Question 1

financial statements should be prepared in this order: 1) income statement, 2) balance sheet, and 3) statement of owner's equity for a proprietorship.

Accepted Answer

A) True 
 B)False

Question 2

income statement should list expenses is what order?

Accepted Answer

A)  Ascending order by amount 
B)  Descending order by amount 
C)  In order of importance to the company's primary mission 
D)  Alphabetical order 
A)  Ascending order by amount 
B)  Descending order by amount 
C)  In order of importance to the company's primary mission 
D)  Alphabetical order

Question 3

Ensuring that information is reported often is part of the:

Accepted Answer

A)  matching principle. 
B)  revenue principle. 
C)  time-period concept. 
D)  expense principle. 
A)  matching principle. 
B)  revenue principle. 
C)  time-period concept. 
D)  expense principle.

Question 4

Which of the following entries would be recorded ONLY if a company is using the accrual method of accounting?

Accepted Answer

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

Question 5

Which of the following is TRUE of plant asset accounts and their related accumulated depreciation accounts?

Accepted Answer

A)  The allocation of a plant asset's cost to expense is called depreciation. 
B)  Accounting for plant assets is the same as accounting for a prepaid expense. 
C)  Accumulated depreciation is a contra-asset account which has a normal credit balance. 
D)  All of the above are true. 
A)  The allocation of a plant asset's cost to expense is called depreciation. 
B)  Accounting for plant assets is the same as accounting for a prepaid expense. 
C)  Accumulated depreciation is a contra-asset account which has a normal credit balance. 
D)  All of the above are true.

Question 6

Every adjustment affects which of the following accounts on the income statement?

Accepted Answer

A)  asset and equity accounts 
B)  revenue and liability accounts 
C)  revenue and asset accounts 
D)  none of these accounts 
A)  asset and equity accounts 
B)  revenue and liability accounts 
C)  revenue and asset accounts 
D)  none of these accounts

Question 7

adjusting entry to record supplies expense accomplishes which of the following?

Accepted Answer

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

Question 8

account type is debited in the adjusting entry when a prepaid expense was initially recorded as an expense?

Accepted Answer

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

Question 9

The accountant for Noble Jewelry Repair Company failed to make an adjusting entry for depreciation expense for the current year. What is the effect of this error on total liabilities?

Accepted Answer

A)  Total liabilities are understated. 
B)  Total liabilities are not affected. 
C)  Total liabilities are overstated. 
D)  There is not enough information presented to determine the effect on total liabilities. 
A)  Total liabilities are understated. 
B)  Total liabilities are not affected. 
C)  Total liabilities are overstated. 
D)  There is not enough information presented to determine the effect on total liabilities.

Question 10

of the following accounts would be adjusted at the end of an accounting period?

Accepted Answer

A)  Accounts receivable 
B)  Accounts payable 
C)  Cash 
D)  Prepaid insurance 
A)  Accounts receivable 
B)  Accounts payable 
C)  Cash 
D)  Prepaid insurance

Question 11

Which of the following accounts would most likely appear on the adjusted trial balance (have an account balance), but NOT appear on the unadjusted trial balance (account balance would be zero)?

Accepted Answer

A)  Service revenue 
B)  Unearned revenue 
C)  Accumulated depreciation 
D)  Depreciation expense 
A)  Service revenue 
B)  Unearned revenue 
C)  Accumulated depreciation 
D)  Depreciation expense

Question 12

are two ways to do accounting: accrual accounting and cash-basis accounting.

Accepted Answer

A) True 
 B)False

Question 13

Unearned rent is an example of a(n):

Accepted Answer

A)  accrued revenue. 
B)  unearned revenue. 
C)  prepaid expense. 
D)  accrued expense. 
A)  accrued revenue. 
B)  unearned revenue. 
C)  prepaid expense. 
D)  accrued expense.

Question 14

The adjusting entry to record prepaid insurance that has now been used accomplishes which of the following?

Accepted Answer

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

Question 15

Under the cash-basis method of accounting, service revenue is recorded at which of the following times?

Accepted Answer

A)  When payment for the services is received 
B)  At the end of the accounting period 
C)  When the services are completed 
D)  At both A and B 
A)  When payment for the services is received 
B)  At the end of the accounting period 
C)  When the services are completed 
D)  At both A and B

Question 16

The adjusting entry to record unearned revenue that has now been earned accomplishes which of the following?

Accepted Answer

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

Question 17

adjusting entry to record depreciation expense accomplishes which of the following?

Accepted Answer

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

Question 18

Plant assets are long-lived tangible assets used in the operation of a business. The allocation of a plant asset's cost to expense is which of the following?

Accepted Answer

A)  The revenue principle 
B)  Revenue allocation 
C)  Depreciation 
D)  Historical cost 
A)  The revenue principle 
B)  Revenue allocation 
C)  Depreciation 
D)  Historical cost

Question 19

January 1, 2012, Office Manor's Unearned revenue account had a balance of $3,800. During the year, the company received $22,300 for services to be performed in the future. After adjusting entries were made, the balance in Unearned revenue on December 31, 2012 was $2,900.
Accounts receivable at the beginning of the year was $3,200. Billings for services performed on account were $31,200 during the year. After adjusting entries were made, the balance in Accounts receivable on December 31, 2012 was $1,000. No services were performed with immediate cash collection. What is the total Service revenue?

Accepted Answer

A)  $56,600 
B)  $54,400 
C)  $55,700 
D)  $53,500 
A)  $56,600 
B)  $54,400 
C)  $55,700 
D)  $53,500

Question 20

account "Prepaid insurance" is an asset account.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

financial statements should be prepared in this order: 1) income statement, 2) balance sheet, and 3) statement of owner's equity for a proprietorship.

income statement should list expenses is what order?

Ensuring that information is reported often is part of the:

Which of the following entries would be recorded ONLY if a company is using the accrual method of accounting?

Which of the following is TRUE of plant asset accounts and their related accumulated depreciation accounts?

Every adjustment affects which of the following accounts on the income statement?

adjusting entry to record supplies expense accomplishes which of the following?

account type is debited in the adjusting entry when a prepaid expense was initially recorded as an expense?

The accountant for Noble Jewelry Repair Company failed to make an adjusting entry for depreciation expense for the current year. What is the effect of this error on total liabilities?

of the following accounts would be adjusted at the end of an accounting period?

Which of the following accounts would most likely appear on the adjusted trial balance (have an account balance), but NOT appear on the unadjusted trial balance (account balance would be zero)?

are two ways to do accounting: accrual accounting and cash-basis accounting.

Unearned rent is an example of a(n):

The adjusting entry to record prepaid insurance that has now been used accomplishes which of the following?

Under the cash-basis method of accounting, service revenue is recorded at which of the following times?

The adjusting entry to record unearned revenue that has now been earned accomplishes which of the following?

adjusting entry to record depreciation expense accomplishes which of the following?

Plant assets are long-lived tangible assets used in the operation of a business. The allocation of a plant asset's cost to expense is which of the following?

account "Prepaid insurance" is an asset account.

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

Filters