Question 1

The final financial statement prepared is the ________.

Accepted Answer

A)  balance sheet 
B)  statement of net income 
C)  statement of cash flows 
D)  statement of retained earnings 
A)  balance sheet 
B)  statement of net income 
C)  statement of cash flows 
D)  statement of retained earnings

Question 2

Which of the following choices shows the correct sequence of the order of preparation of the financial statements?

Accepted Answer

A)  balance sheet, statement of net income, statement of stockholders' equity, statement of cash flows 
B)  statement of net income, statement of stockholders' equity, balance sheet, statement of cash flows 
C)  statement of net income, balance sheet, statement of stockholders' equity, statement of cash flows 
D)  statement of stockholders' equity, balance sheet, statement of net income, statement of cash flows 
A)  balance sheet, statement of net income, statement of stockholders' equity, statement of cash flows 
B)  statement of net income, statement of stockholders' equity, balance sheet, statement of cash flows 
C)  statement of net income, balance sheet, statement of stockholders' equity, statement of cash flows 
D)  statement of stockholders' equity, balance sheet, statement of net income, statement of cash flows

Question 3

If a prepaid expense is recorded as an expense, and the adjusting entry is not made at the end of the period, expenses on the income statement will be overstated.

Accepted Answer

A) True 
 B)False

Question 4

If a prepaid expense is initially recorded as an asset, the end-of-period adjusting entry records the unexpired portion.

Accepted Answer

A) True 
 B)False

Question 5

Bay City Corporation received $27,000 for 12 months' rent in advance. What entry is used to record this transaction?

Accepted Answer

A)  $$\begin{array} { l } 
\text { Cash }&27,000 \
\quad \text { Prepaid Rent }&&27,000
\end{array}$$ 
B)  $\begin{array}{l}
\text { Rent Expense }&27,000 \
\text { Cash }&&27,00
\end{array}$ 
C)  $$\begin{array} { l } 
\text { Cash } &27,000\
\quad \text { Unearned Rent Revenue }&&27,000
\end{array}$$ 
D)  $\begin{array}{ll}
\text { Unearned Rent Revenue } & 27,000 \
\quad \text { Rent Revenue } && 27,000
\end{array}$ 
A)  $$\begin{array} { l } 
\text { Cash }&27,000 \
\quad \text { Prepaid Rent }&&27,000
\end{array}$$ 
B)  $\begin{array}{l}
\text { Rent Expense }&27,000 \
\text { Cash }&&27,00
\end{array}$ 
C)  $$\begin{array} { l } 
\text { Cash } &27,000\
\quad \text { Unearned Rent Revenue }&&27,000
\end{array}$$ 
D)  $\begin{array}{ll}
\text { Unearned Rent Revenue } & 27,000 \
\quad \text { Rent Revenue } && 27,000
\end{array}$

Question 6

Recording depreciation expense is necessary to allocate the cost of an asset over its expected useful life.

Accepted Answer

A) True 
 B)False

Question 7

Mattox Corporation had an unadjusted balance of $5,000 in Supplies. The actual balance was $190. The accountant failed to make the adjusting entry. What is the effect on the current year financial statements?

Accepted Answer

A)  Net income is understated by $4,810. 
B)  Current assets are overstated by $4,810. 
C)  Current assets are understated by $5,000. 
D)  Retained Earnings is overstated by $5,000. 
A)  Net income is understated by $4,810. 
B)  Current assets are overstated by $4,810. 
C)  Current assets are understated by $5,000. 
D)  Retained Earnings is overstated by $5,000.

Question 8

The post-closing trial balance contains both permanent and temporary accounts.

Accepted Answer

A) True 
 B)False

Question 9

The final step in the accounting cycle is to ________.

Accepted Answer

A)  prepare an adjusted trial balance 
B)  close temporary accounts 
C)  prepare a post-closing trial balance 
D)  prepare financial statements 
A)  prepare an adjusted trial balance 
B)  close temporary accounts 
C)  prepare a post-closing trial balance 
D)  prepare financial statements

Question 10

Permanent accounts include all balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following errors will not be revealed by the unadjusted trial balance?

Accepted Answer

A)  incorrectly posting a debit for Salaries Expense to Supplies Expense 
B)  failing to post one side of a journal entry 
C)  posting a $50,000 debit to Accounts Receivable as $5,000 while recording the credit to revenue as $50,000 
D)  posting a credit to cash for $5,400 as $4,500 while posting the debit to expense as $5,400 
A)  incorrectly posting a debit for Salaries Expense to Supplies Expense 
B)  failing to post one side of a journal entry 
C)  posting a $50,000 debit to Accounts Receivable as $5,000 while recording the credit to revenue as $50,000 
D)  posting a credit to cash for $5,400 as $4,500 while posting the debit to expense as $5,400

Question 12

If a company does not adjust a prepaid expense initially recorded as an asset, assets will be understated.

Accepted Answer

A) True 
 B)False

Question 13

Snowden Company purchased a 2-year insurance policy on March 31, 2018 for $16,000 and charged the entire amount to Insurance Expense. The adjusting entry on December 31, 2018 will include ________.

Accepted Answer

A)  a credit to Insurance Expense for $10,000 
B)  a credit to Prepaid Insurance for $10,000 
C)  a debit to Insurance Expense for $6,000 
D)  a credit to Cash for $6,000 
A)  a credit to Insurance Expense for $10,000 
B)  a credit to Prepaid Insurance for $10,000 
C)  a debit to Insurance Expense for $6,000 
D)  a credit to Cash for $6,000

Question 14

Closing revenue accounts results in a credit to income summary.

Accepted Answer

A) True 
 B)False

Question 15

Selected transactions of Ventura Corporation are presented below:
 March 1 -Received $\$ 9,000$ in payment for 6 months advance rent from Franken Company and recorded it as rent revenue. May 1 -Paid Acme Insurance $\$ 6,000$ for a 2-year liability policy and recorded it as insurance expense. Policy begins on May 1. June 1 -Received $\$ 5,400$ from Kennedy Corporation as an advance payment for a 6 -month advertising contract and recorded it as advertising revenue. Contract begins on June 1 . Required: Prepare the adjusting entries that would be required on June 30.

Accepted Answer

None

Question 16

Which of the following is not a reason for why adjusting journal entries are necessary?

Accepted Answer

A)  to ensure all revenues are recognized in the period earned 
B)  to ensure all expenses are recognized in the period incurred 
C)  because U.S. GAAP requires that financial information be reported using the accrual basis of accounting 
D)  because U.S. GAAP requires that financial information be reported on the cash basis of accounting and adjusting entries adjust accounts from the accrual to the cash basis 
A)  to ensure all revenues are recognized in the period earned 
B)  to ensure all expenses are recognized in the period incurred 
C)  because U.S. GAAP requires that financial information be reported using the accrual basis of accounting 
D)  because U.S. GAAP requires that financial information be reported on the cash basis of accounting and adjusting entries adjust accounts from the accrual to the cash basis

Question 17

The accounting equation is correctly stated as ________.

Accepted Answer

A)  Assets = Liabilities + Equity 
B)  Assets + Liabilities = Equity 
C)  Assets = Liabilities - Equity 
D)  Assets = Liabilities = Equity 
A)  Assets = Liabilities + Equity 
B)  Assets + Liabilities = Equity 
C)  Assets = Liabilities - Equity 
D)  Assets = Liabilities = Equity

Question 18

A revenue account has a normal debit balance.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an adjusting entry?

Accepted Answer

A)  Depreciation Expense 
Accumulated Depreciation 
B)  Unearned Service Revenue 
Service Revenue 
C)  Cash 
Unearned Rent Revenue 
D)  Insurance Expense
 Prepaid Insurance 
A)  Depreciation Expense 
Accumulated Depreciation 
B)  Unearned Service Revenue 
Service Revenue 
C)  Cash 
Unearned Rent Revenue 
D)  Insurance Expense
 Prepaid Insurance

Question 20

Realistic Rentals collected $10,000 in payment of advance rent for 6 months. This an example of ________.

Accepted Answer

A)  an accrued receivable 
B)  a prepaid expense 
C)  an unearned revenue 
D)  an accrued liability 
A)  an accrued receivable 
B)  a prepaid expense 
C)  an unearned revenue 
D)  an accrued liability

Exam 4: Review of the Accounting Cycle

The final financial statement prepared is the ________.

Which of the following choices shows the correct sequence of the order of preparation of the financial statements?

If a prepaid expense is recorded as an expense, and the adjusting entry is not made at the end of the period, expenses on the income statement will be overstated.

If a prepaid expense is initially recorded as an asset, the end-of-period adjusting entry records the unexpired portion.

Bay City Corporation received $27,000 for 12 months' rent in advance. What entry is used to record this transaction?

Recording depreciation expense is necessary to allocate the cost of an asset over its expected useful life.

Mattox Corporation had an unadjusted balance of $5,000 in Supplies. The actual balance was $190. The accountant failed to make the adjusting entry. What is the effect on the current year financial statements?

The post-closing trial balance contains both permanent and temporary accounts.

The final step in the accounting cycle is to ________.

Permanent accounts include all balance sheet accounts.

Which of the following errors will not be revealed by the unadjusted trial balance?

If a company does not adjust a prepaid expense initially recorded as an asset, assets will be understated.

Snowden Company purchased a 2-year insurance policy on March 31, 2018 for $16,000 and charged the entire amount to Insurance Expense. The adjusting entry on December 31, 2018 will include ________.

Closing revenue accounts results in a credit to income summary.

Which of the following is not a reason for why adjusting journal entries are necessary?

The accounting equation is correctly stated as ________.

A revenue account has a normal debit balance.

Which of the following is not an adjusting entry?

Realistic Rentals collected $10,000 in payment of advance rent for 6 months. This an example of ________.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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