  will be incurred and paid in the future. 
A)  has been paid and incurred. 
B)  the business has paid, but not yet incurred . 
C)  the business has incurred, but not yet paid. 
D)  will be incurred and paid in the future. B

Question 3

Under which of the following methods of accounting is an expense recorded ONLY when cash is paid?

Accepted Answer

A)  Receivable 
B)  Accrual 
C)  Deferral 
D)  Cash 
A)  Receivable 
B)  Accrual 
C)  Deferral 
D)  Cash D

Question 4

adjusting entry required to accrue revenue consists of a debit to an expense and a credit to a liability.

Accepted Answer

A) True 
 B)False

Question 5

Under which of the following methods of accounting is revenue recorded ONLY when cash is received?

Accepted Answer

A)  Cash 
B)  Receivable 
C)  Deferral 
D)  Accrual 
A)  Cash 
B)  Receivable 
C)  Deferral 
D)  Accrual

Question 6

debit to a(n) _________ account is required in the adjusting process for depreciation.

Accepted Answer

A)  deferred revenue 
B)  asset 
C)  expense 
D)  unearned expense 
A)  deferred revenue 
B)  asset 
C)  expense 
D)  unearned expense

Question 7

accrual of revenue records the cash receipt before the expense.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following entries would be recorded if a company is using the cash-basis method of accounting?

Accepted Answer

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Accounts receivable } & & 1,000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Cash } & & 1,000 \
\hline
\end{array}$$ 
D)  Both A and C are correct. 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Accounts receivable } & & 1,000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Cash } & & 1,000 \
\hline
\end{array}$$ 
D)  Both A and C are correct.

Question 9

The accountant for Duman Legal Services failed to make an adjusting entry for supplies inventory that had been used for the year. Which of the following is true?

Accepted Answer

A)  Total revenue is overstated. 
B)  Total revenue is understated. 
C)  Total expenses are overstated. 
D)  Total expenses are understated. 
A)  Total revenue is overstated. 
B)  Total revenue is understated. 
C)  Total expenses are overstated. 
D)  Total expenses are understated.

Question 10

credit to a(n) _________ account is required as part of an adjusting entry when an accrued revenue was initially recorded as revenue.

Accepted Answer

A)  revenue 
B)  liability 
C)  contra liability 
D)  unearned revenue 
A)  revenue 
B)  liability 
C)  contra liability 
D)  unearned revenue

Question 11

adjusting entry required for a prepaid expense consists of a debit to an expense and a credit to an asset.

Accepted Answer

A) True 
 B)False

Question 12

The purposes of the adjusting process are:

Accepted Answer

A)  to measure net income or loss and to update the balance sheet. 
B)  to compute ending retained earnings and to journalize the period's activity. 
C)  both A and B. 
D)  none of the above. 
A)  to measure net income or loss and to update the balance sheet. 
B)  to compute ending retained earnings and to journalize the period's activity. 
C)  both A and B. 
D)  none of the above.

Question 13

a prepaid adjustment, the cash payment occurs before an expense is recorded.

Accepted Answer

A) True 
 B)False

Question 14

ABC Company signed a one-year $12,000 note at 8% interest on May 1, 2010. If the company paid the note in full on December 31, 2010, they would owe the bank $12,640. How much interest expense must be accrued on December 31, 2010?

Accepted Answer

A)  $960 
B)  $320 
C)  $640 
D)  None of the above 
A)  $960 
B)  $320 
C)  $640 
D)  None of the above

Question 15

The adjusting entry to record prepaid rent after the company has used the rented property for the rental period accomplishes which of the following?

