Question 1

Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 2

Tacoma Corporation purchased a one-year insurance policy in January 2016 for $57000. The insurance policy is in effect from May 2016 through April 2017. If the company neglects to make the proper year-end adjustment for the expired insurance

Accepted Answer

A)  net income and assets will be understated by $38000. 
B)  net income and assets will be overstated by $38000. 
C)  net income and assets will be understated by $19000. 
D)  net income and assets will be overstated by $19000. 
A)  net income and assets will be understated by $38000. 
B)  net income and assets will be overstated by $38000. 
C)  net income and assets will be understated by $19000. 
D)  net income and assets will be overstated by $19000.

Question 3

An accumulated depreciation account

Accepted Answer

A)  is a contra-liability account. 
B)  increases on the debit side. 
C)  is offset against total assets on the balance sheet. 
D)  has a normal credit balance. 
A)  is a contra-liability account. 
B)  increases on the debit side. 
C)  is offset against total assets on the balance sheet. 
D)  has a normal credit balance.

Question 4

Expenses paid and recorded in an asset account before they are used or consumed are called ______________. Revenue received and recorded as a liability before it is recognized is referred to as ______________.

Accepted Answer

prepaid ex

Question 5

Salem Corporation purchased a one-year insurance policy in January 2016 for $51000. The insurance policy is in effect from April 2016 through March 2017. If the company neglects to make the proper year-end adjustment for the expired insurance

Accepted Answer

A)  net income and assets will be understated by $38250. 
B)  net income and assets will be overstated by $38250. 
C)  net income and assets will be understated by $8500. 
D)  net income and assets will be overstated by $8500. 
A)  net income and assets will be understated by $38250. 
B)  net income and assets will be overstated by $38250. 
C)  net income and assets will be understated by $8500. 
D)  net income and assets will be overstated by $8500.

Question 6

Business Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered. $\begin{array}{c}
 \text { BUSINESS INSURANCE AGENCY }\
 \text { Income Statement }\
 \text { For the Month Ended June 30}\\
\begin{array}{lrr}
  \text {Revenues  } &\
 \text { Sales revenue } &\$36,000\
 \text { Expenses } &\
 \text { Salaries and wages expense } &\$6,500\
 \text {  Rent expense} &4,200\
 \text { Depreciation expense } &2,800\
 \text { Advertising expense } &900\
 \text {Total expenses  } &&14,400\
 \text { Net income. } &&\$21,600\
\end{array}\end{array}$
 Additional Data: When the income statement was prepared the company accountant neglected to take into consideration the following information:
1. A utility bill for $2800 was received on the last day of the month for electric and gas service for the month of June.
2. A company insurance salesman sold a life insurance policy to a client for a premium of $24000. The agency billed the client for the policy and is entitled to a commission of 25%.
3. Supplies on hand at the beginning of the month were $3000. The agency purchased additional supplies during the month for $4000 in cash and $2600 of supplies were on hand at June 30.
4. The agency purchased a new car at the beginning of the month for $31000 cash. The car will depreciate $9000 per year.
5. Salaries owed to employees at the end of the month total $6100. The salaries will be paid on July 5.
Instructions
Prepare a correct income statement.

Accepted Answer

None

Question 7

Unearned revenue is classified as

Accepted Answer

A)  an asset account. 
B)  a revenue account. 
C)  a contra-revenue account. 
D)  a liability account. 
A)  an asset account. 
B)  a revenue account. 
C)  a contra-revenue account. 
D)  a liability account.

Question 8

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

Accepted Answer

A) True 
 B)False

Question 9

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Accepted Answer

A) True 
 B)False

Question 10

Depreciation based on revaluation of land and buildings is permitted 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 11

If a company fails to make an adjusting entry to record supplies expense then

Accepted Answer

A)  owner's equity will be understated. 
B)  expense will be understated. 
C)  assets will be understated. 
D)  net income will be understated. 
A)  owner's equity will be understated. 
B)  expense will be understated. 
C)  assets will be understated. 
D)  net income will be understated.

Question 12

The adjusted trial balance is prepared

Accepted Answer

A)  after financial statements are prepared. 
B)  before the trial balance. 
C)  to prove the equality of total assets and total liabilities. 
D)  after adjusting entries have been journalized and posted. 
A)  after financial statements are prepared. 
B)  before the trial balance. 
C)  to prove the equality of total assets and total liabilities. 
D)  after adjusting entries have been journalized and posted.

Question 13

Durawash Laundry purchased $8000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30 an inventory of the supplies indicated only $3000 on hand. The adjusting entry that should be made by the company on June 30 is

Accepted Answer

A)  Debit Supplies Expense $3000; Credit Supplies $3000. 
B)  Debit Supplies $3000; Credit Supplies Expense $3000. 
C)  Debit Supplies $5000; Credit Supplies Expense $5000. 
D)  Debit Supplies Expense $5000; Credit Supplies $5000. 
A)  Debit Supplies Expense $3000; Credit Supplies $3000. 
B)  Debit Supplies $3000; Credit Supplies Expense $3000. 
C)  Debit Supplies $5000; Credit Supplies Expense $5000. 
D)  Debit Supplies Expense $5000; Credit Supplies $5000.

Question 14

Expense recognition is tied to revenue recognition.

Accepted Answer

A) True 
 B)False

Question 15

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 16

The fiscal year of a business is usually determined by

Accepted Answer

A)  the IRS. 
B)  a lottery. 
C)  the business. 
D)  the SEC. 
A)  the IRS. 
B)  a lottery. 
C)  the business. 
D)  the SEC.

Question 17

Employees at Mango Corporation are paid $18000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Tuesday December 31. How much salaries and wages expense should be recorded three days later on January 2?

Accepted Answer

A)  $18000 
B)  $7200 
C)  $10800 
D)  None matching requires the weekly salary to be accrued on December 31. 
A)  $18000 
B)  $7200 
C)  $10800 
D)  None matching requires the weekly salary to be accrued on December 31.

Question 18

Characteristics associated with faithfully representative accounting information are

Accepted Answer

A)  verifiable and timely. 
B)  neutral and verifiable. 
C)  complete and neutral. 
D)  relevance and verifiable. 
A)  verifiable and timely. 
B)  neutral and verifiable. 
C)  complete and neutral. 
D)  relevance and verifiable.

Question 19

Financial statements can be prepared from the information provided by an adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 20

At March 1 2016 Milo Corp. had supplies on hand of $600. During the month Milo purchased supplies of $1300 and used supplies of $1400. The March 31 adjusting journal entry should include a

Accepted Answer

A)  debit to the supplies account for $1400. 
B)  credit to the supplies account for $600. 
C)  debit to the supplies account for $1300. 
D)  credit to the supplies account for $1400. 
A)  debit to the supplies account for $1400. 
B)  credit to the supplies account for $600. 
C)  debit to the supplies account for $1300. 
D)  credit to the supplies account for $1400.

Exam 3: Adjusting the Accounts

Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

Tacoma Corporation purchased a one-year insurance policy in January 2016 for $57000. The insurance policy is in effect from May 2016 through April 2017. If the company neglects to make the proper year-end adjustment for the expired insurance

An accumulated depreciation account

Expenses paid and recorded in an asset account before they are used or consumed are called ______________. Revenue received and recorded as a liability before it is recognized is referred to as ______________.

Salem Corporation purchased a one-year insurance policy in January 2016 for $51000. The insurance policy is in effect from April 2016 through March 2017. If the company neglects to make the proper year-end adjustment for the expired insurance

Unearned revenue is classified as

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Depreciation based on revaluation of land and buildings is permitted under

If a company fails to make an adjusting entry to record supplies expense then

The adjusted trial balance is prepared

Durawash Laundry purchased $8000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30 an inventory of the supplies indicated only $3000 on hand. The adjusting entry that should be made by the company on June 30 is

Expense recognition is tied to revenue recognition.

If an adjustment is needed for unearned revenues the

The fiscal year of a business is usually determined by

Employees at Mango Corporation are paid $18000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Tuesday December 31. How much salaries and wages expense should be recorded three days later on January 2?

Characteristics associated with faithfully representative accounting information are

Financial statements can be prepared from the information provided by an adjusted trial balance.

At March 1 2016 Milo Corp. had supplies on hand of $600. During the month Milo purchased supplies of $1300 and used supplies of $1400. The March 31 adjusting journal entry should include a

Accounting in Action

The Recording Process

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

Expenses paid and recorded in an asset account before they are used or consumed are called . Revenue received and recorded as a liability before it is recognized is referred to as .