Question 1

The revenue recognition concept

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 2

On April 30, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required as of April 30. (b) If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of April 30?

Accepted Answer

The answer of On April 30, a business estimates depreciation...

Question 3

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

Accepted Answer

A) True 
 B)False

Question 4

What effect will this adjusting journal entry have on the accounting records?

Accepted Answer

A)  increase income 
B)  decrease net income 
C)  decrease expenses 
D)  increase assets 
A)  increase income 
B)  decrease net income 
C)  decrease expenses 
D)  increase assets

Question 5

Depreciation on equipment for the year is $6,300.
(a) Record the journal entry if the company adjusts its account once a year.
(b) Record the journal entry if the company adjusts its account on a monthly basis.

Accepted Answer

The answer of Depreciation on equipment for the year is...

Question 6

Generally accepted accounting principles requires that companies use the ____ of accounting.

Accepted Answer

A)  cash basis 
B)  deferral basis 
C)  accrual basis 
D)  account basis 
A)  cash basis 
B)  deferral basis 
C)  accrual basis 
D)  account basis

Question 7

Listed below are accounts to use for transactions (a) through (j), each identified by a number. Following this list are the transactions. You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box.

Accepted Answer

The answer of Listed below are accounts to use for...

Question 8

Depreciation Expense and Accumulated Depreciation 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 9

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 10

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

Accepted Answer

A) True 
 B)False

Question 11

A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription Revenue, $150.

Accepted Answer

A) True 
 B)False

Question 12

At the end of April, the first month of the year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated, because of the error, on (a) the income statement for April and (b) the balance sheet as of April 30. Also indicate whether the items in error will be overstated or understated.

Accepted Answer

The answer of At the end of April, the first...

Question 13

For the year ending June 30, Island Clinical Services mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. What is the combined effect of these errors on (a) revenues, (b) expenses, and (c) net income for the year ending June 30?

Accepted Answer

(a) Revenues were understated

Question 14

Given the following account balances for Garry's Tree Service, prepare a trial balance.

Accepted Answer

The answer of Given the following account balances for Garry's...

Question 15

Under accrual accounting, revenues and expenses should be recorded in the same period to which they relate.

Accepted Answer

A) True 
 B)False

Question 16

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

Accepted Answer

A) True 
 B)False

Question 17

Depreciation on Office Equipment is $3,300. The adjusting entry on December 31, 2011 would be

Accepted Answer

The answer of Depreciation on Office Equipment is $3,300. The...

Question 18

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry.

Accepted Answer

A)  Record the payment of wages. 
B)  Record wages that were paid last month. 
C)  Record wages paid in advance. 
D)  Record wages expense incurred and to be paid next month. 
A)  Record the payment of wages. 
B)  Record wages that were paid last month. 
C)  Record wages paid in advance. 
D)  Record wages expense incurred and to be paid next month.

Question 19

Two income statements for PS Enterprises are shown below:  
 Prepare a vertical analysis of PS Enterprises' income statements. Has operating income increased or decreased as a percentage of revenue?

Accepted Answer

A)  Yes, increased by 5% 
B)  Yes, increased by 111% 
C)  No, decreased by 5%. 
D)  None are correct. 
A)  Yes, increased by 5% 
B)  Yes, increased by 111% 
C)  No, decreased by 5%. 
D)  None are correct.

Question 20

What effect will this adjustment have on the accounting records?

Accepted Answer

A)  increase net income 
B)  increase revenues reported for the period 
C)  decrease liabilities 
D)  all of these 
A)  increase net income 
B)  increase revenues reported for the period 
C)  decrease liabilities 
D)  all of these

Exam 3: The Adjusting Process

The revenue recognition concept

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

What effect will this adjusting journal entry have on the accounting records?

Depreciation on equipment for the year is $6,300. (a) Record the journal entry if the company adjusts its account once a year. (b) Record the journal entry if the company adjusts its account on a monthly basis.

Generally accepted accounting principles requires that companies use the ____ of accounting.

Listed below are accounts to use for transactions (a) through (j), each identified by a number. Following this list are the transactions. You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box.

Depreciation Expense and Accumulated Depreciation are classified, respectively, as

Using accrual accounting, expenses are recorded and reported only

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription Revenue, $150.

Given the following account balances for Garry's Tree Service, prepare a trial balance.

Under accrual accounting, revenues and expenses should be recorded in the same period to which they relate.

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

Depreciation on Office Equipment is $3,300. The adjusting entry on December 31, 2011 would be

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry.

Two income statements for PS Enterprises are shown below: Prepare a vertical analysis of PS Enterprises' income statements. Has operating income increased or decreased as a percentage of revenue?

What effect will this adjustment have on the accounting records?

Introduction to Accounting and Business

Analyzing Transactions

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

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