Question 1

Deferred revenues are assets because the business has collected the cash before earning the revenue.

Accepted Answer

A) True 
 B)False

Question 2

Princeton Financial Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, what account, other than Computers, should appear on the balance sheet as of December 31, 2018?

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 3

An internal document that helps summarize data for the preparation of financial statements is called a ________.

Accepted Answer

A)  journal 
B)  ledger 
C)  worksheet 
D)  chart of accounts 
A)  journal 
B)  ledger 
C)  worksheet 
D)  chart of accounts

Question 4

On October 1, 2019 Ranger Service Company paid $5,000 in rent for the next five months, beginning with October 2019. On that date, Ranger debited Prepaid Rent and credited Cash. If Ranger fails to make an adjusting entry on December 31, 2019, indicate the effect on assets, liabilities, equity, and net income.

Accepted Answer

The answer of On October 1, 2019 Ranger Service Company...

Question 5

Oakland Tax Planning Service bought computer equipment for $22,000 on January 1, 2018. It has an estimated useful life of four years and zero residual value. Oakland uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month. Calculate the amount of Depreciation Expense for the period, January 1, 2018 through September 30, 2018, for this equipment. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Accepted Answer

A)  $5,500 
B)  $4,125 
C)  $5,958 
D)  $4,583 
A)  $5,500 
B)  $4,125 
C)  $5,958 
D)  $4,583

Question 6

On December 31, 2018, interest of $1,500 has accrued on a bank note. This interest payment is due on January 20, 2019. If no adjusting entry is made on December 31, 2018, indicate the effect on assets, liabilities, equity, and net income.
 $$\begin{array} { | l | l | } 
\hline & \text { Understated, Overstated, No Effect } \
\hline \text { Assets } & \
\hline \text { Liabilities } & \
\hline \text { Equity } & \
\hline \text { Net Income } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline &

Question 7

Unearned Revenue is a(n) ________ account and carries a normal ________ balance.

Accepted Answer

A)  liability; credit 
B)  asset; credit 
C)  revenue; debit 
D)  asset; debit 
A)  liability; credit 
B)  asset; credit 
C)  revenue; debit 
D)  asset; debit

Question 8

The time period concept states that ________.

Accepted Answer

A)  financial statements can be prepared for specific periods 
B)  all expenses should be recorded when they are incurred during the period 
C)  companies should record revenue when it has been earned 
D)  expenses incurred during a period should be matched against the revenues of the period 
A)  financial statements can be prepared for specific periods 
B)  all expenses should be recorded when they are incurred during the period 
C)  companies should record revenue when it has been earned 
D)  expenses incurred during a period should be matched against the revenues of the period

Question 9

On September 1, Advantage Maintenance Company contracted to provide monthly maintenance services for the next five months at a rate of $3,000 per month. The client paid Advantage $15,000 on September 1. The maintenance services began on that date. Assuming Advantage records deferred revenues using the alternative treatment, what would be the adjusting entry recorded on December 31?

Accepted Answer

A)  No entry is needed since revenue was recorded on September 1. 
B)  Debit Service Revenue and credit Unearned Revenue for $3,000. 
C)  Debit Service Revenue and credit Unearned Revenue for $15,000. 
D)  Debit Unearned Revenue and credit Service Revenue for $12,000. 
A)  No entry is needed since revenue was recorded on September 1. 
B)  Debit Service Revenue and credit Unearned Revenue for $3,000. 
C)  Debit Service Revenue and credit Unearned Revenue for $15,000. 
D)  Debit Unearned Revenue and credit Service Revenue for $12,000.

Question 10

The key differences between the cash basis and accrual basis of accounting can be explained by understanding the rules of debits and credits.

Accepted Answer

A) True 
 B)False

Question 11

The Pediatric Dental Corporation prepays the rent on its dental office. On July 1, the corporation paid $18,000 for 6 months of rent. The rent period begins on July 1. How much Rent Expense should the corporation record for the three months ended September 30 under the cash basis? Why?

Accepted Answer

Pediatric Dental should report

Question 12

Jupiter, Inc. signed a one-year $24,000 note payable at 8% interest on March 1, 2019. How much interest expense must be accrued on May 31, 2019? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

Accepted Answer

A)  $1,920 
B)  $720 
C)  $480 
D)  $240 
A)  $1,920 
B)  $720 
C)  $480 
D)  $240

Question 13

If a company fails to make an adjusting entry to record accrued expenses, the liabilities and net income will be overstated.

Accepted Answer

A) True 
 B)False

Question 14

Adjusting entries are needed to correctly measure the ________.

Accepted Answer

A)  ending balance in the Cash account 
B)  net income (loss) on the balance sheet 
C)  net income (loss) on the income statement 
D)  beginning balance in the Cash account 
A)  ending balance in the Cash account 
B)  net income (loss) on the balance sheet 
C)  net income (loss) on the income statement 
D)  beginning balance in the Cash account

Question 15

If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of rent had been previously recorded as a(n) ________.

Accepted Answer

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

Question 16

Juniper Tree Service has a weekly payroll of $50,000. December 31, 2018 falls on Thursday and Juniper will pay its employees the following Monday (January 4, 2019) for the previous full week. Assume that the company has a five-day workweek and has an unadjusted balance in Salaries Expense of $845,000 at December 31. Prepare the December 31, 2018 adjusting entry.

Accepted Answer

\[\begin{array} { l } 
\text {

Question 17

A good or service is considered transferred when the customer places an order or requests a service.

Accepted Answer

A) True 
 B)False

Question 18

In the case of a deferred expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the deferred expense was initially recorded as an asset.

Accepted Answer

A) True 
 B)False

Question 19

Deferred revenues, also called unearned revenues, arise when a business collects cash before earning the revenue.

Accepted Answer

A) True 
 B)False

Question 20

The time period concept assumes that the activities of a business can be sliced into small time segments and that financial statements can be prepared for specific periods of time.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

Deferred revenues are assets because the business has collected the cash before earning the revenue.

Princeton Financial Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, what account, other than Computers, should appear on the balance sheet as of December 31, 2018?

An internal document that helps summarize data for the preparation of financial statements is called a ________.

Unearned Revenue is a(n) ________ account and carries a normal ________ balance.

The time period concept states that ________.

The key differences between the cash basis and accrual basis of accounting can be explained by understanding the rules of debits and credits.

The Pediatric Dental Corporation prepays the rent on its dental office. On July 1, the corporation paid $18,000 for 6 months of rent. The rent period begins on July 1. How much Rent Expense should the corporation record for the three months ended September 30 under the cash basis? Why?

Jupiter, Inc. signed a one-year $24,000 note payable at 8% interest on March 1, 2019. How much interest expense must be accrued on May 31, 2019? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

If a company fails to make an adjusting entry to record accrued expenses, the liabilities and net income will be overstated.

Adjusting entries are needed to correctly measure the ________.

If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of rent had been previously recorded as a(n) ________.

A good or service is considered transferred when the customer places an order or requests a service.

In the case of a deferred expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the deferred expense was initially recorded as an asset.

Deferred revenues, also called unearned revenues, arise when a business collects cash before earning the revenue.

The time period concept assumes that the activities of a business can be sliced into small time segments and that financial statements can be prepared for specific periods of time.

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

Unearned Revenue is a(n) account and carries a normal balance.