Question 1

Montana Inc.'s fiscal year ended on December 31, 2012. The balance in the prepaid insurance account as of December 31, 2012, was $34,800 (before adjustment) and consisted of the following policies:  The adjusting entry required on December 31, 2012, would be

Accepted Answer

A) 
$\begin{array} { c r } 
\text { Insurance Expense } & 22,000 \
\text { Prepaid Insurance } & 22,000
\end{array}$ 
B)  
Insurance Expense $\quad 20,200$
Prepaid Insurance$\quad 20,200$ 
C)  
$\begin{array} { c r } 
\text { Prepaid Insurance } & 17,600 \
\text { Insurance Expense } & 17,600
\end{array}$ 
D) 
$\begin{array}{l}
\text { Insurance Expense } \quad 25,600\
\text { Prepaid Insurance } \quad 25,600
\end{array}$

Question 2

In the course of your examination of the books and records of Andelin Company for the year ending December 31, 2012, you find the following data:
 
Compute Andelin Company's net income for 2012 using accrual-basis accounting.

Accepted Answer

The answer of In the course of your examination of...

Question 3

An adjusting entry to record an unrecorded liability usually includes a credit to

Accepted Answer

A)  A liability account 
B)  An asset account 
C)  A revenue account 
D)  An expense account

Question 4

The notes to the financial statements tell all of the following EXCEPT

Accepted Answer

A)  Details about specific items 
B)  Assumptions used by the company 
C)  Accounting methods used by the company 
D)  Financial analysis

Question 5

The idea that a company's life can be divided into distinct time periods so that accounting information can be reported on a timely basis is the

Accepted Answer

A)  Accrual basis accounting 
B)  Time period concept 
C)  Fiscal year concept 
D)  Revenue recognition concept

Question 6

Unrecognized interest expense on a note is an example of a(n)

Accepted Answer

A)  Unrecorded receivable 
B)  Unearned revenue 
C)  Unrecorded liability 
D)  Prepaid expense

Question 7

Which of the following is true about accrual-basis accounting?

Accepted Answer

A)  Income is generally larger with accrual-basis accounting. 
B)  Accrual-basis accounting provides a better measure of performance. 
C)  Accrual-basis accounting is not required by GAAP. 
D)  Accrual-basis accounting and cash-basis accounting always produce the same results.

Question 8

Adjusting entries are

Accepted Answer

A)  Recorded on a daily basis as transactions occur 
B)  Not posted to the general ledger 
C)  Made at the end of an accounting period 
D)  Not required under accrual-basis accounting

Question 9

Which of the following will occur if an adjusting entry to record an unrecorded receivable is NOT made?

Accepted Answer

A)  Both revenues and assets will be understated. 
B)  Both revenues and assets will be overstated. 
C)  Revenues will be understated, but assets will be overstated. 
D)  Assets will be understated, but revenues will be overstated.

Question 10

Exhibit 4-2 Short Company has the following income statement for 2012:
 
-Refer to Exhibit 4-2. Given the information above, the entry to close expenses would include a

Accepted Answer

A)  Debit to Utilities expense of $42,000 
B)  Credit to Utilities expense of $42,000 
C)  Credit to Sales revenue of $630,000 
D)  Debit to Salaries expense of $483,000

Question 11

The matching principle requires that

Accepted Answer

A)  Cash outflows be matched with cash inflows 
B)  Expenses incurred be matched with revenues earned 
C)  Assets be matched with liabilities 
D)  Assets be matched with owners' equity

Question 12

The failure to adjust an unearned revenue that has been partially earned and was originally recorded as a credit to Unearned Revenue will usually result in an

Accepted Answer

A)  Overstatement of revenues and an overstatement of liabilities 
B)  Overstatement of revenues and an understatement of liabilities 
C)  Understatement of revenues and an understatement of liabilities 
D)  Understatement of revenues and an overstatement of liabilities

Question 13

Boudin Corporation, a calendar-year company, obtained a $15,000, one-year, 10 percent bank loan on October 31 of the current year. Interest is payable at the end of the loan term. The adjusting entry needed on December 31 is

Accepted Answer

A)  A debit to Interest Expense of $1,500 and a credit to Interest Payable of $1,500 
B)  A debit to Interest Payable of $1,500 and a credit to Interest Expense of 1,500 
C)  A debit to Interest Expense of $250 and a credit to Interest Payable of $250 
D)  A debit to Interest Expense of $250 and a credit to Cash of $250

Question 14

Bay Graphics pays its employees each Friday for a five-day total workweek. The payroll is $9,000 per week. If the end of the accounting period occurs on a Wednesday, the adjusting entry to record wages payable would include a

Accepted Answer

A)  Debit to Salary Expense of $3,600 
B)  Debit to Salary Expense of $5,400 
C)  Credit to Cash of $5,400 
D)  Credit to Salaries Payable of $3,600

Question 15

Bay Graphics pays its employees each Friday for a five-day total workweek. The payroll is $9,000 per week. If the end of the accounting period occurs on a Wednesday, what is the adjusting entry to record wages payable?

Accepted Answer

A)  
$\begin{array}{cc}
\text { Salaries Payable } & 5,400 \
\text { Cash } & 5,400
\end{array}$ 
B)  
Salary Expense $\quad 5,400$
Salaries Payable $\quad 5,400$ 
C) 
$\begin{array} { l r } 
\text { Salaries Payable } & 5,400 \
\text { Salary Expense } & 5,400
\end{array}$ 
D) 
Salaries Payable $\quad 9,000$
Salary Expense$\quad 9,000$

Question 16

The December 31, 2012, adjusted account balances taken from the Adjusted Trial Balance of Cajon Corporation are as follows:
 
-Refer to Exhibit 4-3. Given the information above, after all closing entries have been made, the balance in Cajon's Retained Earnings account would be

Accepted Answer

A)  $380 
B)  $400 
C)  $330 
D)  $200

Question 17

From the following data, determine the amount of rent revenue earned during the period.

Accepted Answer

A)  $20,400 
B)  $35,600 
C)  $30,400 
D)  $55,900

Question 18

At the beginning of the period, Hann Corporation had $4,000 of supplies on hand. During the period, it purchased $1,300 of supplies and debited supplies for the same amount. At the end of the period, Hann Corporation determined that only $1,000 of supplies were still on hand. What adjusting entry should Hann Corporation make at the end of the period?

Accepted Answer

A)  
Supplies $\quad 4,300$
Supplies Expense$\quad 4,300$ 
B)  
Supplies $\quad 1,300$
Supplies Expense$\quad 1,300$ 
C) 
Supplies Expense $\quad 1,300$
Supplies$\quad 1,300$ 
D)  
$\begin{array} { c c } 
\text { Supplies Expense } & 4,300 \
\text { Supplies } & 4,300
\end{array}$

Question 19

The idea that all expenses incurred in generating revenues should be recognized in the same period as those revenues is called the

Accepted Answer

A)  Time period concept 
B)  Realization concept 
C)  Matching principle 
D)  Revenue recognition principle

Question 20

Which of the following sources provides the raw material to prepare the financial statements?

Accepted Answer

A)  Income statement from previous year 
B)  Balance sheet from previous year 
C)  Adjusted trial balance 
D)  Unadjusted trial balance

Exam 4: Completing the Accounting Cycle

Montana Inc.'s fiscal year ended on December 31, 2012. The balance in the prepaid insurance account as of December 31, 2012, was $34,800 (before adjustment) and consisted of the following policies: The adjusting entry required on December 31, 2012, would be

In the course of your examination of the books and records of Andelin Company for the year ending December 31, 2012, you find the following data: Compute Andelin Company's net income for 2012 using accrual-basis accounting.