Question 1

An adjusting entry to accrue an incurred expense will affect total liabilities.

Accepted Answer

A) True 
 B)False

Question 2

The revenue recognition principle

Accepted Answer

A)  is not in conflict with the cash method of accounting 
B)  determines when revenue is credited to a revenue account 
C)  states that revenue is not recorded until the cash is received 
D)  controls all revenue reporting for the cash basis of accounting 
A)  is not in conflict with the cash method of accounting 
B)  determines when revenue is credited to a revenue account 
C)  states that revenue is not recorded until the cash is received 
D)  controls all revenue reporting for the cash basis of accounting

Question 3

Using accrual accounting,expenses are recorded and reported only

Accepted Answer

A)  when they are incurred,whether or not cash is paid 
B)  when they are incurred and paid at the same time 
C)  if they are paid before they are incurred 
D)  if they are paid after they are incurred 
A)  when they are incurred,whether or not cash is paid 
B)  when they are incurred and paid at the same time 
C)  if they are paid before they are incurred 
D)  if they are paid after they are incurred

Question 4

The revenue recognition principle requires that the reporting of revenue be included in the period when cash for the service is received.

Accepted Answer

A) True 
 B)False

Question 5

All of the following statements regarding vertical analysis are true except

Accepted Answer

A)  vertical analysis may be prepared for several periods to analyze changes in relationships over time 
B)  in a vertical analysis of a balance sheet,each asset item is stated as a percent of total assets 
C)  in a vertical analysis of an income statement,each item is stated as a percent of total expenses 
D)  major differences between a company's vertical analysis and industry averages should be investigated 
A)  vertical analysis may be prepared for several periods to analyze changes in relationships over time 
B)  in a vertical analysis of a balance sheet,each asset item is stated as a percent of total assets 
C)  in a vertical analysis of an income statement,each item is stated as a percent of total expenses 
D)  major differences between a company's vertical analysis and industry averages should be investigated

Question 6

The matching principle requires expenses be recorded in the same period that the related revenue is recorded.

Accepted Answer

A) True 
 B)False

Question 7

Revenues and expenses should be recorded in the same period to which they relate.

Accepted Answer

A) True 
 B)False

Question 8

Gracie,Inc.made a prepaid rent payment of $2,800 on January 1.The company's monthly rent is $700.The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is

Accepted Answer

A)  $2,100 
B)  $700 
C)  $2,800 
D)  $1,400 
A)  $2,100 
B)  $700 
C)  $2,800 
D)  $1,400

Question 9

A company pays $36,000 for twelve months' rent on October 1,recording the prepayment as an asset.The adjusting entry on December 31 is a debit to Rent Expense,$9,000,and a credit to Prepaid Rent,$9,000.

Accepted Answer

A) True 
 B)False

Question 10

Supplies are recorded as assets when purchased.Therefore,the credit to Supplies in the adjusting entry is for the amount of supplies

Accepted Answer

A)  still on hand 
B)  purchased 
C)  used 
D)  required for the next accounting period 
A)  still on hand 
B)  purchased 
C)  used 
D)  required for the next accounting period

Question 11

The balance in the prepaid rent account before adjustment at the end of the year is $32,000,which represents four months' rent paid on December 1.The adjusting entry required on December 31 is

Accepted Answer

A)  debit Rent Expense,$8,000; credit Prepaid Rent,$8,000 
B)  debit Prepaid Rent,$24,000; credit Rent Expense,$8,000 
C)  debit Rent Expense,$24,000; credit Prepaid Rent,$8,000 
D)  debit Prepaid Rent,$8,000; credit Rent Expense,$8,000 
A)  debit Rent Expense,$8,000; credit Prepaid Rent,$8,000 
B)  debit Prepaid Rent,$24,000; credit Rent Expense,$8,000 
C)  debit Rent Expense,$24,000; credit Prepaid Rent,$8,000 
D)  debit Prepaid Rent,$8,000; credit Rent Expense,$8,000

Question 12

Which of the following is not a characteristic of the accrual basis of accounting?

