Question 1

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

Accepted Answer

A) True 
 B)False

Question 2

Why is it important for companies to record adjusting entries?

Accepted Answer

It is important for companies to record

Question 3

The key differences between the cash basis and accrual basis of accounting are the timing and recognition of assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 4

The purpose of the adjusted trial balance is to ensure that no errors were made during the adjusting process.

Accepted Answer

A) True 
 B)False

Question 5

An adjusting entry that credits Salaries Payable is an example of a(n) ________.

Accepted Answer

A)  accrued expense 
B)  deferred revenue 
C)  accrued revenue 
D)  deferred expense 
A)  accrued expense 
B)  deferred revenue 
C)  accrued revenue 
D)  deferred expense

Question 6

Aspen Event Planning Services, Inc. records deferred expenses and deferred revenues using alternative treatments. It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year. On December 15, it collected $3,000 from a customer in advance for a series of events that will start late December and end in March. At the end of the year, it had performed approximately 10% of the services for its customer. The adjusting entry on December 31 will include a debit to Service Revenue for $2,700.

Accepted Answer

A) True 
 B)False

Question 7

On January 1, Nash, Inc. had $2,000 of supplies on hand. During January, Nash purchased $5,500 worth of new supplies. At the end of the month, a count revealed $700 worth of supplies remaining on the shelves. The adjusting entry needed will include a debit to Supplies Expense of $6,800. The supplies were initially recorded as an asset.

Accepted Answer

A) True 
 B)False

Question 8

The matching principle states that ________.

Accepted Answer

A)  financial statements can be prepared for specific periods 
B)  a business's activities can be sliced into small time segments 
C)  all expenses should be recorded when they are incurred during the period 
D)  companies should record revenue when it has been earned 
A)  financial statements can be prepared for specific periods 
B)  a business's activities can be sliced into small time segments 
C)  all expenses should be recorded when they are incurred during the period 
D)  companies should record revenue when it has been earned

Question 9

On the first day of January, Builders, Inc. borrowed $1,000 on a one-year note payable bearing interest at 7% per year. The note specifies that principal and interest must be paid in full at the end of the one-year period. On June 30, the adjusted trial balance will show Interest Payable of ________.

Accepted Answer

A)  $35 credit 
B)  $35 debit 
C)  $70 credit 
D)  $70 debit 
A)  $35 credit 
B)  $35 debit 
C)  $70 credit 
D)  $70 debit

Question 10

What is the effect of the adjusting entry for Depreciation Expense?

Accepted Answer

A)  It increases total liabilities and increases total expenses. 
B)  It increases total assets and increases total expenses. 
C)  It decreases total assets and increases total expenses. 
D)  It decreases total liabilities and increases total expenses. 
A)  It increases total liabilities and increases total expenses. 
B)  It increases total assets and increases total expenses. 
C)  It decreases total assets and increases total expenses. 
D)  It decreases total liabilities and increases total expenses.

Question 11

For accounting purposes, depreciation refers to the process of ________.

Accepted Answer

A)  allocating the cost of a plant asset to expense over its useful life 
B)  recording the decline in the market value of an asset to its book value 
C)  estimating an asset's current market value 
D)  determining the selling price of an asset 
A)  allocating the cost of a plant asset to expense over its useful life 
B)  recording the decline in the market value of an asset to its book value 
C)  estimating an asset's current market value 
D)  determining the selling price of an asset

Question 12

Marcy's Event Planning Services, Inc. records deferred expenses and deferred revenues using the alternative treatments. The business makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year. On October 1, Marcy's paid $3,600 for insurance for a one-year period. At the end of the year, it will make an adjusting entry that debits Insurance Expense for $1,500.

Accepted Answer

A) True 
 B)False

Question 13

The accrual method is an easier accounting method to follow than cash basis accounting because it generally requires less knowledge of accounting concepts and principles.

Accepted Answer

A) True 
 B)False

Question 14

Metro Event Planning Services collects fees from its customers in advance. On January 1, 2019, the balance of its Unearned Revenue account was $4,000 (CR). During January and February, the company collected $2,000 and $600 as advance fees. During the two-month period, it performed services of $5,500 related to the deferred revenue. What is the balance in Unearned Revenue at the end of February?

Accepted Answer

A)  debit balance of $4,000 
B)  credit balance of $4,000 
C)  debit balance of $1,100 
D)  credit balance of $1,100 
A)  debit balance of $4,000 
B)  credit balance of $4,000 
C)  debit balance of $1,100 
D)  credit balance of $1,100

Question 15

Reece Consultants had the following balances before preparing adjusting entries in the books on December 31, 2019.
 $$\begin{array} { l l l } 
\text { Cash } & \$ 6,000 & \text { Dividends } \
\text { Accounts Receivable } & 2,000 \text { Service Revenue } & 10,600 \
\text { Office Supplies } & 1,000 \text { Salaries Expense } & 4,000 \
\text { Equipment } & 15,000 & \text { Rent Expense } \
\text { Accumulated Depreciation - } & 9,000 \text { Depreciation Expense - } & 1,500 \
\text { Equipment } & { \text { Equipment } } \
\text { Common Stock } & 15,000 & \
\text { Expense } & 500 & \text { Supplies }
\end{array}$$ Prepare the adjusted trial balance after considering these adjustments:
a. Office Supplies used, $800. Assume the office supplies were initially recorded as an asset.
b. Accrued salaries on December 31, $600.
c. Revenue earned but not recorded, $200.

Accepted Answer

None

Question 16

All of the accounts and the account balances of a company appear on the ________.

Accepted Answer

A)  statement of retained earnings 
B)  balance sheet 
C)  adjusted trial balance 
D)  income statement 
A)  statement of retained earnings 
B)  balance sheet 
C)  adjusted trial balance 
D)  income statement

Question 17

Deborah Consultants had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances. Calculate the amount of service revenue and prepare the adjusted trial balance for Deborah Consultants as of December 31, 2019.
 $\begin{array}{lll}
\text { Cash } & \$ 6,000 \text { Dividends } & \$ 3,000 \
\text { Accounts Receivable } & 2,000 \text { Service Revenue } & ? \
\text { Office Supplies } & 1,800 \text { Salaries Expense } & 4,000 \
\text { Equipment } & 15,000 \text { Rent Expense } & 800 \
\text { Accumulated Depreciation - } & 9,000 \text { Depreciation Expense- } & 1,500 \
\text { Equipment } & \text { Equipment } \
\text { Common Stock } & 15,000 \text { Supplies Expense } & 500
\end{array}$

Accepted Answer

Service Revenue = $3

Question 18

On January 1, 2017, the Accounts Receivable of Martha, Inc. had a debit balance of $150,000. During January, the company provided services for $400,000 on account. The company collected $240,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at the end of January?

Accepted Answer

A)  $160,000 
B)  $550,000 
C)  $310,000 
D)  $400,000 
A)  $160,000 
B)  $550,000 
C)  $310,000 
D)  $400,000

Question 19

The employees of Leichester Services, Inc. worked the last two weeks of December, 2016. They received their paychecks on January 2, 2017. Which of the following accounts should appear on the income statement for the year ended December 31, 2016?

Accepted Answer

A)  Salaries Expense 
B)  Prepaid Expense 
C)  Salaries Payable 
D)  Unearned Revenue 
A)  Salaries Expense 
B)  Prepaid Expense 
C)  Salaries Payable 
D)  Unearned Revenue

Question 20

To match expenses against revenues means to ________.

Accepted Answer

A)  add expenses incurred during one period to revenues earned during that same period 
B)  subtract expenses incurred during one period from revenues earned during the previous period 
C)  add expenses incurred during one period to revenues earned during the previous period 
D)  subtract expenses incurred during one period from revenues earned during that same period 
A)  add expenses incurred during one period to revenues earned during that same period 
B)  subtract expenses incurred during one period from revenues earned during the previous period 
C)  add expenses incurred during one period to revenues earned during the previous period 
D)  subtract expenses incurred during one period from revenues earned during that same period

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

Why is it important for companies to record adjusting entries?

The key differences between the cash basis and accrual basis of accounting are the timing and recognition of assets and liabilities.

The purpose of the adjusted trial balance is to ensure that no errors were made during the adjusting process.

An adjusting entry that credits Salaries Payable is an example of a(n) ________.

The matching principle states that ________.

What is the effect of the adjusting entry for Depreciation Expense?

For accounting purposes, depreciation refers to the process of ________.

The accrual method is an easier accounting method to follow than cash basis accounting because it generally requires less knowledge of accounting concepts and principles.

All of the accounts and the account balances of a company appear on the ________.

The employees of Leichester Services, Inc. worked the last two weeks of December, 2016. They received their paychecks on January 2, 2017. Which of the following accounts should appear on the income statement for the year ended December 31, 2016?

To match expenses against revenues means to ________.

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

Filters

Exam 3: The Adjusting Process

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

Why is it important for companies to record adjusting entries?

The key differences between the cash basis and accrual basis of accounting are the timing and recognition of assets and liabilities.

The purpose of the adjusted trial balance is to ensure that no errors were made during the adjusting process.

An adjusting entry that credits Salaries Payable is an example of a(n) ________.

The matching principle states that ________.

What is the effect of the adjusting entry for Depreciation Expense?

For accounting purposes, depreciation refers to the process of ________.

The accrual method is an easier accounting method to follow than cash basis accounting because it generally requires less knowledge of accounting concepts and principles.

All of the accounts and the account balances of a company appear on the ________.

The employees of Leichester Services, Inc. worked the last two weeks of December, 2016. They received their paychecks on January 2, 2017. Which of the following accounts should appear on the income statement for the year ended December 31, 2016?

To match expenses against revenues means to ________.

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

Filters