Question 1

A trial balance prepared after adjustments have been recorded is called a(n)

Accepted Answer

A)  Balance sheet. 
B)  Adjusted trial balance. 
C)  Unadjusted trial balance. 
D)  Classified balance sheet. 
E)  Unclassified balance sheet. 
A)  Balance sheet. 
B)  Adjusted trial balance. 
C)  Unadjusted trial balance. 
D)  Classified balance sheet. 
E)  Unclassified balance sheet.

Question 2

The time period assumption assumes that an organization's activities can be divided into specific time periods including all of the following except:

Accepted Answer

A)  Months. 
B)  Quarters. 
C)  Fiscal years. 
D)  Calendar years. 
E)  Days. 
A)  Months. 
B)  Quarters. 
C)  Fiscal years. 
D)  Calendar years. 
E)  Days.

Question 3

The entry to record a cash receipt from a customer when the service to be provided has not yet been performed involves a debit to an unearned revenue account.

Accepted Answer

A) True 
 B)False

Question 4

PPW Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which PPW Co. recorded as unearned revenue. The journal entry made by PPW Co. at year-end on December 31 would include:

Accepted Answer

A)  A debit to Rent Earned for $2,400. 
B)  A credit to Unearned Rent for $2,400. 
C)  A debit to Cash for $6,400. 
D)  A credit to Rent Earned for $2,400. 
E)  A debit to Unearned Rent for $4,000. 
A)  A debit to Rent Earned for $2,400. 
B)  A credit to Unearned Rent for $2,400. 
C)  A debit to Cash for $6,400. 
D)  A credit to Rent Earned for $2,400. 
E)  A debit to Unearned Rent for $4,000.

Question 5

Which of the following statements is incorrect?

Accepted Answer

A)  An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. 
B)  An adjusted trial balance is a list of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger. 
C)  Each trial balance amount is used in preparing the financial statements. 
D)  Financial statements should be prepared directly from information in the unadjusted trial balance. 
E)  Financial statements can be prepared directly from information in the adjusted trial balance. 
A)  An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. 
B)  An adjusted trial balance is a list of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger. 
C)  Each trial balance amount is used in preparing the financial statements. 
D)  Financial statements should be prepared directly from information in the unadjusted trial balance. 
E)  Financial statements can be prepared directly from information in the adjusted trial balance.

Question 6

Salvo Co. had the following transactions in the last two months of its year ended December 31. Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.

Accepted Answer

The answer of Salvo Co. had the following transactions in...

Question 7

The accrual basis of accounting recognizes expenses when cash is paid.

Accepted Answer

A) True 
 B)False

Question 8

Before an adjusting entry is made to recognize the cost of expired insurance for the period, Prepaid Insurance and Insurance Expense are both overstated.

Accepted Answer

A) True 
 B)False

Question 9

Accrued revenues:

Accepted Answer

A)  At the end of one accounting period often result in cash receipts from customers in the next period. 
B)  At the end of one accounting period often result in cash payments in the next period. 
C)  Are also called unearned revenues. 
D)  Are listed on the balance sheet as liabilities. 
E)  Are recorded at the end of an accounting period because cash has already been received for revenues earned. 
A)  At the end of one accounting period often result in cash receipts from customers in the next period. 
B)  At the end of one accounting period often result in cash payments in the next period. 
C)  Are also called unearned revenues. 
D)  Are listed on the balance sheet as liabilities. 
E)  Are recorded at the end of an accounting period because cash has already been received for revenues earned.

Question 10

Prepare general journal entries on December 31 to record the following unrelated year-end adjustments.
a. Estimated depreciation on office equipment for the year, $4,000.
b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An examination of insurance policies shows $950 of insurance expired.
c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An examination of insurance policies shows $600 of unexpired insurance.
d. The company has three office employees who each earn $100 per day for a five-day workweek that ends on Friday. The employees were paid on Friday, December 26, and have worked full days on Monday, Tuesday, and Wednesday, December 29, 30, and 31.
e. On November 1, the company received 6 months' rent in advance from a tenant whose rent is $700 per month. The $4,200 was credited to the Unearned Rent account.
f. The company collects rent monthly from its tenants. One tenant whose rent is $750 per month has not paid his rent for December.

Accepted Answer

The answer of Prepare general journal entries on December 31...

Question 11

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Accepted Answer

A)  Increase an expense; increase a liability. 
B)  Increase an asset; increase revenue. 
C)  Decrease a liability; increase revenue. 
D)  Increase an expense; decrease an asset. 
E)  Increase an expense; decrease a liability. 
A)  Increase an expense; increase a liability. 
B)  Increase an asset; increase revenue. 
C)  Decrease a liability; increase revenue. 
D)  Increase an expense; decrease an asset. 
E)  Increase an expense; decrease a liability.

Question 12

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

Accepted Answer

A) True 
 B)False

Question 13

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees. If the company fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be:

Accepted Answer

A)  An overstatement of equity. 
B)  An understatement of equity. 
C)  An understatement of assets. 
D)  An understatement of liabilities. 
E)  An overstatement of assets. 
A)  An overstatement of equity. 
B)  An understatement of equity. 
C)  An understatement of assets. 
D)  An understatement of liabilities. 
E)  An overstatement of assets.

Question 14

Adjusting entries result in a better matching of revenues and expenses for the period.

Accepted Answer

A) True 
 B)False

Question 15

The unadjusted trial balance and the adjustment data for Harris Training Institute are given below along with adjusting entry information. What is the impact of the adjusting entries on the balance sheet? Show calculation for total assets, total liabilities, and owner's equity without the adjustments; show calculation for total assets, total liabilities, and owner's equity with the adjustments. Which one gives the most accurate presentation of the balance sheet?
Additional information items:
a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end.
b. A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent.
c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Accepted Answer

The accrual basis gives the most accurat

Question 16

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

Accepted Answer

A) True 
 B)False

Question 17

A company performs 20 days work on a 30-day contract before the end of the year. The total contract is valued at $6,000 and payment is not due until the contract is fully completed. The adjusting entry includes a $4,000 credit to unearned revenue.

Accepted Answer

A) True 
 B)False

Question 18

The accrual basis of accounting:

Accepted Answer

A)  Is generally accepted for external reporting because it is more useful than cash basis for most business decisions. 
B)  Is flawed because it gives complete information about cash flows. 
C)  Recognizes revenues when received in cash. 
D)  Recognizes expenses when paid in cash. 
E)  Eliminates the need for adjusting entries at the end of each period. 
A)  Is generally accepted for external reporting because it is more useful than cash basis for most business decisions. 
B)  Is flawed because it gives complete information about cash flows. 
C)  Recognizes revenues when received in cash. 
D)  Recognizes expenses when paid in cash. 
E)  Eliminates the need for adjusting entries at the end of each period.

Question 19

Explain how the owner of Cheezburger Network uses the accrual basis of accounting.

Accepted Answer

The owner understood the importance of a

Question 20

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Accepted Answer

A)  Fiscal year. 
B)  Calendar year. 
C)  Natural business year. 
D)  Accounting period. 
E)  Interim period. 
A)  Fiscal year. 
B)  Calendar year. 
C)  Natural business year. 
D)  Accounting period. 
E)  Interim period.

Exam 3: Adjusting Accounts and Preparing Financial Statements

A trial balance prepared after adjustments have been recorded is called a(n)

The time period assumption assumes that an organization's activities can be divided into specific time periods including all of the following except:

The entry to record a cash receipt from a customer when the service to be provided has not yet been performed involves a debit to an unearned revenue account.

Which of the following statements is incorrect?

Salvo Co. had the following transactions in the last two months of its year ended December 31. Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.

The accrual basis of accounting recognizes expenses when cash is paid.

Before an adjusting entry is made to recognize the cost of expired insurance for the period, Prepaid Insurance and Insurance Expense are both overstated.

Accrued revenues:

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees. If the company fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be:

Adjusting entries result in a better matching of revenues and expenses for the period.

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

A company performs 20 days work on a 30-day contract before the end of the year. The total contract is valued at $6,000 and payment is not due until the contract is fully completed. The adjusting entry includes a $4,000 credit to unearned revenue.

The accrual basis of accounting:

Explain how the owner of Cheezburger Network uses the accrual basis of accounting.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

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