Question 1

A company prepays rent of $500 and receives a $3,000 payment for services not yet rendered. Under accrual basis accounting, these two transactions will:

Accepted Answer

A) Increase profit by $2,500. 
B) Have no effect on profit. 
C) Decrease profit by $500. 
D) Increase profit by $3,000. 
E) Decrease profit by $3,500.

Question 2

A contra account is an account the balance of which is added to the balance of an associated account to show a more proper amount for the item recorded in theassociated account.

Accepted Answer

A) True 
 B)False

Question 3

Failure to record depreciation expense will overstate the asset and understate the expense.

Accepted Answer

A) True 
 B)False

Question 4

The accrual basis of accounting

Accepted Answer

A) Recognizes revenues when received. 
B) Recognizes expenses when paid. 
C) Is generally accepted for external reporting because it gives more useful information. 
D) Is not acceptable because it gives incomplete information about cash flows. 
E) Eliminates the need for adjusting entries.

Question 5

Companies with little seasonal variation in sales often choose the calendar year as theirfiscal year.

Accepted Answer

A) True 
 B)False

Question 6

The two main accounting principles used in the adjusting process are matching and fulldisclosure.

Accepted Answer

A) True 
 B)False

Question 7

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include:

Accepted Answer

A) A debit to Cash and a credit to Salaries Payable. 
B) A debit to Salaries Payable and a credit to Salaries Expense. 
C) A debit to Cash and a credit to Prepaid Salaries. 
D) A debit to Salaries Payable and a credit to Cash. 
E) No entry would be necessary on January 5.

Question 8

Discuss the types of adjusting entries used for accrued expenses and accruedrevenues.

Accepted Answer

The answer of Discuss the types of adjusting entries used...

Question 9

External business transactions are transactions between the business entity and some 5)other (outside)party.

Accepted Answer

A) True 
 B)False

Question 10

On Oct. 1, 2017, Bianca Inc. signed a 1-year $75,000 note payable from Prime National Bank. The loan plus 4% interest is to be repaid on Sept. 30, 2018. Bianca's year-end is December 31. In its 2017 financial statements Bianca will record interest expense of:

Accepted Answer

A) $3,375. 
B) $750. 
C) $250. 
D) $1,000. 
E) $3,000.

Question 11

On December 1, your company paid its insurance agent $2,400 for the annual insurance premium covering the twelve-month period beginning on December 1. The $2,400payment was recorded on December 1 with a debit to the income statement account Insurance Expense and a credit to the current asset Cash. Your company prepares monthly financial statements at the end of each calendar month.The entry to be made at the December 31 month end to adjust the accounts is:

Accepted Answer

A) Debit Prepaid Insurance 200; Credit Insurance Expense 200. 
B) Debit Insurance Expense 200; Credit Prepaid Insurance 200. 
C) Debit Insurance Expense 2400; Credit Prepaid Insurance 2400. 
D) Debit Insurance Expense 2200; Credit Prepaid Insurance 2200. 
E) Debit Prepaid insurance 2200; Credit Insurance Expense 2200.

Question 12

Accepted Answer

The answer of  ...

Question 13

All items of plant and equipment, including land, eventually wear out or lose their usefulness.

Accepted Answer

A) True 
 B)False

Question 14

Explain how accounting adjustments affect financial statements

Accepted Answer

The answer of Explain how accounting adjustments affect financial statements...

Question 15

The Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of officesupplies was purchased during the year?

Accepted Answer

A) $3,500. 
B) $3,300. 
C) $2,700. 
D) $2,900. 
E) $3,700.

Question 16

Gallery Corp. owes its employees $7,000 for the week ended March 31. The company will pay the employees on April 5. The adjusting journal entry prepared on March 31 will include a debit to Salaries Expense and a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 17

The following journal entry (incorrectly)recorded the purchase of office supplies for$1,200 on credit: 
What entry or entries best correct and document the correction of this error?

Accepted Answer

A)  None required. The original entry above is correct. 
B)   
C)   
D)   
E)

Question 18

Accrued expenses at the end of one period result in cash payments in a subsequent period.

Accepted Answer

A) True 
 B)False

Question 19

Generally, accrual basis accounting results in a more accurate measurement of profit the period than does cash basis accounting.

Accepted Answer

A) True 
 B)False

Question 20

An account the balance of which is subtracted from the balance of a related account sothat more complete information than simply the net amount is provided is a(n):

Accepted Answer

A) Accrued revenue. 
B) Accrued expense. 
C) Withdrawal. 
D) Contra account. 
E) Prepaid expense.

Exam 3: Adjusting Accounts for Financial Statements

A company prepays rent of $500 and receives a $3,000 payment for services not yet rendered. Under accrual basis accounting, these two transactions will:

A contra account is an account the balance of which is added to the balance of an associated account to show a more proper amount for the item recorded in theassociated account.

Failure to record depreciation expense will overstate the asset and understate the expense.

The accrual basis of accounting

Companies with little seasonal variation in sales often choose the calendar year as theirfiscal year.

The two main accounting principles used in the adjusting process are matching and fulldisclosure.

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include:

Discuss the types of adjusting entries used for accrued expenses and accruedrevenues.

External business transactions are transactions between the business entity and some 5)other (outside)party.

On Oct. 1, 2017, Bianca Inc. signed a 1-year $75,000 note payable from Prime National Bank. The loan plus 4% interest is to be repaid on Sept. 30, 2018. Bianca's year-end is December 31. In its 2017 financial statements Bianca will record interest expense of:

All items of plant and equipment, including land, eventually wear out or lose their usefulness.

Explain how accounting adjustments affect financial statements

The Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of officesupplies was purchased during the year?

Gallery Corp. owes its employees $7,000 for the week ended March 31. The company will pay the employees on April 5. The adjusting journal entry prepared on March 31 will include a debit to Salaries Expense and a credit to Cash.

The following journal entry (incorrectly) recorded the purchase of office supplies for$1,200 on credit: What entry or entries best correct and document the correction of this error?

Accrued expenses at the end of one period result in cash payments in a subsequent period.

Generally, accrual basis accounting results in a more accurate measurement of profit the period than does cash basis accounting.

An account the balance of which is subtracted from the balance of a related account sothat more complete information than simply the net amount is provided is a(n) :