Question 1

Under cash basis accounting,an expense is recorded only when cash is paid.

Accepted Answer

A) True 
 B)False

Question 2

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

Accepted Answer

A) True 
 B)False

Question 3

Accrued revenue represents the receipt of cash before the revenue has been earned.

Accepted Answer

A) True 
 B)False

Question 4

To fill in the unadjusted trial balance columns in a worksheet,the account balances before adjustments are copied directly from the ________.

Accepted Answer

A) ledger 
B) adjusted trial balance 
C) chart of accounts 
D) balance sheet of previous year 
A) ledger 
B) adjusted trial balance 
C) chart of accounts 
D) balance sheet of previous year

Question 5

DeLito Tax Planning Service bought production equipment for $10,200 on January 1,2017.It has an estimated useful life of five years and zero residual value.DeLito uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2017,the book value of this equipment shown on its balance sheet will be ________.

Accepted Answer

A) $9,180 
B) $10,200 
C) $11,220 
D) $10,370 
A) $9,180 
B) $10,200 
C) $11,220 
D) $10,370

Question 6

The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.

Accepted Answer

A) book value 
B) residual value 
C) depreciation expense 
D) accumulated depreciation 
A) book value 
B) residual value 
C) depreciation expense 
D) accumulated depreciation

Question 7

An adjusting entry is completed ________.

Accepted Answer

A) at the beginning of the accounting period 
B) at the end of the accounting period 
C) when the balance sheet is prepared 
D) when accounts need to be balanced in the ledger 
A) at the beginning of the accounting period 
B) at the end of the accounting period 
C) when the balance sheet is prepared 
D) when accounts need to be balanced in the ledger

Question 8

Viva,Inc.bought machine X for $18,000 two years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

Accepted Answer

A) $14,400 
B) $3,600 
C) $19,800 
D) $18,000 
A) $14,400 
B) $3,600 
C) $19,800 
D) $18,000

Question 9

The revenue recognition principle guides accountants in ________.

Accepted Answer

A) ensuring only revenues received in cash are recorded 
B) determining when to record expenses 
C) determining when to record revenues 
D) ensuring expenses are deducted from revenues 
A) ensuring only revenues received in cash are recorded 
B) determining when to record expenses 
C) determining when to record revenues 
D) ensuring expenses are deducted from revenues

Question 10

Healthy Living,a diet magazine,collected $240,000 in subscription revenue on May 31.Each subscriber will receive an issue of the magazine in each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.What is the amount of Subscription Revenue that has been earned by the end of December?

Accepted Answer

A) $100,000 
B) $180,000 
C) $240,000 
D) $140,000 
A) $100,000 
B) $180,000 
C) $240,000 
D) $140,000

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

Under accrual basis accounting,revenue is recorded only when cash is received.

Accepted Answer

A) True 
 B)False

Question 14

Allen Company is hired on December 15,2016 to perform services,beginning on December 16,2016.Under this agreement,Allen will earn $4,500 monthly and receive payment on January 15,2017.What amount of service revenue should be recorded for the year ending December 31,2016?

Accepted Answer

A) 0 
B) $2,250 
C) $4,500 
D) There is not enough information to answer this. 
A) 0 
B) $2,250 
C) $4,500 
D) There is not enough information to answer this.

Question 15

Which of the following statements is true of accrual basis accounting?

Accepted Answer

A) Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). 
B) Accrual basis accounting records expenses only when cash has been paid for them. 
C) Accrual basis accounting records revenue only when cash is received. 
D) Accrual basis accounting always results in greater net income than cash basis accounting. 
A) Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). 
B) Accrual basis accounting records expenses only when cash has been paid for them. 
C) Accrual basis accounting records revenue only when cash is received. 
D) Accrual basis accounting always results in greater net income than cash basis accounting.

Question 16

On December 31,2016,$2,500 of salaries have been earned but not yet paid to employees.If the business failed to make an adjusting entry on December 31,2016,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

The answer of On December 31,2016,$2,500 of salaries have been...

Question 17

The revenue recognition principle is the basis for recording revenues-both when to record revenue and the amount of revenue to record.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Financial statements are prepared from the balances in a(n)________.

Accepted Answer

A) general journal 
B) chart of accounts 
C) unadjusted trial balance 
D) adjusted trial balance 
A) general journal 
B) chart of accounts 
C) unadjusted trial balance 
D) adjusted trial balance

Question 20

Explore,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.Provide the journal entry for collection of cash in May.(Ignore explanation).Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

The answer of Explore,a travel magazine,collected $500,000 in subscription revenue...

Exam 3: The Adjusting Process

Under cash basis accounting,an expense is recorded only when cash is paid.

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

Accrued revenue represents the receipt of cash before the revenue has been earned.

To fill in the unadjusted trial balance columns in a worksheet,the account balances before adjustments are copied directly from the ________.

The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.

An adjusting entry is completed ________.

Viva,Inc.bought machine X for $18,000 two years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

The revenue recognition principle guides accountants in ________.

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

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

Under accrual basis accounting,revenue is recorded only when cash is received.

Allen Company is hired on December 15,2016 to perform services,beginning on December 16,2016.Under this agreement,Allen will earn $4,500 monthly and receive payment on January 15,2017.What amount of service revenue should be recorded for the year ending December 31,2016?

Which of the following statements is true of accrual basis accounting?

On December 31,2016,$2,500 of salaries have been earned but not yet paid to employees.If the business failed to make an adjusting entry on December 31,2016,indicate the effect on assets,liabilities,equity,and net income. Understated, Overstated, No Effect Assets Liabilities Equity Net Income

The revenue recognition principle is the basis for recording revenues-both when to record revenue and the amount of revenue to record.

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

Financial statements are prepared from the balances in a(n)________.

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, and Quality Management Systems

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

Accounting Information Systems

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