Question 1

Can financial statements be prepared directly from the adjusted trial balance?

Accepted Answer

A) They cannot.The general ledger must be used. 
B) Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts. 
C) No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted.It has no other purpose. 
D) They can because that is the only reason that an adjusted trial balance is prepared. 
A) They cannot.The general ledger must be used. 
B) Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts. 
C) No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted.It has no other purpose. 
D) They can because that is the only reason that an adjusted trial balance is prepared.

Question 2

If an adjustment is needed for unearned revenues, the

Accepted Answer

A) liability and related revenue are overstated before adjustment. 
B) liability and related revenue are understated before adjustment. 
C) liability is overstated and the related revenue is understated before adjustment. 
D) liability is understated and the related revenue is overstated before adjustment. 
A) liability and related revenue are overstated before adjustment. 
B) liability and related revenue are understated before adjustment. 
C) liability is overstated and the related revenue is understated before adjustment. 
D) liability is understated and the related revenue is overstated before adjustment.

Question 3

To be faithfully representative, accounting information should predict future events, confirm prior expectations, and be reported on a timely basis.

Accepted Answer

A) True 
 B)False

Question 4

Depreciation expense for a period is the

Accepted Answer

A) original cost of an asset - accumulated depreciation. 
B) book value of the asset ÷ useful life. 
C) portion of an asset's cost that expired during the period. 
D) market value of the asset ÷ useful life. 
A) original cost of an asset - accumulated depreciation. 
B) book value of the asset ÷ useful life. 
C) portion of an asset's cost that expired during the period. 
D) market value of the asset ÷ useful life.

Question 5

Adjusting entries are required

Accepted Answer

A) because some costs expire with the passage of time and have not yet been journalized. 
B) when the company's profits are below the budget. 
C) when expenses are recorded in the period in which they are incurred. 
D) when revenues are recorded in the period in which services are performed. 
A) because some costs expire with the passage of time and have not yet been journalized. 
B) when the company's profits are below the budget. 
C) when expenses are recorded in the period in which they are incurred. 
D) when revenues are recorded in the period in which services are performed.

Question 6

An adjusted trial balance should be prepared before the adjusting entries are made.

Accepted Answer

A) True 
 B)False

Question 7

REM Real Estate received a check for $27,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $27,000. Financial statements will be prepared on July 31. REM Real Estate should make the following adjusting entry on July 31:

Accepted Answer

A) Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500. 
B) Debit Rent Revenue, $4,500; Credit Unearned Rent Revenue, $4,500. 
C) Debit Unearned Rent Revenue, $27,000; Credit Rent Revenue, $24,000. 
D) Debit Cash, $27,000; Credit Rent Revenue, $27,000. 
A) Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500. 
B) Debit Rent Revenue, $4,500; Credit Unearned Rent Revenue, $4,500. 
C) Debit Unearned Rent Revenue, $27,000; Credit Rent Revenue, $24,000. 
D) Debit Cash, $27,000; Credit Rent Revenue, $27,000.

Question 8

Asset prepayments become expenses when they expire.

Accepted Answer

A) True 
 B)False

Question 9

On July 1, Runner's Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

Accepted Answer

A) Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500. 
B) Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500. 
C) Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500. 
D) Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000. 
A) Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500. 
B) Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500. 
C) Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500. 
D) Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000.

Question 10

The two fundamental qualities of useful information are

Accepted Answer

A) verifiability and timeliness. 
B) relevance and faithful representation. 
C) comparability and flexibility. 
D) understandability and consistency. 
A) verifiability and timeliness. 
B) relevance and faithful representation. 
C) comparability and flexibility. 
D) understandability and consistency.

Question 11

A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in

Accepted Answer

A) February. 
B) March. 
C) the period when the workers receive their checks. 
D) either in February or March depending on when the pay period ends. 
A) February. 
B) March. 
C) the period when the workers receive their checks. 
D) either in February or March depending on when the pay period ends.

Question 12

Sebastian Belle, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will Sebastian make upon receipt of the payments?

Accepted Answer

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

Question 13

Employees at Tengo Corporation are paid $15,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2?

Accepted Answer

A) $15,000 
B) $9,000 
C) $6,000 
D) None, matching requires the weekly salary to be accrued on December 31. 
A) $15,000 
B) $9,000 
C) $6,000 
D) None, matching requires the weekly salary to be accrued on December 31.

Question 14

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

Accepted Answer

A) a fiscal year. 
B) an interim period. 
C) the time period assumption. 
D) a reporting period. 
A) a fiscal year. 
B) an interim period. 
C) the time period assumption. 
D) a reporting period.

Question 15

The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is

Accepted Answer

A) $3,500. 
B) $5,700. 
C) $6,500. 
D) $11,700. 
A) $3,500. 
B) $5,700. 
C) $6,500. 
D) $11,700.

Question 16

An adjusting entry always involves two balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Prepaid expenses are

Accepted Answer

A) paid and recorded in an asset account before they are used or consumed. 
B) paid and recorded in an asset account after they are used or consumed. 
C) incurred but not yet paid or recorded. 
D) incurred and already paid or recorded. 
A) paid and recorded in an asset account before they are used or consumed. 
B) paid and recorded in an asset account after they are used or consumed. 
C) incurred but not yet paid or recorded. 
D) incurred and already paid or recorded.

Question 19

Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated that annual depreciation on the equipment will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

Accepted Answer

A) Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800. 
B) Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150. 
C) Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400. 
D) Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200. 
A) Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800. 
B) Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150. 
C) Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400. 
D) Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200.

Question 20

Under accrual-basis accounting

Accepted Answer

A) cash must be received before revenue is recognized. 
B) net income is calculated by matching cash outflows against cash inflows. 
C) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. 
D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. 
A) cash must be received before revenue is recognized. 
B) net income is calculated by matching cash outflows against cash inflows. 
C) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. 
D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

Can financial statements be prepared directly from the adjusted trial balance?

If an adjustment is needed for unearned revenues, the

To be faithfully representative, accounting information should predict future events, confirm prior expectations, and be reported on a timely basis.

Depreciation expense for a period is the

Adjusting entries are required

An adjusted trial balance should be prepared before the adjusting entries are made.

Asset prepayments become expenses when they expire.

On July 1, Runner's Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

The two fundamental qualities of useful information are

A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in

Sebastian Belle, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will Sebastian make upon receipt of the payments?

Employees at Tengo Corporation are paid $15,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2?

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is

An adjusting entry always involves two balance sheet accounts.

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

Prepaid expenses are

Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated that annual depreciation on the equipment will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

Under accrual-basis accounting

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 3: Adjusting the Accounts

Can financial statements be prepared directly from the adjusted trial balance?

If an adjustment is needed for unearned revenues, the

To be faithfully representative, accounting information should predict future events, confirm prior expectations, and be reported on a timely basis.

Depreciation expense for a period is the

Adjusting entries are required

An adjusted trial balance should be prepared before the adjusting entries are made.

Asset prepayments become expenses when they expire.

On July 1, Runner's Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

The two fundamental qualities of useful information are

A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in

Sebastian Belle, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will Sebastian make upon receipt of the payments?

Employees at Tengo Corporation are paid $15,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2?

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is

An adjusting entry always involves two balance sheet accounts.

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

Prepaid expenses are

Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated that annual depreciation on the equipment will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

Under accrual-basis accounting

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters