Question 1

Which of the following accounts would be used under the accrual basis of accounting,but not under cash basis accounting?

Accepted Answer

A)  Cash 
B)  Unearned Revenue 
C)  Service Revenue 
D)  Salaries Expense 
A)  Cash 
B)  Unearned Revenue 
C)  Service Revenue 
D)  Salaries Expense

Question 2

The goal of the time period concept is to compute an accurate net income or net loss.

Accepted Answer

A) True 
 B)False

Question 3

Bayside Technical Services signed a contract on a six-month job for a client,starting on March 1.Bayside will collect $24,000 from its customer when the job is finished but the revenue is earned evenly over the six months.On March 31,before adjusting entries are made,Bayside's Accounts Receivable account had a debit balance of $6,000.After the March 31 monthly adjusting entry has been made,what will be the balance in Accounts Receivable?

Accepted Answer

A)  Debit balance of $4,000 
B)  Credit balance of $20,000 
C)  Debit balance of $10,000 
D)  Debit balance of $24,000 
A)  Debit balance of $4,000 
B)  Credit balance of $20,000 
C)  Debit balance of $10,000 
D)  Debit balance of $24,000

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The accounting records of Mason Service Company include the following selected,unadjusted balances at June 30: Accounts Receivable,$2,700; Office Supplies,$1,800; Prepaid Rent,$3,600; Equipment,$15,000; Accumulated Depreciation - Equipment,$1,800; Salaries Payable,$0; Unearned Revenue,$2,400; Office Supplies Expense,$2,800; Rent Expense,$0; Salaries Expense,$15,000; Service Revenue,$40,500.
The following data developed for adjusting entries are as follows:
a.Service revenue accrued,$1,400
b.Unearned Revenue that has been earned,$800
c.Office Supplies on hand,$700
d.Salaries owed to employees,$1,800
e.One month of prepaid rent has expired,$1,200
f.Depreciation on equipment,$1,500
Journalize the adjusting entries.Omit explanations.
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { Accounts } & \text { Debit } & \text { Credit } \
\hline \mathrm { a }& & & \
\hline \mathrm { b }& & & \
\hline\mathrm {  c }& & & \
\hline \mathrm { d} & & & \
\hline \mathrm { e } & & & \
\hline\mathrm {  f }& & & \
\hline
\end{array}$$

Accepted Answer

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

Question 8

Cash received in advance of providing the service is called ________.

Accepted Answer

A)  accrued revenues 
B)  deferred expenses 
C)  deferred revenues 
D)  accrued expenses 
A)  accrued revenues 
B)  deferred expenses 
C)  deferred revenues 
D)  accrued expenses

Question 9

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The accountant for Diamond Jewelry Repair Services Company forgot to make an adjusting entry for Depreciation Expense for the current year.Which of the following is an effect of this error?

Accepted Answer

A)  Revenues are understated. 
B)  Total assets are understated. 
C)  Net income is overstated. 
D)  Total liabilities are understated. 
A)  Revenues are understated. 
B)  Total assets are understated. 
C)  Net income is overstated. 
D)  Total liabilities are understated.

Question 12

At the time the transaction occurred,which of the following would result in an increase in net income under the accrual basis of accounting,but would not result in an increase in net income under cash basis accounting?

Accepted Answer

A)  purchase of supplies for cash 
B)  performance of services on account 
C)  use of supplies purchased earlier 
D)  receipt of cash for services that were performed earlier on account 
A)  purchase of supplies for cash 
B)  performance of services on account 
C)  use of supplies purchased earlier 
D)  receipt of cash for services that were performed earlier on account

Question 13

On January 1,2018,the Prepaid Insurance account of Dogwood Company had a beginning balance of $1,500.Three months of insurance premiums remain in this beginning balance.On February 21,2018,the company paid an annual insurance premium in the amount of $3,400 for the period beginning March 1.On February 28,2018,the balance in Prepaid Insurance is $1,000.

Accepted Answer

A) True 
 B)False

Question 14

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Accepted Answer

A) True 
 B)False

Question 15

Luminous Electrical Company performed services of $8,000 on January 24 and invoiced the customer.Luminous received the $8,000 on January 31.Provide the journal entry on January 24 when services were performed.(Ignore explanation.)

Accepted Answer

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

Question 16

The accountant of Reliable Consulting Company failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year.Assume the company initially recorded a liability.Which of the following statements is TRUE?

Accepted Answer

A)  The total liabilities will be overstated. 
B)  The total liabilities will be understated. 
C)  The total assets will be overstated. 
D)  The total assets will be understated. 
A)  The total liabilities will be overstated. 
B)  The total liabilities will be understated. 
C)  The total assets will be overstated. 
D)  The total assets will be understated.

Question 17

The adjusted trial balance is prepared after the adjustments have been journalized and posted.

Accepted Answer

A) True 
 B)False

Question 18

On July 1,Delta Company prepaid rent for an equipment storage building.Delta paid $20,000 to rent the building from July 1 through the end of the year.Prepare the journal entry needed on July 1 when the payment is made.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.

Accepted Answer

None

Question 19

On March 1,2016,Nortons Company paid $60,000 as office rent covering the three-month period ending May 31,2016.Journalize the entry on March 1 by using the alternative treatment of deferred expenses.Omit explanation.

Accepted Answer

None

Question 20

A worksheet is an internal document that helps summarize data for the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

Which of the following accounts would be used under the accrual basis of accounting,but not under cash basis accounting?

The goal of the time period concept is to compute an accurate net income or net loss.

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

To match expenses against revenues means to ________.

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

Cash received in advance of providing the service is called ________.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

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

The accountant for Diamond Jewelry Repair Services Company forgot to make an adjusting entry for Depreciation Expense for the current year.Which of the following is an effect of this error?

At the time the transaction occurred,which of the following would result in an increase in net income under the accrual basis of accounting,but would not result in an increase in net income under cash basis accounting?

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Luminous Electrical Company performed services of $8,000 on January 24 and invoiced the customer.Luminous received the $8,000 on January 31.Provide the journal entry on January 24 when services were performed.(Ignore explanation.)

The accountant of Reliable Consulting Company failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year.Assume the company initially recorded a liability.Which of the following statements is TRUE?

The adjusted trial balance is prepared after the adjustments have been journalized and posted.

On March 1,2016,Nortons Company paid $60,000 as office rent covering the three-month period ending May 31,2016.Journalize the entry on March 1 by using the alternative treatment of deferred expenses.Omit explanation.

A worksheet is an internal document that helps summarize data for the preparation of financial statements.

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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