Question 1

Unearned revenue is:

Accepted Answer

A) An asset. 
B) Income. 
C) A liability. 
D) An expense. 
A) An asset. 
B) Income. 
C) A liability. 
D) An expense. C

Question 2

Accounting terminology
Listed below are nine technical accounting terms emphasized in this chapter:   Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
________ (a. )An account with a credit balance that is an offset against an asset account.
________ (b. )A contra-account.
________ (c. )A liability to customers who have paid in advance.
________ (d. )The estimated current value of an asset.
________ (e. )Entries made to achieve the goals of accrual accounting when revenue or expense transactions span more than one accounting period.
________ (f. )An asset that will expire shortly.
________ (g. )Revenue that has been earned,but not yet received.

Accepted Answer

(a)Contra-asset (b)Accumulated depreciation (c)Unearned revenue (d)None (Book value is based on cost,not estimated current market value. )(e)Adjusting entries (f)Prepaid expense (g)Accrued revenue

Question 3

The accrued interest should be:

Accepted Answer

A) Debited to Notes Payable. 
B) Credited to Interest Payable. 
C) Credited to Cash. 
D) Credited to Interest Expense. 
A) Debited to Notes Payable. 
B) Credited to Interest Payable. 
C) Credited to Cash. 
D) Credited to Interest Expense. B

Question 4

Which of the following is not considered an end-of-period adjusting entry?

Accepted Answer

A) The entry to record the portion of unexpired insurance which has become expense during the period. 
B) An entry to record revenue that has been earned but has not yet been billed to customers. 
C) The entry to record depreciation expense. 
D) An entry to record repayment of a bank loan and to recognize related interest expense. 
A) The entry to record the portion of unexpired insurance which has become expense during the period. 
B) An entry to record revenue that has been earned but has not yet been billed to customers. 
C) The entry to record depreciation expense. 
D) An entry to record repayment of a bank loan and to recognize related interest expense.

Question 5

On March 1,Hoffman paid in advance for four months' insurance.The necessary adjusting entry at March 31 includes which of the following?

Accepted Answer

A) A credit to Prepaid Insurance for $2,340. 
B) A credit to Prepaid Insurance for $780. 
C) A debit to Prepaid Insurance for $2,340. 
D) A debit to Prepaid Insurance for $780. 
A) A credit to Prepaid Insurance for $2,340. 
B) A credit to Prepaid Insurance for $780. 
C) A debit to Prepaid Insurance for $2,340. 
D) A debit to Prepaid Insurance for $780.

Question 6

Under accrual accounting,fees received in advance from customers should be shown as being earned:

Accepted Answer

A) When cash is collected. 
B) When services are performed or goods delivered. 
C) When tax rates are low. 
D) When tax rates are high. 
A) When cash is collected. 
B) When services are performed or goods delivered. 
C) When tax rates are low. 
D) When tax rates are high.

Question 7

In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting. )

Accepted Answer

A) $4,000 is paid in January for equipment with a useful life of four years. 
B) $1,800 is paid in January for a two-year fire insurance policy. 
C) $1,200 cash dividends are declared and paid. 
D) $900 is paid to an attorney for legal services rendered during the current year. 
A) $4,000 is paid in January for equipment with a useful life of four years. 
B) $1,800 is paid in January for a two-year fire insurance policy. 
C) $1,200 cash dividends are declared and paid. 
D) $900 is paid to an attorney for legal services rendered during the current year.

Question 8

If an asset was purchased on January 1,2015 for $140,000 with an estimated life of 5 years,what is the accumulated depreciation at December 31,2018?

Accepted Answer

A) $28,000. 
B) $112,000. 
C) $56,000. 
D) $84,000. 
A) $28,000. 
B) $112,000. 
C) $56,000. 
D) $84,000.

Question 9

Which of the following statements regarding depreciation is correct?

Accepted Answer

A) Depreciation is an exact calculation of the decline in value of an asset. 
B) Depreciation is only an estimate of the decline in value of an asset. 
C) Depreciation is only recorded at the end of a year and never over a shorter time period. 
D) Management must know the exact life of an asset in order to calculate an acceptable depreciation expense. 
A) Depreciation is an exact calculation of the decline in value of an asset. 
B) Depreciation is only an estimate of the decline in value of an asset. 
C) Depreciation is only recorded at the end of a year and never over a shorter time period. 
D) Management must know the exact life of an asset in order to calculate an acceptable depreciation expense.

Question 10

How much is owed the employees for their wages?

Accepted Answer

A) $0 
B) $2,560 
C) $5,120 
D) $12,800 
A) $0 
B) $2,560 
C) $5,120 
D) $12,800

Question 11

Interest that has accrued during the accounting period on a note payable requires an adjusting entry consisting of:

Accepted Answer

A) A debit to Interest Expense and a credit to Cash. 
B) A debit to Notes Payable and a credit to Interest Payable. 
C) A debit to an asset and a credit to a liability. 
D) A debit to Interest Expense and a credit to Interest Payable. 
A) A debit to Interest Expense and a credit to Cash. 
B) A debit to Notes Payable and a credit to Interest Payable. 
C) A debit to an asset and a credit to a liability. 
D) A debit to Interest Expense and a credit to Interest Payable.

Question 12

Adjusting entries
Selected ledger accounts used by American Advertising,Inc. ,are listed along with identifying numbers.Following this list of account numbers and titles is a series of transactions.For each transaction,you are to indicate the proper accounts to be debited and credited.

Accepted Answer

The answer of Adjusting entries
Selected ledger accounts used by American...

Question 13

Avalon Company paid $4,400 cash for an insurance policy providing three years' protection against fire loss.This transaction could properly be recorded by a $4,400 debit to Unexpired Insurance and a $4,400 credit to Cash.

Accepted Answer

A) True 
 B)False

Question 14

What should be the balance of the Prepaid Rent?

Accepted Answer

A) $0 
B) $7,000 
C) $14,000 
D) $21,000 
A) $0 
B) $7,000 
C) $14,000 
D) $21,000

Question 15

Which of the following statements is not true regarding prepaid expenses?

Accepted Answer

A) Prepaid expenses represent assets. 
B) Prepaid expenses are shown in a special section of the income statement. 
C) Prepaid expenses become expenses only as goods or services are used up. 
D) Prepaid expenses appear in the balance sheet. 
A) Prepaid expenses represent assets. 
B) Prepaid expenses are shown in a special section of the income statement. 
C) Prepaid expenses become expenses only as goods or services are used up. 
D) Prepaid expenses appear in the balance sheet.

Question 16

Under accrual accounting,salaries earned by employees but not yet paid should be expensed:

Accepted Answer

A) In the period in which they are earned. 
B) In the period in which they are paid. 
C) In the period with the higher earnings. 
D) In the period with the lower earnings. 
A) In the period in which they are earned. 
B) In the period in which they are paid. 
C) In the period with the higher earnings. 
D) In the period with the lower earnings.

Question 17

Adjusting entries are only required when errors are made.

Accepted Answer

A) True 
 B)False

Question 18

Colonial Systems prepares monthly financial statements.Colonial would record a prepaid expense in each of the following situations except:

Accepted Answer

A) Colonial Systems purchased a two-year fire insurance policy. 
B) Colonial Systems paid for six months' gardening services in advance. 
C) A tenant paid Colonial Systems three months' rent in advance. 
D) Colonial Systems purchased enough office supplies to last several months. 
A) Colonial Systems purchased a two-year fire insurance policy. 
B) Colonial Systems paid for six months' gardening services in advance. 
C) A tenant paid Colonial Systems three months' rent in advance. 
D) Colonial Systems purchased enough office supplies to last several months.

Question 19

Omission of the adjusting entry needed to accrue an expense at the end of the period would cause liabilities to be understated.

Accepted Answer

A) True 
 B)False

Question 20

Adjusting entries are needed whenever transactions affect the revenue or expenses of more than one accounting period.

Accepted Answer

A) True 
 B)False

Exam 4: The Accounting Cycle: Accruals and Deferrals

Unearned revenue is:

The accrued interest should be:

Which of the following is not considered an end-of-period adjusting entry?

On March 1,Hoffman paid in advance for four months' insurance.The necessary adjusting entry at March 31 includes which of the following?

Under accrual accounting,fees received in advance from customers should be shown as being earned:

In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting. )

If an asset was purchased on January 1,2015 for $140,000 with an estimated life of 5 years,what is the accumulated depreciation at December 31,2018?

Which of the following statements regarding depreciation is correct?

How much is owed the employees for their wages?

Interest that has accrued during the accounting period on a note payable requires an adjusting entry consisting of:

Adjusting entries Selected ledger accounts used by American Advertising,Inc. ,are listed along with identifying numbers.Following this list of account numbers and titles is a series of transactions.For each transaction,you are to indicate the proper accounts to be debited and credited.

Avalon Company paid $4,400 cash for an insurance policy providing three years' protection against fire loss.This transaction could properly be recorded by a $4,400 debit to Unexpired Insurance and a $4,400 credit to Cash.

What should be the balance of the Prepaid Rent?

Which of the following statements is not true regarding prepaid expenses?

Under accrual accounting,salaries earned by employees but not yet paid should be expensed:

Adjusting entries are only required when errors are made.

Colonial Systems prepares monthly financial statements.Colonial would record a prepaid expense in each of the following situations except:

Omission of the adjusting entry needed to accrue an expense at the end of the period would cause liabilities to be understated.

Adjusting entries are needed whenever transactions affect the revenue or expenses of more than one accounting period.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters