Question 1

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accepted Answer

A) Cash basis accounting. 
B) The matching principle. 
C) The time period assumption. 
D) Accrual basis accounting. 
E) Revenue basis accounting. 
A) Cash basis accounting. 
B) The matching principle. 
C) The time period assumption. 
D) Accrual basis accounting. 
E) Revenue basis accounting.

Question 2

On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs. The adjusting entry needed on December 31 of the first year is:

Accepted Answer

A) Debit Depreciation Expense, $9,000; credit Accumulated Depreciation, $9,000. 
B) Debit Depreciation Expense, $18,000; credit Accumulated Depreciation, $18,000. 
C) Debit Depreciation Expense, $90,000; credit Accumulated Depreciation, $90,000. 
D) Debit Depreciation Expense, $18,000; credit Equipment, $18,000. 
E) Debit Depreciation Expense, $9,000; credit Equipment, $9,000. 
A) Debit Depreciation Expense, $9,000; credit Accumulated Depreciation, $9,000. 
B) Debit Depreciation Expense, $18,000; credit Accumulated Depreciation, $18,000. 
C) Debit Depreciation Expense, $90,000; credit Accumulated Depreciation, $90,000. 
D) Debit Depreciation Expense, $18,000; credit Equipment, $18,000. 
E) Debit Depreciation Expense, $9,000; credit Equipment, $9,000.

Question 3

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example.

Accepted Answer

The answer of Using the table below, indicate the impact...

Question 4

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Accepted Answer

A) Debit Cash and credit Legal Fees Earned. 
B) Debit Cash and credit Unearned Legal Fees. 
C) Debit Unearned Legal Fees and credit Legal Fees Earned. 
D) Debit Legal Fees Earned and credit Unearned Legal Fees. 
E) Debit Unearned Legal Fees and credit Accounts Receivable. 
A) Debit Cash and credit Legal Fees Earned. 
B) Debit Cash and credit Unearned Legal Fees. 
C) Debit Unearned Legal Fees and credit Legal Fees Earned. 
D) Debit Legal Fees Earned and credit Unearned Legal Fees. 
E) Debit Unearned Legal Fees and credit Accounts Receivable.

Question 5

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

Accepted Answer

A) True 
 B)False

Question 6

Recording revenues early overstates current-period income; recording revenues late understates current period income.

Accepted Answer

A) True 
 B)False

Question 7

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

Accepted Answer

A) True 
 B)False

Question 8

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

Accepted Answer

The answer of _____________ expenses are those costs that are...

Question 9

An adjusting entry often includes an entry to Cash.

Accepted Answer

A) True 
 B)False

Question 10

If a company plans to continue business into the future, closing entries are not required.

Accepted Answer

A) True 
 B)False

Question 11

A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:

Accepted Answer

A) $4,000. 
B) $800. 
C) $1,600. 
D) $2,400. 
E) $3,200. 
A) $4,000. 
B) $800. 
C) $1,600. 
D) $2,400. 
E) $3,200.

Question 12

A company purchased a building at a cost of $280,000 on January 1. The building is estimated to have a useful life of 15 years and a $40,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense for the building for the second year?

Accepted Answer

A) $16,000 
B) $18,667 
C) $264,000 
D) $32,000 
E) $248,000 
A) $16,000 
B) $18,667 
C) $264,000 
D) $32,000 
E) $248,000

Question 13

Which of the following does not require an adjusting entry at year-end?

Accepted Answer

A) Accrued interest on notes payable. 
B) Supplies used during the period. 
C) Cash invested by stockholder. 
D) Accrued wages. 
E) Expired portion of prepaid insurance. 
A) Accrued interest on notes payable. 
B) Supplies used during the period. 
C) Cash invested by stockholder. 
D) Accrued wages. 
E) Expired portion of prepaid insurance.

Question 14

The unadjusted trial balance of Barber Housekeeping Service, Inc. is entered on the partial work sheet below.   Required:
Complete the work sheet using the following information:
(a) Salaries earned by employees that are unpaid and unrecorded, $5,000.
(b) An inventory of supplies showed $3,000 of unused supplies still on hand.
(c) Depreciation on automobiles, $30,000.
(d) Advertising for November and December in the amount of $8,000 remains unpaid and unrecorded.

Accepted Answer

The answer of The unadjusted trial balance of Barber Housekeeping...

Question 15

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Accepted Answer

A) Debit Office Supplies $105 and credit Office Supplies Expense $105. 
B) Debit Office Supplies Expense $105 and credit Office Supplies $105. 
C) Debit Office Supplies Expense $254 and credit Office Supplies $254. 
D) Debit Office Supplies $254 and credit Office Supplies Expense $254. 
E) Debit Office Supplies $105 and credit Supplies Expense $254. 
A) Debit Office Supplies $105 and credit Office Supplies Expense $105. 
B) Debit Office Supplies Expense $105 and credit Office Supplies $105. 
C) Debit Office Supplies Expense $254 and credit Office Supplies $254. 
D) Debit Office Supplies $254 and credit Office Supplies Expense $254. 
E) Debit Office Supplies $105 and credit Supplies Expense $254.

Question 16

Based on the unadjusted trial balance for Highlight Styling, Inc. and the adjusting information given below, prepare the adjusting journal entries for Highlight Styling Inc.
Highlight Styling Inc.'s unadjusted trial balance for the current year follows:   Additional information:
a. An insurance policy examination showed $1,040 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,020.
e. A beautician is behind on space rental payments, and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was still unearned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month's interest on the note payable, $600, has accrued but is unrecorded.

Accepted Answer

The answer of Based on the unadjusted trial balance for...

Question 17

Which of the following statements regarding reporting under GAAP and IFRS is not true?

Accepted Answer

A) Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets. 
B) The definition of an asset under GAAP and IFRS involves three basic criteria. 
C) Both GAAP and IFRS define the initial asset value as replacement value. 
D) The definition of a liability under GAAP and IFRS involves three basic criteria. 
E) After acquisition, one of two asset measurement systems is applied. 
A) Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets. 
B) The definition of an asset under GAAP and IFRS involves three basic criteria. 
C) Both GAAP and IFRS define the initial asset value as replacement value. 
D) The definition of a liability under GAAP and IFRS involves three basic criteria. 
E) After acquisition, one of two asset measurement systems is applied.

Question 18

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Accepted Answer

A) True 
 B)False

Question 19

The current ratio:

Accepted Answer

A) Is used to measure a company's profitability. 
B) Is used to measure the relation between assets and long-term debt. 
C) Measures the effect of operating income on profit. 
D) Is used to help assess a company's ability to pay its debts in the near future. 
E) Is calculated by dividing current assets by equity. 
A) Is used to measure a company's profitability. 
B) Is used to measure the relation between assets and long-term debt. 
C) Measures the effect of operating income on profit. 
D) Is used to help assess a company's ability to pay its debts in the near future. 
E) Is calculated by dividing current assets by equity.

Question 20

The following information is available for Brendon Company, Inc. before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained Earnings?

Accepted Answer

A) $80,000. 
B) $64,400. 
C) $43,000. 
D) $32,400. 
E) $42,400. 
A) $80,000. 
B) $64,400. 
C) $43,000. 
D) $32,400. 
E) $42,400.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs. The adjusting entry needed on December 31 of the first year is:

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example.

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

Recording revenues early overstates current-period income; recording revenues late understates current period income.

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

An adjusting entry often includes an entry to Cash.

If a company plans to continue business into the future, closing entries are not required.

A company purchased a building at a cost of $280,000 on January 1. The building is estimated to have a useful life of 15 years and a $40,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense for the building for the second year?

Which of the following does not require an adjusting entry at year-end?

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Which of the following statements regarding reporting under GAAP and IFRS is not true?

An expense account is normally closed by debiting Income Summary and crediting the expense account.

The current ratio:

The following information is available for Brendon Company, Inc. before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained Earnings?

Introducing Financial Accounting

Accounting System and Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 3: Adjusting Accounts for Financial Statements

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs. The adjusting entry needed on December 31 of the first year is:

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example.

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

Recording revenues early overstates current-period income; recording revenues late understates current period income.

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

An adjusting entry often includes an entry to Cash.

If a company plans to continue business into the future, closing entries are not required.

A company purchased a building at a cost of $280,000 on January 1. The building is estimated to have a useful life of 15 years and a $40,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense for the building for the second year?

Which of the following does not require an adjusting entry at year-end?

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Which of the following statements regarding reporting under GAAP and IFRS is not true?

An expense account is normally closed by debiting Income Summary and crediting the expense account.

The current ratio:

The following information is available for Brendon Company, Inc. before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained Earnings?

Introducing Financial Accounting

Accounting System and Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters