Question 1

Which of the following regarding accrual versus cash-basis accounting is true?

Accepted Answer

A)  The FASB believes that the cash basis is appropriate for some smaller companies,especially those in the service industry. 
B)  The cash basis is less useful in predicting the timing and amounts of future cash flows of an enterprise. 
C)  Application of the cash basis results in an income statement reporting only revenues. 
D)  The cash basis requires a complete set of double-entry records.

Question 2

The records of Majestic Co.showed the following account balances on December 31,2013:
  Assuming that the inventory balance at January 1,2013,is $152,000,prepare the entry to adjust the inventory accounts.

Accepted Answer

The answer of The records of Majestic Co.showed the following...

Question 3

Which of the following accounts most likely would not appear in a post-closing trial balance?

Accepted Answer

A)  Retained Earnings 
B)  Inventory 
C)  Sales Revenue 
D)  Common Stock

Question 4

The Supplies on Hand account balance at the beginning of the period was $6,600.Supplies totaling $12,825 were purchased during the period and debited to Supplies on Hand.A physical count shows $3,825 of Supplies on Hand at the end of the period.The proper journal entry at the end of the period

Accepted Answer

A)  debits Supplies on Hand and credits Supplies Expense for $9,000. 
B)  debits Supplies Expense and credits Supplies on Hand for $12,825. 
C)  debits Supplies on Hand and credits Supplies Expense for $15,600. 
D)  debits Supplies Expense and credits Supplies on Hand for $15,600.

Question 5

Comet Corporation's liability account balances at June 30,2013,included a 10 percent note payable.The note is dated October 1,2011,and carried an original principal amount of $600,000.The note is payable in three equal annual payments of $200,000 plus interest.The first interest and principal payment was made on October 1,2012.In Comet's June 30,2013,balance sheet,what amount should be reported as Interest Payable for this note?

Accepted Answer

A)  $10,000 
B)  $15,000 
C)  $30,000 
D)  $45,000

Question 6

On June 30,a company paid $3,600 for insurance premiums for the current year and debited the amount to Prepaid Insurance.At December 31,the bookkeeper forgot to record the amount expired.The omission has the following effect on the financial statements prepared December 31:

Accepted Answer

A)  overstates owners' equity. 
B)  overstates assets. 
C)  understates net income. 
D)  overstates both owners' equity and assets.

Question 7

Failure to record depreciation expense at the end of an accounting period results in

Accepted Answer

A)  understated income. 
B)  understated assets. 
C)  overstated expenses. 
D)  overstated assets.

Question 8

Under the cash basis of accounting,

Accepted Answer

A)  revenues are recorded when they are earned. 
B)  accounts receivable would appear on the balance sheet. 
C)  depreciation of assets having an economic life of more than one year is recognized. 
D)  the matching principle is ignored.

Question 9

Caribou Corporation shows the following balances:  Caribou paid suppliers $100,000 during the year.What is Caribou's cost of goods sold for the year?

Accepted Answer

A)  $97,500 
B)  $107,500 
C)  $102,500 
D)  $92,500

Question 10

Scott Co.reported an allowance for doubtful accounts of $28,000 (credit)at December 31,2013,before performing an aging of accounts receivable.As a result of the aging,Scott determined that an estimated $27,000 of the December 31,2013,accounts receivable would prove uncollectible.The adjusting entry required at December 31,2013,would be

Accepted Answer

A)  Doubtful Accounts Expense ...........27,000
Allowance for Doubtful Accounts ...27,000 
B)  Doubtful Accounts Expense ...........27,000
Accounts Receivable ...............27,000 
C)  Allowance for Doubtful Accounts .....1,000
Doubtful Accounts Expense .........1,000 
D)  Doubtful Accounts Expense ...........1,000
Allowance for Doubtful Accounts ...1,000

Question 11

Which of the following is true?

Accepted Answer

A)  Prepaid expenses are increased by a credit. 
B)  Gains are increased by a debit. 
C)  Losses are increased by a credit. 
D)  Accumulated depreciation is increased by a credit.

Question 12

Record the following transactions and events of Royal Wulff Company in general journal form.If the item does not require a journal entry,write "no entry."

Accepted Answer

The answer of Record the following transactions and events of...

Question 13

On March 1,2012,Forest Co.borrowed cash and signed a 36-month,interest-bearing note on which both the principal and interest are payable on February 28,2015.At December 31,2014,the liability for accrued interest should be

Accepted Answer

A)  10 months' interest. 
B)  22 months' interest. 
C)  34 months' interest. 
D)  36 months' interest.

Question 14

How would proceeds received in advance from the sale of nonrefundable tickets for the Super Bowl be reported in the seller's financial statements published before the Super Bowl?

Accepted Answer

A)  Revenue for the entire proceeds. 
B)  Revenue less related costs. 
C)  Unearned revenue less related costs. 
D)  Unearned revenue for the entire proceeds.

Question 15

At the end of the current fiscal year,an analysis of the payroll records of Bev Company showed accrued salaries of $22,200.The Accrued Salaries Payable account had a balance of $32,000 at the end of the current fiscal year,which was unchanged from its balance at the end of the prior fiscal year.The books of the company have not yet been closed.The entry needed in this situation would include a

Accepted Answer

A)  debit to Retained Earnings of $9,800. 
B)  credit to Retained Earnings of $9,800. 
C)  debit to Accrued Salaries payable of $9,800. 
D)  debit to Salaries Expense of $9,800.

Question 16

In an accrual accounting system,

Accepted Answer

A)  all accounts have normal debit balances. 
B)  a debit entry is recorded on the left-hand side of an account. 
C)  liabilities,owner's capital,and dividends all have normal credit balances. 
D)  revenues are recorded only when cash is received.

Question 17

The following data are from a comparison of the balance sheets of Brassie Company as of December 31,2013,and December 31,2012:
  The following data are from Brassie's 2011 income statement:
  During 2013:

Accepted Answer

The answer of The following data are from a comparison...

Question 18

Which of the following is presented in a balance sheet?

Accepted Answer

A)  Prepaid expenses 
B)  Revenues 
C)  Net income 
D)  Gains

Question 19

Crescent Corporation's interest revenue for 2013 was $13,100.Accrued interest receivable on December 31,2013,was $2,275 and $1,875 on December 31,2012.The cash received for interest during 2013 was

Accepted Answer

A)  $1,350. 
B)  $10,825. 
C)  $12,700. 
D)  $13,100.

Question 20

Arid Company paid $1,704 on June 1,2013,for a two-year insurance policy and recorded the entire amount as Insurance Expense.The December 31,2013,adjusting entry is

Accepted Answer

A)  debit Prepaid Insurance and credit Insurance Expense,$497. 
B)  debit Insurance Expense and credit Prepaid Insurance,$497. 
C)  debit Insurance Expense and credit Prepaid Insurance,$1,207. 
D)  debit Prepaid Insurance and credit Insurance Expense,$1,207.

Exam 2: A Review of the Accounting Cycle