Question 1

If a company receives cash before it does the work or delivers a product, no journal entry is needed until the revenue has been earned.

Accepted Answer

A) True 
 B)False

Question 2

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

Accepted Answer

A) True 
 B)False

Question 3

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.

Accepted Answer

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

Question 4

The worksheet is not a journal, a ledger, or a financial statement.

Accepted Answer

A) True 
 B)False

Question 5

The unadjusted trial balance of James Business Consulting at December 31, 2018, and the data for the adjustments follow:
 James Business Consulting
 Unadjusted Trial Balance
 December 31,2018 $$\begin{array} { | l | r | r | } 
\hline & \text { Balance } &  { \text { Balance } } \
\hline \text { Account Title } & \text { Debit } & \text { Credit } \
\hline \text { Cash } & \$ 40,000 & \
\hline \text { Accounts Receivable } & 12,000 & \
\hline \text { Prepaid Insurance } & 3,000 & \
\hline \text { Office Supplies } & 6,000 & \
\hline \text { Accounts Payable } & & 5,000 \
\hline \text { Advertising Payable } & & 30,000 \
\hline \text { Common Stock } & & 7,000 \
\hline \text { Retained Earnings } & 5,000 & \
\hline \text { Dividends } & & 44,000 \
\hline \text { Service Revenue } & 500 & \
\hline \text { Advertising Expense } & 1,500 & \
\hline \text { Insurance Expense } & 0 & \
\hline \text { Office Supplies Expense } & 6,000 & \
\hline \text { Sent Expense } & \underline { 12,000 } & \
\hline \text { Total } & \$ 86,000 & \$ 86,000 \
\hline
\end{array}$$ Data for adjustments:
a. James prepaid 6 months of business insurance on September 30, 2018, with coverage beginning on October 1. James treats deferred expenses initially as assets.
b. A physical count of office supplies was made on December 31, 2018. This count showed a balance of $4,200 office supplies on hand.
c. On December 31, 2018, James received a bill for the November and December advertising in a local newspaper, $800. This bill will be paid on its due date, which is 1/10/2019.
James is preparing financial statements for the quarter ending December 31, 2018.
Requirements
1. Journalize the adjusting entries on December 31, 2018.
2. Prepare the December 31, 2018 adjusted trial balance. Use a proper heading.

Accepted Answer

1.
   2.
 James Busi

Question 6

A contract can only have one performance obligation.

Accepted Answer

A) True 
 B)False

Question 7

What is the term used for the difference between the Equipment account and the Accumulated Depreciation-Equipment account?

Accepted Answer

A)  contra asset 
B)  market value 
C)  historical cost 
D)  book value 
A)  contra asset 
B)  market value 
C)  historical cost 
D)  book value

Question 8

The asset account, Office Supplies, had a beginning balance of $3,700. During the accounting period, office supplies were purchased, on account, for $2,500. Supplies Expense for the accounting period is $4,300. What is the ending balance of Office Supplies?

Accepted Answer

A)  $6,200 
B)  $1,900 
C)  $4,300 
D)  $5,500 
A)  $6,200 
B)  $1,900 
C)  $4,300 
D)  $5,500

Question 9

Accrued revenue is revenue that ________.

Accepted Answer

A)  has been collected and earned 
B)  the business has collected in cash, but not yet earned 
C)  the business has earned, but not yet collected in cash 
D)  will be collected and earned in the future 
A)  has been collected and earned 
B)  the business has collected in cash, but not yet earned 
C)  the business has earned, but not yet collected in cash 
D)  will be collected and earned in the future

Question 10

Generally Accepted Accounting Principles (GAAP) require the use of the accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 11

Prepaid Insurance is an asset account that appears on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 12

A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry to record this cash receipt would include a ________. The company uses a liability account for revenue received in advance.

Accepted Answer

A)  credit to Accounts Payable for $5,000 
B)  debit to Prepaid Expenses for $5,000 
C)  credit to Unearned Revenue for $5,000 
D)  debit to Note Payable for $5,000 
A)  credit to Accounts Payable for $5,000 
B)  debit to Prepaid Expenses for $5,000 
C)  credit to Unearned Revenue for $5,000 
D)  debit to Note Payable for $5,000

Question 13

Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received.

Accepted Answer

A) True 
 B)False

Question 14

The Accumulated Depreciation account is ________.

Accepted Answer

A)  a record of the sum of all the depreciation expense recorded to date for a depreciable asset 
B)  the price quoted to the buyer of a used asset 
C)  a liability account 
D)  the expense account used to allocate the depreciable cost of an asset 
A)  a record of the sum of all the depreciation expense recorded to date for a depreciable asset 
B)  the price quoted to the buyer of a used asset 
C)  a liability account 
D)  the expense account used to allocate the depreciable cost of an asset

Question 15

Dynamic Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, the related account that should appear on the income statement for the year ended December 31, 2018 is ________.

Accepted Answer

A)  Depreciation Expense - Equipment 
B)  Service Revenue 
C)  Accumulated Depreciation - Equipment 
D)  Equipment Expense 
A)  Depreciation Expense - Equipment 
B)  Service Revenue 
C)  Accumulated Depreciation - Equipment 
D)  Equipment Expense

Question 16

A performance obligation is a contractual promise with a customer to transfer a distinct good or service.

Accepted Answer

A) True 
 B)False

Question 17

Maxwell Tax Planning Service bought communications equipment for $10,200 on January 1, 2019. The equipment has an estimated useful life of five years and zero residual value. Maxwell uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month. As of June 30, 2019, the balance in the Accumulated Depreciation account for this equipment is ________.

Accepted Answer

A)  $170 
B)  $2,040 
C)  $850 
D)  $1,020 
A)  $170 
B)  $2,040 
C)  $850 
D)  $1,020

Question 18

Which of the following is a contra account?

Accepted Answer

A)  Depreciation Expense 
B)  Accumulated Depreciation 
C)  Unearned Revenue 
D)  Book Value 
A)  Depreciation Expense 
B)  Accumulated Depreciation 
C)  Unearned Revenue 
D)  Book Value

Question 19

Get Away, a travel magazine, collected $500,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. Prepare the journal entry for collection of cash in May. (Ignore explanation). Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

\[\begin{array} { | c | r | r

Question 20

Adjusting entries may involve any account, including Cash.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

If a company receives cash before it does the work or delivers a product, no journal entry is needed until the revenue has been earned.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.

The worksheet is not a journal, a ledger, or a financial statement.

A contract can only have one performance obligation.

What is the term used for the difference between the Equipment account and the Accumulated Depreciation-Equipment account?

The asset account, Office Supplies, had a beginning balance of $3,700. During the accounting period, office supplies were purchased, on account, for $2,500. Supplies Expense for the accounting period is $4,300. What is the ending balance of Office Supplies?

Accrued revenue is revenue that ________.

Generally Accepted Accounting Principles (GAAP) require the use of the accrual basis of accounting.

Prepaid Insurance is an asset account that appears on the balance sheet.

A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry to record this cash receipt would include a ________. The company uses a liability account for revenue received in advance.

Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received.

The Accumulated Depreciation account is ________.

Dynamic Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, the related account that should appear on the income statement for the year ended December 31, 2018 is ________.

A performance obligation is a contractual promise with a customer to transfer a distinct good or service.

Which of the following is a contra account?

Adjusting entries may involve any account, including Cash.

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

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