Question 1

Adjusting entries do not update balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 2

List and briefly discuss three accounting concepts and principles that apply to accrual basis accounting.

Accepted Answer

1.Time period concept - A business's act

Question 3

For each of the following statements,indicate whether it applies to:
the cash basis of accounting (cash basis)
the accrual basis of accounting (accrual basis)
both the cash and accrual basis of accounting (both)
neither the cash nor the accrual basis of accounting (neither).
Your response should be cash basis,accrual basis,both,or neither.
 $$\begin{array} { | l | l | } 
\hline \text { Statement } & \text { Applies to } \
\hline \text { Does a good job of tracking a } & \
\text { business's cash flows } & \
\hline \text { It is irrelevant when cash is received } & \
\text { or paid } & \
\hline \text { May require a company to prorate a } & \
\text { prepayment of rent } & \
\hline
\end{array}$$

Accepted Answer

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

Question 4

Revenue is earned when ________.

Accepted Answer

A)  there is a binding agreement to provide goods or services 
B)  the journal entry to record revenue has been prepared 
C)  the business has received cash from the customer 
D)  (or as) the business satisfies each performance obligation 
A)  there is a binding agreement to provide goods or services 
B)  the journal entry to record revenue has been prepared 
C)  the business has received cash from the customer 
D)  (or as) the business satisfies each performance obligation

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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} { lll } 
\text

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

An adjusted trial balance does not list the revenues and expenses of a business.

Accepted Answer

A) True 
 B)False

Question 11

What type of account is Prepaid Rent,and what is its normal balance?

Accepted Answer

A)  It is an expense account and has a debit balance. 
B)  It is a liability account and has a credit balance. 
C)  It is a revenue account and has a credit balance. 
D)  It is an asset account and has a debit balance. 
A)  It is an expense account and has a debit balance. 
B)  It is a liability account and has a credit balance. 
C)  It is a revenue account and has a credit balance. 
D)  It is an asset account and has a debit balance.

Question 12

When does a company account for revenue if it uses cash basis accounting?

Accepted Answer

A)  when services are performed, even though cash may be received at a later date 
B)  before services are performed 
C)  when the services are being performed 
D)  when cash is received, either prior to, at the time of, or after the services are performed 
A)  when services are performed, even though cash may be received at a later date 
B)  before services are performed 
C)  when the services are being performed 
D)  when cash is received, either prior to, at the time of, or after the services are performed

Question 13

The matching principle is also called the ________.

Accepted Answer

A)  adjusting entry concept 
B)  revenue recognition principle 
C)  expense recognition principle 
D)  time period concept 
A)  adjusting entry concept 
B)  revenue recognition principle 
C)  expense recognition principle 
D)  time period concept

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 $5,000 (CR).During January and February,the company collected $2,000 and $700 as advance fees,respectively.During the two-month period,it performed services of $4,500 related to the deferred revenue.What is the balance in Unearned Revenue at the end of February?

Accepted Answer

A)  debit balance of $5,000 
B)  credit balance of $5,000 
C)  debit balance of $3,200 
D)  credit balance of $3,200 
A)  debit balance of $5,000 
B)  credit balance of $5,000 
C)  debit balance of $3,200 
D)  credit balance of $3,200

Question 15

Prepaid Rent is an expense account that appears on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

Jones Financial Services Company performed accounting services for a client in December.A bill was mailed to the client on December 30.The company received the client's check by mail on January 5.Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed?

Accepted Answer

A)  Service Revenue 
B)  Unearned Revenue 
C)  Accounts Payable 
D)  Prepaid Expense 
A)  Service Revenue 
B)  Unearned Revenue 
C)  Accounts Payable 
D)  Prepaid Expense

Question 17

An accrual adjusting entry records an expense after the cash is paid,or it records revenue before the cash is received.

Accepted Answer

A) True 
 B)False

Question 18

Marcy's Event Planning Services Company 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.Coverage begins on October 1.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 19

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

Question 20

The time period concept assumes that the activities of a business can be sliced into small time segments.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

Adjusting entries do not update balance sheet accounts.

List and briefly discuss three accounting concepts and principles that apply to accrual basis accounting.

Revenue is earned when ________.

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

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

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

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

An adjusted trial balance does not list the revenues and expenses of a business.

What type of account is Prepaid Rent,and what is its normal balance?

When does a company account for revenue if it uses cash basis accounting?

The matching principle is also called the ________.

Prepaid Rent is an expense account that appears on the income statement.

An accrual adjusting entry records an expense after the cash is paid,or it records revenue before the cash is received.

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.

The time period concept assumes that the activities of a business can be sliced into small time segments.

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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