Question 1

Cash-basis accounting is allowed under

Accepted Answer

A) GAAP but not IFRS. 
B) IFRS but not GAAP. 
C) both IFRS and GAAP. 
D) neither IFRS nor GAAP. 
A) GAAP but not IFRS. 
B) IFRS but not GAAP. 
C) both IFRS and GAAP. 
D) neither IFRS nor GAAP.

Question 2

Crue Company had the following transactions during 2015: 
-Sales of $4,500 on account
-Collected $2,500 for services to be performed in 2016
-Paid $1,625 cash in salaries
-Purchased airline tickets for $250 in December for a trip to take place in 2016
What is Crue's 2015 net income using cash basis accounting?

Accepted Answer

A) $625. 
B) $875. 
C) $5,125. 
D) $5,375. 
A) $625. 
B) $875. 
C) $5,125. 
D) $5,375.

Question 3

Which one of the following is not an application of revenue recognition?

Accepted Answer

A) Recording revenue as an adjusting entry on the last day of the accounting period. 
B) Accepting cash from an established customer for services to be performed over the next three months. 
C) Billing customers on June 30 for services completed during June. 
D) Receiving cash for services performed. 
A) Recording revenue as an adjusting entry on the last day of the accounting period. 
B) Accepting cash from an established customer for services to be performed over the next three months. 
C) Billing customers on June 30 for services completed during June. 
D) Receiving cash for services performed.

Question 4

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Accepted Answer

A) stockholders' equity will be overstated by $800. 
B) expenses will be understated by $750. 
C) assets will be understated by $250. 
D) net income will be understated by $800. 
A) stockholders' equity will be overstated by $800. 
B) expenses will be understated by $750. 
C) assets will be understated by $250. 
D) net income will be understated by $800.

Question 5

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Accepted Answer

A) True 
 B)False

Question 6

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

Accepted Answer

A) Monetary unit assumption. 
B) Economic entity assumption. 
C) Periodicity assumption. 
D) Going concern assumption. 
A) Monetary unit assumption. 
B) Economic entity assumption. 
C) Periodicity assumption. 
D) Going concern assumption.

Question 7

A common application of materiality is weighing the factual nature of cost figures versus the relevance of fair value.

Accepted Answer

A) True 
 B)False

Question 8

In general, adjusting entries are required each time financial statements are prepared.

Accepted Answer

A) True 
 B)False

Question 9

At March 1, 2015, Minutemen Corp. had supplies on hand of $500. During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a

Accepted Answer

A) debit to the supplies account for $1,500. 
B) credit to the supplies account for $500. 
C) debit to the supplies account for $1,200. 
D) credit to the supplies account for $1,500. 
A) debit to the supplies account for $1,500. 
B) credit to the supplies account for $500. 
C) debit to the supplies account for $1,200. 
D) credit to the supplies account for $1,500.

Question 10

Which one of the following is not a justification for adjusting entries?

Accepted Answer

A) Adjusting entries are necessary to ensure that the revenue recognition principle is followed. 
B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget. 
A) Adjusting entries are necessary to ensure that the revenue recognition principle is followed. 
B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Question 11

A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?

Accepted Answer

A) December 5. 
B) December 10. 
C) November 30. 
D) December 1. 
A) December 5. 
B) December 10. 
C) November 30. 
D) December 1.

Question 12

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Accepted Answer

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

Question 13

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 14

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, the failure to make an adjusting entry will cause

Accepted Answer

A) assets to be understated. 
B) assets to be overstated. 
C) expenses to be understated. 
D) contra-expenses to be overstated. 
A) assets to be understated. 
B) assets to be overstated. 
C) expenses to be understated. 
D) contra-expenses to be overstated.

Question 15

Which of the following statements concerning accrual-basis accounting is incorrect?

Accepted Answer

A) Accrual-basis accounting follows the revenue recognition principle. 
B) Accrual-basis accounting is the method required by generally accepted accounting principles. 
C) Accrual-basis accounting recognizes expenses when they are paid. 
D) Accrual-basis accounting follows the expense recognition principle. 
A) Accrual-basis accounting follows the revenue recognition principle. 
B) Accrual-basis accounting is the method required by generally accepted accounting principles. 
C) Accrual-basis accounting recognizes expenses when they are paid. 
D) Accrual-basis accounting follows the expense recognition principle.

Question 16

Accrued revenues are amounts recorded and received but not yet recognized.

Accepted Answer

A) True 
 B)False

Question 17

Adjusting entries are required

Accepted Answer

A) yearly. 
B) quarterly. 
C) monthly. 
D) every time financial statements are prepared. 
A) yearly. 
B) quarterly. 
C) monthly. 
D) every time financial statements are prepared.

Question 18

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an accounting assumption?

Accepted Answer

A) Integrity. 
B) Going concern. 
C) Periodicity. 
D) Economic entity. 
A) Integrity. 
B) Going concern. 
C) Periodicity. 
D) Economic entity.

Question 20

The time period assumption is often referred to as the expense recognition principle.

Accepted Answer

A) True 
 B)False

Cash-basis accounting is allowed under

Which one of the following is not an application of revenue recognition?

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

A common application of materiality is weighing the factual nature of cost figures versus the relevance of fair value.

In general, adjusting entries are required each time financial statements are prepared.

At March 1, 2015, Minutemen Corp. had supplies on hand of $500. During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a

Which one of the following is not a justification for adjusting entries?

A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, the failure to make an adjusting entry will cause

Which of the following statements concerning accrual-basis accounting is incorrect?

Accrued revenues are amounts recorded and received but not yet recognized.

Adjusting entries are required

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Which of the following is not an accounting assumption?

The time period assumption is often referred to as the expense recognition principle.

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

Cash-basis accounting is allowed under

Which one of the following is not an application of revenue recognition?

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

A common application of materiality is weighing the factual nature of cost figures versus the relevance of fair value.

In general, adjusting entries are required each time financial statements are prepared.

At March 1, 2015, Minutemen Corp. had supplies on hand of $500. During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a

Which one of the following is not a justification for adjusting entries?

A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?

Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sebastian make?

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, the failure to make an adjusting entry will cause

Which of the following statements concerning accrual-basis accounting is incorrect?

Accrued revenues are amounts recorded and received but not yet recognized.

Adjusting entries are required

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Which of the following is not an accounting assumption?

The time period assumption is often referred to as the expense recognition principle.

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