Question 1

A liability-revenue account relationship exists with an unearned rent revenue adjusting entry.

Accepted Answer

A) True 
 B)False

Question 2

Blue Guitar Music School borrowed $30000 from the bank signing an 8% 6-month note on November 1. Principal and interest are payable to the bank on May 1. If the company prepares monthly financial statements what adjusting entry should the company make at November 30 with regard to the note (round answer to the nearest dollar)?

Accepted Answer

None

Question 3

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 4

A company usually determines the amount of supplies used during a period by

Accepted Answer

A)  adding the supplies on hand to the balance of the Supplies account. 
B)  summing the amount of supplies purchased during the period. 
C)  taking the difference between the supplies purchased and the supplies paid for during the period. 
D)  taking the difference between the balance of the Supplies account and the cost of supplies on hand. 
A)  adding the supplies on hand to the balance of the Supplies account. 
B)  summing the amount of supplies purchased during the period. 
C)  taking the difference between the supplies purchased and the supplies paid for during the period. 
D)  taking the difference between the balance of the Supplies account and the cost of supplies on hand.

Question 5

If the adjusting entry for depreciation is not made

Accepted Answer

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

Question 6

Adjusting entries are often made because some business events are not recorded as they occur.

Accepted Answer

A) True 
 B)False

Question 7

The preparation of adjusting entries is

Accepted Answer

A)  straight forward because the accounts that need adjustment will be out of balance. 
B)  often an involved process requiring the skills of a professional. 
C)  only required for accounts that do not have a normal balance. 
D)  optional when financial statements are prepared. 
A)  straight forward because the accounts that need adjustment will be out of balance. 
B)  often an involved process requiring the skills of a professional. 
C)  only required for accounts that do not have a normal balance. 
D)  optional when financial statements are prepared.

Question 8

On July 1 2014 Damlen Jurado Company pays $12000 to its insurance company for a 2-year insurance policy.
Instructions
Prepare the necessary journal entries for Damlen Jurado on July 1 and December 31.

Accepted Answer

None

Question 9

If an adjusting entry is not made for an accrued revenue

Accepted Answer

A)  assets will be overstated. 
B)  expenses will be understated. 
C)  owner's equity will be understated. 
D)  revenues will be overstated. 
A)  assets will be overstated. 
B)  expenses will be understated. 
C)  owner's equity will be understated. 
D)  revenues will be overstated.

Question 10

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 11

Jay Farrar Company is a manufacturing company that specializes in writing instruments. The past year was a difficult one for the company as it sought to retain its share in a market in which the largest competitors were also rapid innovators. Jay Farrar introduced a new product late in the year even though testing was not complete. It was a pen designed with two cartridges: one supplying ink and the other correction fluid. A person could then switch easily between writing and correcting errors. It was priced fairly high and was never heavily advertised. Even so the Correct-O-Pen as the product was named was an overwhelming success.
The success of the product has Josh Ritter the manager of the New Products division worried however. He was concerned that quality problems would begin occurring since the longevity of the pen and stability of the correction fluid formulation had not been tested. He did not want sales personnel to get the bonuses that appeared to be indicated since they might aggressively promote a product that would fail in use. He preferred to complete testing of the pen first so that more confidence could be placed in the results.
Top management however declined the tests. Mr. Ritter then instructed you the accountant not to prorate payroll taxes or rent expense for the rest of the year but to show them as current expenses in total. In this way the new product would appear to be only slightly profitable.
Required:
1. Describe the alternatives that you as an accountant would have in this situation.
2. Indicate which alternative is best.

Accepted Answer

The choices include:
1. Follow the manag

Question 12

The expense recognition principle matches

Accepted Answer

A)  customers with businesses. 
B)  expenses with revenues. 
C)  assets with liabilities. 
D)  creditors with businesses. 
A)  customers with businesses. 
B)  expenses with revenues. 
C)  assets with liabilities. 
D)  creditors with businesses.

Question 13

Which statement is correct?

Accepted Answer

A)  As long as a company consistently uses the cash basis of accounting generally accepted accounting principles allow its use. 
B)  The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. 
C)  The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. 
D)  As long as management is ethical there are no problems with using the cash basis of accounting. 
A)  As long as a company consistently uses the cash basis of accounting generally accepted accounting principles allow its use. 
B)  The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. 
C)  The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. 
D)  As long as management is ethical there are no problems with using the cash basis of accounting.

Question 14

Tom See has performed $4000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Tom 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 15

Hal Corp. prepared the following income statement using the cash basis of accounting: $\begin{array}{c}
\text {HAL CORP}\
\text {Income Statement, Cash Basis }\
\text {For the Year Ended December 31, 2016}\\\begin{array}{lrr}
\text { Service revenue (does not include } \$ 25,000 \text { of services rendered on account }&\
 \text { because the collection will not be until 2017) } &\$370,000\
 \text {  Expenses (does not include $ \$ 15,000 $ of expenses on account because} &\
 \text {  payment will not be made until 2017)} &220,000\
 \text { Net income } &\$150,000\
\end{array}\end{array}$
 Additional data:
1. Depreciation on a company automobile for the year amounted to $6000. This amount is not included in the expenses above.
2. On January 1 2016 paid for a two-year insurance policy on the automobile amounting to $1800. This amount is included in the expenses above.
Instructions
(a) Recast the above income statement on the accrual basis in conformity with generally accepted accounting principles. Show computations and explain each change.
(b) Explain which basis (cash or accrual) provides a better measure of income.

Accepted Answer

(a)  
 Service revenue should include th

Question 16

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

Accepted Answer

A) True 
 B)False

Question 17

Prepare the required end-of-period adjusting entries for each independent case listed below.
Case 1
Sleater-Kinney Company began the year with a $3000 balance in the Supplies account. During the year $8500 worth of additional supplies were purchased. A physical count of supplies on hand at the end of the year revealed that $7400 worth of supplies had been used during the year. No adjusting entry has been made until year end.
Case 2
Western Company has a calendar year-end accounting period. On July 1 the company purchased equipment for $30000. It is estimated that the equipment will depreciate $300 each month. No adjusting entry has been made until year end.
Case 3
Ranch Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $900 per month apartments and one tenant in the $1200 per month apartment had not paid their August rent as of August 31st.

Accepted Answer

None

Question 18

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 19

Truffle Candies paid employee wages on and through Friday January 26 and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $1800 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January? a.$\begin{array}{lll}
 \text {  Salaries and Wages } & 1,800 \
 \text { Salaries and Wages Payable. } &&1,800 \\end{array}$

b.$\begin{array}{lll} \text { Salaries and Wages Expense. } & 9,000 \
 \text { Salaries and Wages Payable } &&9,000 \\end{array}$

c.$\begin{array}{lll}\text { Salaries and Wages Expense. } & 5,400 \
\text { Salaries and Wages Payable }&&5,400 \\end{array}$

d.$\begin{array}{lll}\text {No adiusting entry is required }
\end{array}$

Accepted Answer

The answer of Truffle Candies paid employee wages on and...

Question 20

Which of the following statements related to the adjusted trial balance is incorrect?

Accepted Answer

A)  It shows the balances of all accounts at the end of the accounting period. 
B)  It is prepared before adjusting entries have been made. 
C)  It proves the equality of the total debit balances and the total credit balances in the ledger. 
D)  Financial statements can be prepared directly from the adjusted trial balance. 
A)  It shows the balances of all accounts at the end of the accounting period. 
B)  It is prepared before adjusting entries have been made. 
C)  It proves the equality of the total debit balances and the total credit balances in the ledger. 
D)  Financial statements can be prepared directly from the adjusted trial balance.

Exam 3: Adjusting the Accounts

A liability-revenue account relationship exists with an unearned rent revenue adjusting entry.

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

A company usually determines the amount of supplies used during a period by

If the adjusting entry for depreciation is not made

Adjusting entries are often made because some business events are not recorded as they occur.

The preparation of adjusting entries is

On July 1 2014 Damlen Jurado Company pays $12000 to its insurance company for a 2-year insurance policy. Instructions Prepare the necessary journal entries for Damlen Jurado on July 1 and December 31.

If an adjusting entry is not made for an accrued revenue

Prepaid expenses are

The expense recognition principle matches

Which statement is correct?

Tom See has performed $4000 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Tom make?

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

The two fundamental qualities of useful information are

Which of the following statements related to the adjusted trial balance is incorrect?

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