Accepted Answer

A)  Decreases an asset and increases an expense 
B)  Decreases a liability and increases an expense 
C)  Decreases a liability and increases a revenue 
D)  Increases an asset and increases an expense 
A)  Decreases an asset and increases an expense 
B)  Decreases a liability and increases an expense 
C)  Decreases a liability and increases a revenue 
D)  Increases an asset and increases an expense

Question 16

Joy Company paid $4,500 for an 8-month lease on September 1, 2010. The adjusting entry would include a:

Accepted Answer

A)  debit of $4,500 to rent expense on December 31, 2010. 
B)  credit of $4,500 to rent expense on December 31, 2010. 
C)  debit of $2,250 to rent expense on December 31, 2010. 
D)  credit of $2,250 to rent expense on December 31, 2010. 
A)  debit of $4,500 to rent expense on December 31, 2010. 
B)  credit of $4,500 to rent expense on December 31, 2010. 
C)  debit of $2,250 to rent expense on December 31, 2010. 
D)  credit of $2,250 to rent expense on December 31, 2010.

Question 17

Supplies account for Vulcan Detail Company had a balance of $3,200 at the beginning of the year. Additional supplies of $13,400 were purchased during the year. A physical count of the ending inventory of supplies revealed that $5,900 of supplies was still on hand. What was total Supplies expense for the year?

Accepted Answer

A)  $16,400 
B)  $9,100 
C)  $10,700 
D)  $4,300 
A)  $16,400 
B)  $9,100 
C)  $10,700 
D)  $4,300

Question 18

account type is debited in the adjusting entry when unearned income was initially recorded as revenue?

Accepted Answer

A)  A debit to a deferred revenue account 
B)  A debit to an unearned expense account 
C)  A debit to an asset account 
D)  A debit to a contra account 
A)  A debit to a deferred revenue account 
B)  A debit to an unearned expense account 
C)  A debit to an asset account 
D)  A debit to a contra account

Question 19

Which of the following entries would be made because of the matching principle?

Accepted Answer

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Salary payable } & & 1,000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Accounts receivable } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
D)  Both A and B are correct. 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Salary payable } & & 1,000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \text { Accounts receivable } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$ 
D)  Both A and B are correct.

Question 20

Every adjustment affects which of the following accounts on the balance sheet?

Accepted Answer

A)  revenue or liability accounts 
B)  revenue or expense accounts 
C)  asset or expense accounts 
D)  asset or liability accounts 
A)  revenue or liability accounts 
B)  revenue or expense accounts 
C)  asset or expense accounts 
D)  asset or liability accounts

Exam 3: The Adjusting Process

Recording the amount of earned revenue from an account that was originally recorded as unearned revenue is an example of:

A prepaid expense is an expense that:

Under which of the following methods of accounting is an expense recorded ONLY when cash is paid?

adjusting entry required to accrue revenue consists of a debit to an expense and a credit to a liability.

Under which of the following methods of accounting is revenue recorded ONLY when cash is received?

debit to a(n) _________ account is required in the adjusting process for depreciation.

accrual of revenue records the cash receipt before the expense.

Which of the following entries would be recorded if a company is using the cash-basis method of accounting?

The accountant for Duman Legal Services failed to make an adjusting entry for supplies inventory that had been used for the year. Which of the following is true?

credit to a(n) _________ account is required as part of an adjusting entry when an accrued revenue was initially recorded as revenue.

adjusting entry required for a prepaid expense consists of a debit to an expense and a credit to an asset.

The purposes of the adjusting process are:

a prepaid adjustment, the cash payment occurs before an expense is recorded.

ABC Company signed a one-year $12,000 note at 8% interest on May 1, 2010. If the company paid the note in full on December 31, 2010, they would owe the bank $12,640. How much interest expense must be accrued on December 31, 2010?

The adjusting entry to record prepaid rent after the company has used the rented property for the rental period accomplishes which of the following?

Joy Company paid $4,500 for an 8-month lease on September 1, 2010. The adjusting entry would include a:

account type is debited in the adjusting entry when unearned income was initially recorded as revenue?

Which of the following entries would be made because of the matching principle?

Every adjustment affects which of the following accounts on the balance sheet?

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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