Accepted Answer

A)  revenues and expenses are reported in the period in which cash is received or paid 
B)  revenues are reported on the income statement in the period in which they are earned 
C)  accrual basis of accounting supports the matching concept 
D)  expenses are reported in the same period as the revenues to which they relate 
A)  revenues and expenses are reported in the period in which cash is received or paid 
B)  revenues are reported on the income statement in the period in which they are earned 
C)  accrual basis of accounting supports the matching concept 
D)  expenses are reported in the same period as the revenues to which they relate

Question 13

Bloom's Company pays biweekly salaries of $40,000 every other Friday for a ten-day period ending on that day.The last payday of December is Friday,December 27.Assuming the next pay period begins on Monday,December 30,journalize the adjusting entry necessary at the end of the fiscal period (December 31).

Accepted Answer

$40,000 / 10 days =

Question 14

Depreciation Expense is reported on the balance sheet as an addition to the related asset.

Accepted Answer

A) True 
 B)False

Question 15

Adjusting entries affect at least one

Accepted Answer

A)  income statement account and one balance sheet account 
B)  revenue and the dividends account 
C)  asset and one stockholders' equity account 
D)  revenue and one stockholders' equity account 
A)  income statement account and one balance sheet account 
B)  revenue and the dividends account 
C)  asset and one stockholders' equity account 
D)  revenue and one stockholders' equity account

Question 16

The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past periods.

Accepted Answer

A) True 
 B)False

Question 17

Accrued salaries of $600 owed to employees for December 29,30,and 31 are not taken into consideration in preparing the financial statements for the year ended December 31.Indicate which items will be erroneously stated,because of the error,on (a)the income statement for the year and (b)the balance sheet as of December 31.Also indicate whether the items in error will be overstated or understated.

Accepted Answer

The answer of Accrued salaries of $600 owed to employees...

Question 18

At the end of the current year,$3,700 fees have been earned but have not been billed to clients.Journalize the adjusting entry to record the accrued fees.

Accepted Answer

The answer of At the end of the current year,$3,700...

Question 19

Accumulated Depreciation and Depreciation Expense are classified,respectively,as

Accepted Answer

A)  expense,contra asset 
B)  asset,contra liability 
C)  revenue,asset 
D)  contra asset,expense 
A)  expense,contra asset 
B)  asset,contra liability 
C)  revenue,asset 
D)  contra asset,expense

Question 20

Gizmo Inc.purchased a one-year insurance policy on October 1 for $1,800.The adjusting entry on December 31 would be
​

Accepted Answer

$1,800 / 1

Exam 3: The Adjusting Process

An adjusting entry to accrue an incurred expense will affect total liabilities.

The revenue recognition principle

Using accrual accounting,expenses are recorded and reported only

The revenue recognition principle requires that the reporting of revenue be included in the period when cash for the service is received.

All of the following statements regarding vertical analysis are true except

The matching principle requires expenses be recorded in the same period that the related revenue is recorded.

Revenues and expenses should be recorded in the same period to which they relate.

Gracie,Inc.made a prepaid rent payment of $2,800 on January 1.The company's monthly rent is $700.The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is

A company pays $36,000 for twelve months' rent on October 1,recording the prepayment as an asset.The adjusting entry on December 31 is a debit to Rent Expense,$9,000,and a credit to Prepaid Rent,$9,000.

Supplies are recorded as assets when purchased.Therefore,the credit to Supplies in the adjusting entry is for the amount of supplies

The balance in the prepaid rent account before adjustment at the end of the year is $32,000,which represents four months' rent paid on December 1.The adjusting entry required on December 31 is

Which of the following is not a characteristic of the accrual basis of accounting?

Depreciation Expense is reported on the balance sheet as an addition to the related asset.

Adjusting entries affect at least one

The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past periods.

At the end of the current year,$3,700 fees have been earned but have not been billed to clients.Journalize the adjusting entry to record the accrued fees.

Accumulated Depreciation and Depreciation Expense are classified,respectively,as

Gizmo Inc.purchased a one-year insurance policy on October 1 for $1,800.The adjusting entry on December 31 would be ​

Introduction to Accounting and Business

Analyzing Transactions

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current,installment Notes,and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Filters

Gizmo Inc.purchased a one-year insurance policy on October 1 for $1,800.The adjusting entry on December 31 would be