Question 1

Which of the following is/are true?

Accepted Answer

A) After cost of sales, the income statement typically shows deductions for other expenses associated with operations (other operating expenses). 
B) Many firms present a subtotal called operating income or operating profit, the difference between revenues and expenses associated with core operating activities. 
C) Two common types of operating expenses are selling, general, and administrative expenses (SG&
A)  and research and development expenses (R&
D) . 
D) All of the above are true. 
E) None of the above are true. 
A) After cost of sales, the income statement typically shows deductions for other expenses associated with operations (other operating expenses). 
B) Many firms present a subtotal called operating income or operating profit, the difference between revenues and expenses associated with core operating activities. 
C) Two common types of operating expenses are selling, general, and administrative expenses (SG&
A)  and research and development expenses (R&
D) . 
D) All of the above are true. 
E) None of the above are true.

Question 2

Which of the following is correct?

Accepted Answer

A) Retained Earnings normally has a debit balance. 
B) Retained Earnings normally has a credit balance. 
C) Retained Earnings is closed at the end of the fiscal year. 
D) Retained Earnings is a nominal account. 
E) None of these answer choices is correct. 
A) Retained Earnings normally has a debit balance. 
B) Retained Earnings normally has a credit balance. 
C) Retained Earnings is closed at the end of the fiscal year. 
D) Retained Earnings is a nominal account. 
E) None of these answer choices is correct.

Question 3

Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders.

Accepted Answer

A) True 
 B)False

Question 4

The result of closing entries is that balances in all temporary accounts

Accepted Answer

A) are adjusted to historical cost. 
B) include monthly depreciation. 
C) are adjusted to zero. 
D) are adjusted to budgeted amounts. 
E) are adjusted to current values. 
A) are adjusted to historical cost. 
B) include monthly depreciation. 
C) are adjusted to zero. 
D) are adjusted to budgeted amounts. 
E) are adjusted to current values.

Question 5

On the next page is the unadjusted trial balance of Bogo Department Store on December 31, Year 6.The company closes its books annually.You are asked to indicate the adjusting entries required on December 31, Year 6 to conform the books to accrual accounting principles.
 1. Bogo neglected to record unpaid charges for telephone services for December in the amount of $13,700.
2. The balance in the Advances from Customers account represents the amount received from a lessee on November 1, Year 6 for the rental of excess warehouse space owned by Bogo. The rental period is for the six months ended April 30, Year 7.
3. Bogo acquired a warehouse on July 1, Year 6 and correctly recorded the acquisition cost of $600,000 in its accounts. The warehouse has a 30-year estimated life and zero salvage value. Bogo neglected to record depreciation on the warehouse, although it has correctly recorded depreciation on all other depreciable assets for Year 6.
4. Bogo debited Selling and Administrative Expenses for salaries paid during Year 6. Salaries remaining unpaid as of December 31, Year 6 total $3,700.
5. Sales made on account during the last two days of December, Year 6 totaled $12,000. Bogo incorrectly recorded these sales by debiting accounts payable. These accounts had not been collected by year end.
6. Bogo sold a piece of equipment during Year 6 for $1,800 that had originally cost $6,000 and had accumulated depreciation of $4,200. Bogo recorded this sale by debiting Cash for $1,800 and crediting Equipment for $1,800.
7. The balance in the Prepaid Insurance account represents the balance as of January 1, Year 6. Bogo renewed its only insurance policy on March 1, Year 6 and charged the one-year premium of $5,100 to Selling and Administrative Expenses.
8. A physical inventory of store supplies on December 31, Year 6 revealed that supplies costing $1,850 were on hand.
9. The note receivable was received from a corporate officer on December 1, Year 6. The note bears interest at 6 percent. The interest is payable with the principal amount borrowed at maturity on June 1, Year 7.
  
Required:
Indicate the letters in the unadjusted trial balance corresponding to the accounts debited and credited and the amount in each debit and credit entry.Use only the accounts listed in the unadjusted trial balance.More than one account may be debited or credited in a particular adjusting entry.If no adjusting entry is needed, indicate "No Entry" by the number of the entry.Remember that asset increases and liability and shareholders' equity decreases are recorded with debits and asset decreases and liability and shareholders' equity increases are recorded with credits.

Accepted Answer

The answer of On the next page is the unadjusted...

Question 6

The following balances have been excerpted from Bain balance sheets: $\begin{array}{lcr}& \text { December 31, 2014}& \text { December 31,2013}\
\hline \text { Prepaid Insurance }&66,000 & \$ 7,500 \
\text { Interest Receivable }&3,700 & 14,500 \
\text { Salaries Payable }&61,500 & 53,000\\
\text { Bain Company paid or collected during } 2014 \text { the following items: }\
\text { Insurance premiums paid. }&\$41,500\
\text { Interest collected }&123,500\
\text { Salaries paid }&481,000
\end{array}$ The salary expense on the income statement for 2014 was

Accepted Answer

A) $366,500. 
B) $472,500. 
C) $489,500. 
D) $595,500. 
E) None of these answer choices is correct. 
A) $366,500. 
B) $472,500. 
C) $489,500. 
D) $595,500. 
E) None of these answer choices is correct.

Question 7

Expenses provide future benefits, and assets measure the consumption of those benefits.

Accepted Answer

A) True 
 B)False

Question 8

Humana Corporation neglected to make various adjusting entries on December 31, Year 8.Indicate the effects on assets, liabilities, and shareholders' equity on December 31, Year 8 of failing to adjust for the following independent items as appropriate, using the notation O/S (overstated), U/S (understated), and No (no effect).Also, give the amount of the effect.Ignore income tax implications.Use the following format:
  
a. On December 15, Year 8, Humana Corporation received a $1,400 advance from a customer for products to be manufactured and delivered in January, Year 9. The firm recorded the advance by debiting Cash and crediting Sales Revenue and has made no adjusting entry as of December 31, Year 8.
b. On July 1, Year 8, Humana Corporation acquired a machine for $5,000 and recorded the acquisition by debiting Cost of Goods Sold and crediting Cash. The machine has a five-year useful life and zero estimated salvage value.
c. On November 1, Year 8, Humana Corporation received a $2,000 note receivable from a customer in settlement of an accounts receivable. It debited Notes Receivable and credited Accounts Receivable upon receipt of the note. The note is a six-month note due April 30, Year 9 and bears interest at an annual rate of 12 percent. Humana Corporation made no other entries related to this note during Year 8.
d. Humana Corporation paid its annual insurance premium of $1,200 on October 1, Year 8, the first day of the year of coverage. It debited Prepaid Insurance $900, debited Insurance Expense $300, and credited Cash for $1,200. It made no other entries related to this insurance during Year 8.
e. The Board of Directors of Humana Corporation declared a dividend of $1,500 on December 31, Year 8. The dividend will be paid on January 15, Year 9. Humana Corporation neglected to record the dividend declaration.
f. On December 1, Year 8, Humana Corporation purchased a machine on account for $50,000, debiting Machinery and crediting Accounts Payable for $50,000. Ten days later, the account was paid and the company took the allowed 2 percent discount. Cash was credited $49,000, Miscellaneous Revenue was credited $1,000, and Accounts Payable was debited $50,000. It is the policy of Humana Corporation to record cash discounts taken as a reduction in the cost of assets. On December 28, Year 8, the machine was installed for $4,000 in cash; Maintenance Expense was debited and Cash was credited for $4,000. The machine started operation on January 1, Year 9. As the machine was not placed into operation until January 1, Year 9, as appropriate, no depreciation expense was recorded for Year 8.

Accepted Answer

Effect of Errors or

Question 9

Which of the following is/are true?

Accepted Answer

A) Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms. 
B) Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms. 
C) In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis. 
D) In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed. 
E) all of the above are true 
A) Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms. 
B) Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms. 
C) In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis. 
D) In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed. 
E) all of the above are true

Question 10

The closing process involve(s):

Accepted Answer

A) reducing to zero the balance in each income statement account. 
B) debiting the revenue accounts. 
C) crediting the expense accounts. 
D) transferring to Retained Earnings the differences between total revenues and total expenses. 
E) all of the above. 
A) reducing to zero the balance in each income statement account. 
B) debiting the revenue accounts. 
C) crediting the expense accounts. 
D) transferring to Retained Earnings the differences between total revenues and total expenses. 
E) all of the above.

Question 11

Entries for the following items were either omitted or recorded incorrectly in preparing the financial statements for Year 3.Indicate the amount and nature [understatement (U), overstatement (O), no effect (N)] of the effect of the omission on total assets, total liabilities, and net income for Year 3.Ignore income tax effects.Use the following format:
 $\text { Total Assets\quad\quad Total Liabilities\quad\quad\quad Net Income }$
a.	On December 1, Year 3, a firm debits Prepaid Rent (Advances to Car Rental Agency) for $600 for 6 months' rent on an automobile. The firm has neglected to make the adjusting entry on December 31.
b.	A firm debits Administrative Expenses for $6,000 for a microcomputer acquired on July 1, Year 3. The microcomputer has an expected useful life of 3 years and zero estimated salvage value.
c.	A firm rents out excess office space for the 6-month period beginning January 1, Year 3. It received the rental check for this period of $600 on December 26, Year 2, and correctly credited Advances from Tenants. It made no further journal entries during Year 3.
d.	Interest on Notes Receivable of $500 had accrued by December 31, Year 3, but the firm overlooked making an entry to record this interest.
e.	A firm receives a check for $250 from a customer on December 31, Year 3, in settlement of an account receivable. The firm recorded this entry with a credit to Sales.
f.	A firm records as $470 an expenditure of $740 for travel during December, Year 3.

Accepted Answer

The answer of Entries for the following items were either...

Question 12

Certain merchandise that a firm may acquire may be inventory or supplies.Accounting treats them differently as to the matching criteria used.
Required:
 a.Describe the situation where merchandise would be considered inventory. How would the firm account for the costs of the merchandise?
b.Describe the situation where merchandise would be considered supplies. How would the firm account for the costs of the merchandise?

Accepted Answer

a.A firm that is an office supply store

Question 13

Which of the following is/are true?

Accepted Answer

A) Cost is the economic sacrifice made to acquire goods or services. 
B) When the good or service acquired has reliably measurable future benefits to a firm, the cost is an asset. 
C) When the firm consumes the good or service, the cost is an expense. 
D) All of the above are true. 
E) None of the above are true. 
A) Cost is the economic sacrifice made to acquire goods or services. 
B) When the good or service acquired has reliably measurable future benefits to a firm, the cost is an asset. 
C) When the firm consumes the good or service, the cost is an expense. 
D) All of the above are true. 
E) None of the above are true.

Question 14

Adjusting entries are part of the measurement of net income for the period and financial position at the end of the period.

Accepted Answer

A) True 
 B)False

Question 15

The _____ convention, links the timing of some expenses with revenue recognition.

Accepted Answer

A) going concern 
B) conservatism 
C) matching 
D) materiality 
E) objectivity 
A) going concern 
B) conservatism 
C) matching 
D) materiality 
E) objectivity

Question 16

Which financial statement reports operating performance for a specific period of time?

Accepted Answer

A) Balance sheet 
B) Income statement 
C) Statement of changes in shareholders' equity 
D) Statement of retained earnings 
E) Statement of Cash Flows 
A) Balance sheet 
B) Income statement 
C) Statement of changes in shareholders' equity 
D) Statement of retained earnings 
E) Statement of Cash Flows

Question 17

If an expense has been incurred but not yet recorded, then the end-of-period adjusting entry would involve

Accepted Answer

A) a liability account and an asset account. 
B) a liability account and a revenue account. 
C) a liability and an expense account. 
D) a receivable account and a revenue account. 
E) None of these answer choices is correct. 
A) a liability account and an asset account. 
B) a liability account and a revenue account. 
C) a liability and an expense account. 
D) a receivable account and a revenue account. 
E) None of these answer choices is correct.

Question 18

Failure to record the expired amount of prepaid rent expense would not

Accepted Answer

A) understate expense. 
B) overstate net income. 
C) overstate owners' equity. 
D) understate liabilities. 
E) All of these choices would result from failure to record expired prepaid rent. 
A) understate expense. 
B) overstate net income. 
C) overstate owners' equity. 
D) understate liabilities. 
E) All of these choices would result from failure to record expired prepaid rent.

Question 19

The Supplies account balance at the beginning of the period was $6,600.Supplies totaling $12,825 were purchased during the period and debited to Supplies .A physical count shows $3,825 of Supplies at the end of the period.The proper journal entry at the end of the period

Accepted Answer

A) debits Supplies and credits Supplies Expense for $9,000. 
B) debits Supplies Expense and credits Supplies for $12,825. 
C) debits Supplies and credits Supplies Expense for $15,600. 
D) debits Supplies Expense and credits Supplies for $15,600. 
E) None of these choices are correct. 
A) debits Supplies and credits Supplies Expense for $9,000. 
B) debits Supplies Expense and credits Supplies for $12,825. 
C) debits Supplies and credits Supplies Expense for $15,600. 
D) debits Supplies Expense and credits Supplies for $15,600. 
E) None of these choices are correct.

Question 20

Which of the following is/are true?

Accepted Answer

A) Revenues measure the inflow of net assets from operating activities. 
B) Expenses measure the outflow of net assets consumed in the process of generating revenues. 
C) Recognizing revenues and expenses always involves a simultaneous entry in an asset and/or liability account. 
D) Adjusting entries almost always involve an entry in at least one income statement and one balance sheet account. 
E) All of the above answer choices are true. 
A) Revenues measure the inflow of net assets from operating activities. 
B) Expenses measure the outflow of net assets consumed in the process of generating revenues. 
C) Recognizing revenues and expenses always involves a simultaneous entry in an asset and/or liability account. 
D) Adjusting entries almost always involve an entry in at least one income statement and one balance sheet account. 
E) All of the above answer choices are true.

Which of the following is/are true?

Which of the following is correct?

Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders.

The result of closing entries is that balances in all temporary accounts

Expenses provide future benefits, and assets measure the consumption of those benefits.

Which of the following is/are true?

The closing process involve(s):

Which of the following is/are true?

Adjusting entries are part of the measurement of net income for the period and financial position at the end of the period.

The _____ convention, links the timing of some expenses with revenue recognition.

Which financial statement reports operating performance for a specific period of time?

If an expense has been incurred but not yet recorded, then the end-of-period adjusting entry would involve

Failure to record the expired amount of prepaid rent expense would not

The Supplies account balance at the beginning of the period was $6,600.Supplies totaling $12,825 were purchased during the period and debited to Supplies .A physical count shows $3,825 of Supplies at the end of the period.The proper journal entry at the end of the period

Which of the following is/are true?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Which of the following is/are true?

Which of the following is correct?

Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders.

The result of closing entries is that balances in all temporary accounts

Expenses provide future benefits, and assets measure the consumption of those benefits.

Which of the following is/are true?

The closing process involve(s):

Which of the following is/are true?

Adjusting entries are part of the measurement of net income for the period and financial position at the end of the period.

The _____ convention, links the timing of some expenses with revenue recognition.

Which financial statement reports operating performance for a specific period of time?

If an expense has been incurred but not yet recorded, then the end-of-period adjusting entry would involve

Failure to record the expired amount of prepaid rent expense would not

The Supplies account balance at the beginning of the period was $6,600.Supplies totaling $12,825 were purchased during the period and debited to Supplies .A physical count shows $3,825 of Supplies at the end of the period.The proper journal entry at the end of the period

Which of the following is/are true?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters