Question 1

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

Accepted Answer

A) True 
 B)False

Question 2

The declaration of a $5,000 dividend by JLH Company would be reported on which of JLH's financial statements?

Accepted Answer

A) The income statement only. 
B) The statement of stockholders' equity. 
C) The balance sheet only. 
D) The statement of cash flows. 
A) The income statement only. 
B) The statement of stockholders' equity. 
C) The balance sheet only. 
D) The statement of cash flows.

Question 3

At the end of the accounting period, the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 4

What is the effect on the financial statements when a company fails to accrue interest expense at year-end?

Accepted Answer

A) Net income is overstated and assets are overstated. 
B) Expenses are understated and liabilities are understated. 
C) Expenses are understated and stockholders' equity is understated. 
D) Net income is overstated and liabilities are overstateD.Failure to accrue interest expense results in expenses being understated and the resulting interest payable is not increased to reflect the obligation to pay this expense. 
A) Net income is overstated and assets are overstated. 
B) Expenses are understated and liabilities are understated. 
C) Expenses are understated and stockholders' equity is understated. 
D) Net income is overstated and liabilities are overstateD.Failure to accrue interest expense results in expenses being understated and the resulting interest payable is not increased to reflect the obligation to pay this expense.

Question 5

Which of the following does not correctly describe the following adjusting journal entry?

Accepted Answer

A) Total assets increase. 
B) The transaction is an example of an accrual. 
C) Stockholders' equity decreases. 
D) Net income increases. 
A) Total assets increase. 
B) The transaction is an example of an accrual. 
C) Stockholders' equity decreases. 
D) Net income increases.

Question 6

Which of the following statements regarding earnings per share is not correct?

Accepted Answer

A) Earnings per share can be reported on the income statement. 
B) The numerator is net income. 
C) The denominator is the average number of shares of common stock outstanding. 
D) Earnings per share does not have to be disclosed on the income statement or the notes to the financial statements. 
A) Earnings per share can be reported on the income statement. 
B) The numerator is net income. 
C) The denominator is the average number of shares of common stock outstanding. 
D) Earnings per share does not have to be disclosed on the income statement or the notes to the financial statements.

Question 7

An accrued expense is incurred and also paid for in the current period.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following does not correctly describe an adjusting journal entry that debits depreciation expense and credits accumulated depreciation?

Accepted Answer

A) The entry increases expenses and increases assets. 
B) The entry decreases net income and decreases assets. 
C) The entry increases expenses and decreases retained earnings. 
D) The entry decreases assets and decreases net income. 
A) The entry increases expenses and increases assets. 
B) The entry decreases net income and decreases assets. 
C) The entry increases expenses and decreases retained earnings. 
D) The entry decreases assets and decreases net income.

Question 9

Which of the following adjusting journal entries is not created as the result of an accrual?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

A deferred expense such as prepaid insurance is created when cash is paid in advance of the expense incurred, and is reduced when the expense is actually incurred.

Accepted Answer

A) True 
 B)False

Question 11

Modern Mother Magazine (MMM) has received cash subscriptions on April 1, 2016 in the amount of $3,600,000 for the next three years. The year-end for MMM is December 31, 2016. Magazine delivery occurs monthly and started on April 1, 2016. These were the only subscription sales for the year.
Required:
Answer the following questions for the year ended December 31, 2016.
A.What amount of cash should be reported for the year on the statement of cash flows?
B.What amount of subscriptions revenue should be reported on the income statement?
C.What amount would be reported as unearned subscriptions revenue on the balance sheet as of December 31, 2016?

Accepted Answer

A. $3,600,000.
B. $9

Question 12

Which of the following does not correctly describe an adjusting journal entry that debits supplies expense and credits supplies?

Accepted Answer

A) The entry increases expenses and decreases assets. 
B) The entry decreases net income and decreases assets. 
C) The entry increases expenses and increases retained earnings. 
D) The entry decreases net income and decreases stockholders' equity. 
A) The entry increases expenses and decreases assets. 
B) The entry decreases net income and decreases assets. 
C) The entry increases expenses and increases retained earnings. 
D) The entry decreases net income and decreases stockholders' equity.

Question 13

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

Accepted Answer

A) Total assets do not change. 
B) Net income decreases. 
C) Liabilities are decreased. 
D) Stockholders' equity increases. 
A) Total assets do not change. 
B) Net income decreases. 
C) Liabilities are decreased. 
D) Stockholders' equity increases.

Question 14

The journal entry to adjust the prepaid rent account for rent used during the period results in an increase in expenses and a decrease in stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 15

Under accrual accounting, interest expense would be recognized on the income statement when the interest has accrued with the passage of time even though cash has not been paid.

Accepted Answer

A) True 
 B)False

Question 16

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Accepted Answer

A) Net income is overstated and stockholders' equity is understated. 
B) Expenses are understated and stockholders' equity is understated. 
C) Expenses are understated and liabilities are overstated. 
D) Net income is overstated and assets are overstateD.Failure to record depreciation results in expenses being too low, net income being overstated and assets being overstated.Not recording depreciation expense fails to increase accumulated depreciation that, as a contra-asset, fails to decrease assets. 
A) Net income is overstated and stockholders' equity is understated. 
B) Expenses are understated and stockholders' equity is understated. 
C) Expenses are understated and liabilities are overstated. 
D) Net income is overstated and assets are overstateD.Failure to record depreciation results in expenses being too low, net income being overstated and assets being overstated.Not recording depreciation expense fails to increase accumulated depreciation that, as a contra-asset, fails to decrease assets.

Question 17

Which of the following correctly describes the closing entry process?

Accepted Answer

A) The closing process reduces the balances in the permanent accounts to zero at the end of each period. 
B) The closing entries are usually prepared prior to the adjusted trial balance. 
C) The closing process creates a zero balance in all temporary accounts at the end of each period. 
D) The closing process creates a zero balance at the end of each period for all accounts on the year-end trial balance. 
A) The closing process reduces the balances in the permanent accounts to zero at the end of each period. 
B) The closing entries are usually prepared prior to the adjusted trial balance. 
C) The closing process creates a zero balance in all temporary accounts at the end of each period. 
D) The closing process creates a zero balance at the end of each period for all accounts on the year-end trial balance.

Question 18

Which of the following journal entries is created to adjust for a previously recorded accrual?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 19

What is the effect on the financial statements when a company fails to accrue wages expense at year-end?

Accepted Answer

A) Net income is overstated and liabilities are understated. 
B) Expenses are understated and stockholders' equity is understated. 
C) Expenses and liabilities are both overstated. 
D) Net income is overstated and liabilities are properly reporteD.Salary expenses that are not accrued result in expenses and liabilities being under-stated.Understated expenses result in overstated net income. 
A) Net income is overstated and liabilities are understated. 
B) Expenses are understated and stockholders' equity is understated. 
C) Expenses and liabilities are both overstated. 
D) Net income is overstated and liabilities are properly reporteD.Salary expenses that are not accrued result in expenses and liabilities being under-stated.Understated expenses result in overstated net income.

Question 20

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

Accepted Answer

A) True 
 B)False

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

The declaration of a $5,000 dividend by JLH Company would be reported on which of JLH's financial statements?

At the end of the accounting period, the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next accounting period.

What is the effect on the financial statements when a company fails to accrue interest expense at year-end?

Which of the following does not correctly describe the following adjusting journal entry?

Which of the following statements regarding earnings per share is not correct?

An accrued expense is incurred and also paid for in the current period.

Which of the following does not correctly describe an adjusting journal entry that debits depreciation expense and credits accumulated depreciation?

Which of the following adjusting journal entries is not created as the result of an accrual?

A deferred expense such as prepaid insurance is created when cash is paid in advance of the expense incurred, and is reduced when the expense is actually incurred.

Which of the following does not correctly describe an adjusting journal entry that debits supplies expense and credits supplies?

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

The journal entry to adjust the prepaid rent account for rent used during the period results in an increase in expenses and a decrease in stockholders' equity.

Under accrual accounting, interest expense would be recognized on the income statement when the interest has accrued with the passage of time even though cash has not been paid.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Which of the following correctly describes the closing entry process?

Which of the following journal entries is created to adjust for a previously recorded accrual?

What is the effect on the financial statements when a company fails to accrue wages expense at year-end?

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

PPA: Reporting and Interpreting Investments in Other Corporations

Filters

Exam 4: Adjustments, Financial Statements, and the Quality of Earnings

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

The declaration of a $5,000 dividend by JLH Company would be reported on which of JLH's financial statements?

At the end of the accounting period, the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next accounting period.

What is the effect on the financial statements when a company fails to accrue interest expense at year-end?

Which of the following does not correctly describe the following adjusting journal entry?

Which of the following statements regarding earnings per share is not correct?

An accrued expense is incurred and also paid for in the current period.

Which of the following does not correctly describe an adjusting journal entry that debits depreciation expense and credits accumulated depreciation?

Which of the following adjusting journal entries is not created as the result of an accrual?

A deferred expense such as prepaid insurance is created when cash is paid in advance of the expense incurred, and is reduced when the expense is actually incurred.

Which of the following does not correctly describe an adjusting journal entry that debits supplies expense and credits supplies?

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

The journal entry to adjust the prepaid rent account for rent used during the period results in an increase in expenses and a decrease in stockholders' equity.

Under accrual accounting, interest expense would be recognized on the income statement when the interest has accrued with the passage of time even though cash has not been paid.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Which of the following correctly describes the closing entry process?

Which of the following journal entries is created to adjust for a previously recorded accrual?

What is the effect on the financial statements when a company fails to accrue wages expense at year-end?

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

PPA: Reporting and Interpreting Investments in Other Corporations

Filters