Question 1

Which of the following properly describes a deferral?

Accepted Answer

A)  Cash is received after revenue is recognized. 
B)  Cash is received before revenue is recognized. 
C)  Cash is paid after expense is incurred. 
D)  Cash is paid in the same time period that an expense is incurred. 
A)  Cash is received after revenue is recognized. 
B)  Cash is received before revenue is recognized. 
C)  Cash is paid after expense is incurred. 
D)  Cash is paid in the same time period that an expense is incurred.

Question 2

The failure to properly record an adjusting entry to accrue an expense will result in an

Accepted Answer

A)  understatement of expenses and an understatement of liabilities. 
B)  understatement of expenses and an overstatement of liabilities. 
C)  understatement of expenses and an overstatement of assets. 
D)  overstatement of expenses and an understatement of assets. 
A)  understatement of expenses and an understatement of liabilities. 
B)  understatement of expenses and an overstatement of liabilities. 
C)  understatement of expenses and an overstatement of assets. 
D)  overstatement of expenses and an understatement of assets.

Question 3

Accrual basis.Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

Accepted Answer

The answer of Accrual basis.Grier & Associates maintains its records...

Question 4

To compute interest expense on a note for an adjusting entry, the formula is (principal × annual rate × a fraction). The numerator and denominator of the fraction are:

Accepted Answer

The answer of To compute interest expense on a note...

Question 5

On June 1, 2014, Nott Corp. loaned Horn $800,000 on a 12% note, payable in five annual installments of $160,000 beginning January 2, 2015. In connection with this loan, Horn was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Horn after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2014. Horn made timely payments through November 1, 2014. On January 2, 2015, Nott received payment of the first principal installment plus all interest due. At December 31, 2014, Nott's interest receivable on the loan to Horn should be

Accepted Answer

A)  $0. 
B)  $8,000. 
C)  $16,000. 
D)  $24,000. 
A)  $0. 
B)  $8,000. 
C)  $16,000. 
D)  $24,000.

Question 6

A prepaid expense can best be described as an amount

Accepted Answer

A)  paid and currently matched with revenues. 
B)  paid and not currently matched with revenues. 
C)  not paid and currently matched with revenues. 
D)  not paid and not currently matched with revenues. 
A)  paid and currently matched with revenues. 
B)  paid and not currently matched with revenues. 
C)  not paid and currently matched with revenues. 
D)  not paid and not currently matched with revenues.

Question 7

An unearned revenue can best be described as an amount

Accepted Answer

A)  collected and currently matched with expenses. 
B)  collected and not currently matched with expenses. 
C)  not collected and currently matched with expenses. 
D)  not collected and not currently matched with expenses. 
A)  collected and currently matched with expenses. 
B)  collected and not currently matched with expenses. 
C)  not collected and currently matched with expenses. 
D)  not collected and not currently matched with expenses.

Question 8

Which of the following is the first step to be taken by a company deciding to convert to IFRS?

Accepted Answer

A)  Preparing an opening balance sheet at the date of transition 
B)  Identifying the timing of first IFRS statement 
C)  Selecting accounting principles that comply with IFRS 
D)  Implementing accounting principles retrospectively 
A)  Preparing an opening balance sheet at the date of transition 
B)  Identifying the timing of first IFRS statement 
C)  Selecting accounting principles that comply with IFRS 
D)  Implementing accounting principles retrospectively

Question 9

Chen Company's account balances at December 31, 2014 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2014 were $1,650,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

Accepted Answer

A)  $17,400. 
B)  $16,500. 
C)  $15,600. 
D)  $4,800. 
A)  $17,400. 
B)  $16,500. 
C)  $15,600. 
D)  $4,800.

Question 10

An example of an internal event would be a flood that destroyed a portion of a company's inventory.

Accepted Answer

A) True 
 B)False

Question 11

The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

Accepted Answer

A) True 
 B)False

Question 12

Accrual basis.Sales salaries paid during 2014 were $85,000. Advances to salesmen were $1,100 on January 1, 2014, and $800 on December 31, 2014. Sales salaries accrued were $1,360 on January 1, 2014, and $1,880 on December 31, 2014. Show the computation of sales salaries on an accrual basis for 2014.

Accepted Answer

$85,000 + $1,100 - $

Question 13

If ending accounts receivable exceeds the beginning accounts receivable

Accepted Answer

A)  cash collections during the period exceed the amount of revenue recognized. 
B)  net income for the period is less than the amount of cash-basis income. 
C)  no cash was collected during the period. 
D)  cash collections during the year are less than the amount of revenue recognized. 
A)  cash collections during the period exceed the amount of revenue recognized. 
B)  net income for the period is less than the amount of cash-basis income. 
C)  no cash was collected during the period. 
D)  cash collections during the year are less than the amount of revenue recognized.

Question 14

Olsen Company paid or collected during 2014 the following items:   The following balances have been excerpted from Olsen's balance sheets:   The interest revenue on the income statement for 2014 was

Accepted Answer

A)  $49,600. 
B)  $61,200. 
C)  $64,400. 
D)  $76,000. 
A)  $49,600. 
B)  $61,200. 
C)  $64,400. 
D)  $76,000.

Question 15

Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

Accepted Answer

A)  The event or item can be measured objectively in financial terms. 
B)  The event or item is relevant and reliable. 
C)  The event or item is an element. 
D)  All of these must be met. 
A)  The event or item can be measured objectively in financial terms. 
B)  The event or item is relevant and reliable. 
C)  The event or item is an element. 
D)  All of these must be met.

Question 16

It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

Accepted Answer

A) True 
 B)False

Question 17

Reversing entries are
1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. useful in simplifying the recording of transactions in the next accounting period.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  1 and 2 
A)  1 
B)  2 
C)  3 
D)  1 and 2

Question 18

A journal entry to record a receipt of rent in advance will include a

Accepted Answer

A)  debit to Rent Revenue. 
B)  credit to Rent Revenue. 
C)  credit to Cash. 
D)  credit to Unearned Revenue. 
A)  debit to Rent Revenue. 
B)  credit to Rent Revenue. 
C)  credit to Cash. 
D)  credit to Unearned Revenue.

Question 19

An adjusting entry should never include

Accepted Answer

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

Question 20

Which of the following is a reason for recasting prior financial statements based on IFRS?

Accepted Answer

A)  To increase the market value of a company's shares 
B)  To report a high income for attracting investors 
C)  To report a low taxable income reducing the tax liability 
D)  To provide financial statement users with comparable information 
A)  To increase the market value of a company's shares 
B)  To report a high income for attracting investors 
C)  To report a low taxable income reducing the tax liability 
D)  To provide financial statement users with comparable information

Exam 3: The Accounting Information System

Which of the following properly describes a deferral?

The failure to properly record an adjusting entry to accrue an expense will result in an

Accrual basis.Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

To compute interest expense on a note for an adjusting entry, the formula is (principal × annual rate × a fraction). The numerator and denominator of the fraction are:

A prepaid expense can best be described as an amount

An unearned revenue can best be described as an amount

Which of the following is the first step to be taken by a company deciding to convert to IFRS?

An example of an internal event would be a flood that destroyed a portion of a company's inventory.

The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

If ending accounts receivable exceeds the beginning accounts receivable

Olsen Company paid or collected during 2014 the following items: The following balances have been excerpted from Olsen's balance sheets: The interest revenue on the income statement for 2014 was

Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

Reversing entries are 1. normally prepared for prepaid, accrued, and estimated items. 2. necessary to achieve a proper matching of revenue and expense. 3. useful in simplifying the recording of transactions in the next accounting period.

A journal entry to record a receipt of rent in advance will include a

An adjusting entry should never include

Which of the following is a reason for recasting prior financial statements based on IFRS?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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