Question 1

Accrued revenues are revenues which have been received but not yet earned.

Accepted Answer

A) True 
 B)False  False

Question 2

A company's calendar year and fiscal year are always the same.

Accepted Answer

A) True 
 B)False  False

Question 3

Southwestern City College sold season tickets for the 2011 football season for $180,000.A total of 8 games will be played during September, October and November.Assuming all the games are played, the Unearned Revenue balance that will be reported on the December 31 statement of financial position will be

Accepted Answer

A)  $0.
B)  $67,500.
C)  $112,500.
D)  $180,000. A

Question 4

If an adjusting entry is not made for an accrued expense,

Accepted Answer

A)  expenses will be overstated.
B)  liabilities will be understated.
C)  net income will be understated.
D)  equity will be understated.

Question 5

Becki Jean Corporation issued a one-year, 6%, $200,000 note on April 30, 2011.Interest expense for the year ended December 31, 2011 was

Accepted Answer

A)  $12,000.
B)  $9,000.
C)  $8,000.
D)  $7,000.

Question 6

Bread Basket provides baking supplies to restaurants and grocery stores.On November 1, 2011, Bread Basket signed a €500,000, 6-month note payable.The note requires Bread Basket to pay interest at an annual rate of 12%.Assuming Bread Basket makes the appropriate adjusting entry, what is the impact on its December 31, 2011 statement of financial position?

Accepted Answer

A)  An expense of  €30,000€ 30,000€30,000 .
B)   An expense of  €10,000€ 10,000€10,000 .
C)   A liability of  €10,000€ 10,000€10,000 .
D)   Two of the choices are correct.

Question 7

Which of the following reflect the balances of prepayment accounts prior to adjustment?

Accepted Answer

A)  Statement of financial position accounts are understated and income statement accounts are understated.
B)  Statement of financial position accounts are overstated and income statement accounts are overstated.
C)  Statement of financial position accounts are overstated and income statement accounts are understated.
D)  Statement of financial position accounts are understated and income statement accounts are overstated.

Question 8

Accrued revenues are

Accepted Answer

A)  received and recorded as liabilities before they are earned.
B)  earned and recorded as liabilities before they are received.
C)  earned but not yet received or recorded.
D)  earned and already received and recorded.

Question 9

Unearned revenues are

Accepted Answer

A)  received and recorded as liabilities before they are earned.
B)  earned and recorded as liabilities before they are received.
C)  earned but not yet received or recorded.
D)  earned and already received and recorded.

Question 10

Accumulated Depreciation is a liability account and has a credit normal account balance.

Accepted Answer

A) True 
 B)False

Question 11

If an adjusting entry is not made for an accrued revenue,

Accepted Answer

A)  assets will be overstated.
B)  expenses will be understated.
C)  equity will be understated.
D)  revenues will be overstated.

Question 12

Financial statements are prepared directly from the

Accepted Answer

A)  general journal.
B)  ledger.
C)  trial balance.
D)  adjusted trial balance.

Question 13

Cara, Inc.purchased supplies costing $2,500 on January 1, 2011 and recorded the transaction by debiting an expense.At the end of the year $1,300 of the supplies are still on hand.If Cara, Inc.does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2011?

Accepted Answer

A)  Assets understated by $1,200.
B)  Equity understated by $1,200.
C)  Equity overstated by $1,300.
D)  Assets understated by $1,300.

Question 14

Expenses incurred but not yet paid or recorded are called

Accepted Answer

A)  prepaid expenses.
B)  accrued expenses.
C)  interim expenses.
D)  unearned expenses.

Question 15

In a service-type business, revenue is considered earned

Accepted Answer

A)  at the end of the month.
B)  at the end of the year.
C)  when the service is performed.
D)  when cash is received.

Question 16

Adjusting entries are required

Accepted Answer

A)  yearly.
B)  quarterly.
C)  monthly.
D)  every time financial statements are prepared.

Question 17

A company must make adjusting entries

Accepted Answer

A)  To ensure that the revenue recognition and expense recognition principles are followed.
B)  Each time it prepares an income statement and a statement of financial position.
C)  To account for accruals or deferrals.
D)  All of the choices are correct regarding adjusting entries.

Question 18

Which of the following statements is false regarding adjusting entries?

Accepted Answer

A)  Cash is neither debited nor credited as a result of adjusting entries.
B)  Each adjusting entry affects one statement of financial position account and one income statement account.
C)  Each adjusting entry affects one revenue account and one expense account.
D)  Adjusting entries involve accruals or deferrals.

Question 19

Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period.What adjusting entry must Betty make?

Accepted Answer

A)  Debit Cash and credit Unearned Revenue
B)  Debit Accounts Receivable and credit Unearned Revenue
C)  Debit Accounts Receivable and credit Service Revenue
D)  Debit Unearned Revenue and credit Service Revenue

Question 20

The fiscal year of a business is usually determined by

Accepted Answer

A)  a government agency.
B)  a lottery.
C)  the business.
D)  the IASB.

Exam 3: Adjusting the Accounts