Question 1

The expense recognition principle is frequently referred to as the matching principle.

Accepted Answer

A) True 
 B)False

Question 2

Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 3

Closing entries deal primarily with the balances of permanent accounts.

Accepted Answer

A) True 
 B)False

Question 4

Payments of expenses that will benefit more than one accounting period are identified as:

Accepted Answer

A) expenses. 
B) revenues. 
C) prepaid expenses. 
D) liabilities.

Question 5

Bluing Corporation issued a one-year 10% $400,000 note on April 30, 2022.Assuming that the company only accrues interest at year-end, the interest expense to be recorded at December 31, 2022 is:

Accepted Answer

A) $36,000. 
B) $27,000. 
C) $26,667. 
D) $40,000.

Question 6

The accrued interest for a three month note payable of $10,000 dated December 1, 2022 at an interest rate of 6% is $150 on December 31, 2022.

Accepted Answer

A) True 
 B)False

Question 7

The expense recognition principle matches:

Accepted Answer

A) customers with businesses. 
B) expenses with revenues. 
C) assets with liabilities. 
D) creditors with businesses.

Question 8

Which types of accounts will appear in the post-closing trial balance?

Accepted Answer

A) Permanent accounts. 
B) Temporary accounts. 
C) Accounts shown in the income statement columns of a work sheet. 
D) None of these answer choices are correct.

Question 9

The periodicity assumption is often referred to as the expense recognition principle.

Accepted Answer

A) True 
 B)False

Question 10

An adjusting entry can include a:

Accepted Answer

A) debit to an asset and a credit to a revenue. 
B) debit to a revenue and a credit to an asset. 
C) credit to an expense and a debit to a revenue. 
D) debit to an expense and a credit to a revenue.

Question 11

Leyland Realty Company received a check for $18,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client.Unearned Rent Revenue was credited for the full $18,000.Financial statements will be prepared on July 31.Leyland Realty should make the following adjusting entry on July 31:

Accepted Answer

A) debit Unearned Rent Revenue, $3,000; credit Rent Revenue, $3,000. 
B) debit Rent Revenue, $3,000; credit Unearned Rent Revenue, $3,000. 
C) debit Unearned Rent Revenue, $18,000; credit Rent Revenue, $18,000. 
D) debit Cash, $18,000; credit Rent Revenue, $18,000.

Question 12

On January 1, 2022, M.Johanson Company purchased equipment for $54,000.The company is depreciating the equipment at the rate of $750 per month.The book value of the equipment at December 31, 2022 is:

Accepted Answer

A) $0. 
B) $9,000. 
C) $45,000. 
D) $54,000.

Question 13

Nacron Company borrowed $15,000 from the bank signing a 6%, 3-month note on October 1, 2021.Principal and interest are payable to the bank on January 1, 2022.If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on October 31, 2021, would be:

Accepted Answer

A) debit Interest Expense, $75; credit Interest Payable, $75. 
B) debit Interest Expense, $900; credit Interest Payable, $900. 
C) debit Note Payable, $900; credit Cash, $900. 
D) debit Cash, $75; credit Interest Payable, $75.

Question 14

The accounting cycle begins with the journalizing of the transactions.

Accepted Answer

A) True 
 B)False

Question 15

La More Company had the following transactions during 2021. 
-Sales of $9,000 on account
-Collected $4,000 for services to be performed in 2022
-Paid $2,650 cash in salaries
-Purchased airline tickets for $500 in December for a trip to take place in 2022
What is La More's 2021 net income using cash basis accounting?

Accepted Answer

A) $10,350 
B) $1,350 
C) $9,850 
D) $850

Question 16

Muldoon Advertising has an opening balance in its supplies account of $2,400 and purchases $3,000 of supplies during the year.A year-end physical count shows $2,800 in supplies inventory.Which is the appropriate journal entry at year end?

Accepted Answer

A) Dr Supplies Expense $2,600 
Cr Supplies $2,600 
B) Dr Supplies Expense $2,800 
Cr Supplies $2,800 
C) Dr Supplies $2,600 
Cr Supplies Expense $2,600 
D) Dr Supplies $3,000 
Cr Cash $3,000

Question 17

Walton Company collected $14,400 in May of 2021 for 4 months of service which would take place from October of 2021 through January of 2022.The revenue reported from this transaction during 2021 would be:

Accepted Answer

A) $0. 
B) $10,800. 
C) $14,400. 
D) $3,600.

Question 18

The Dividends account is closed to the Income Summary account at the end of each year.

Accepted Answer

A) True 
 B)False

Question 19

Adjusting entries are required:

Accepted Answer

A) because some costs expire with the passage of time and have not yet been journalized. 
B) when the company's profits are below the budget. 
C) when expenses are recorded in the period in which they are earned. 
D) None of these answer choices are correct.

Question 20

Adjusting entries affect at least:

Accepted Answer

A) one revenue and one expense account. 
B) one asset and one liability account. 
C) one revenue and one balance sheet account. 
D) one income statement account and one balance sheet account.

Exam 4: Accrual Accounting Concepts

The expense recognition principle is frequently referred to as the matching principle.

Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as liabilities.

Closing entries deal primarily with the balances of permanent accounts.

Payments of expenses that will benefit more than one accounting period are identified as:

Bluing Corporation issued a one-year 10% $400,000 note on April 30, 2022.Assuming that the company only accrues interest at year-end, the interest expense to be recorded at December 31, 2022 is:

The accrued interest for a three month note payable of $10,000 dated December 1, 2022 at an interest rate of 6% is $150 on December 31, 2022.

The expense recognition principle matches:

Which types of accounts will appear in the post-closing trial balance?

The periodicity assumption is often referred to as the expense recognition principle.

An adjusting entry can include a:

On January 1, 2022, M.Johanson Company purchased equipment for $54,000.The company is depreciating the equipment at the rate of $750 per month.The book value of the equipment at December 31, 2022 is:

The accounting cycle begins with the journalizing of the transactions.

Muldoon Advertising has an opening balance in its supplies account of $2,400 and purchases $3,000 of supplies during the year.A year-end physical count shows $2,800 in supplies inventory.Which is the appropriate journal entry at year end?

Walton Company collected $14,400 in May of 2021 for 4 months of service which would take place from October of 2021 through January of 2022.The revenue reported from this transaction during 2021 would be:

The Dividends account is closed to the Income Summary account at the end of each year.

Adjusting entries are required:

Adjusting entries affect at least: