Question 1

Which of the following reflects the balances of prepayment accounts prior to adjustment?

Accepted Answer

A)  Balance sheet accounts are understated and income statement accounts are understated. 
B)  Balance sheet accounts are overstated and income statement accounts are overstated. 
C)  Balance sheet accounts are overstated and income statement accounts are understated. 
D)  Balance sheet accounts are understated and income statement accounts are overstated. 
A)  Balance sheet accounts are understated and income statement accounts are understated. 
B)  Balance sheet accounts are overstated and income statement accounts are overstated. 
C)  Balance sheet accounts are overstated and income statement accounts are understated. 
D)  Balance sheet accounts are understated and income statement accounts are overstated.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The expense recognition principle requires that efforts be matched with accomplishments.

Accepted Answer

A) True 
 B)False

Question 4

Yakima Co. purchased equipment on May 1 2016 for $7704. The company expects to use the equipment for 6 years. It has no salvage value.
1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1284)?
2. What is the book value of the equipment at May 31 2016?

Accepted Answer

None

Question 5

In a service-type business revenue is considered recognized

Accepted Answer

A)  at the end of the month. 
B)  at the end of the year. 
C)  when the service is performed. 
D)  when cash is received. 
A)  at the end of the month. 
B)  at the end of the year. 
C)  when the service is performed. 
D)  when cash is received.

Question 6

On January 1 2016 Bottle Rockets Corp. purchased a general liability insurance policy for $9000 to provide coverage for the calendar year.
1. If the company recorded the policy as an asset when purchased what is the monthly adjusting journal entry that should be recorded at January 31 2016?
*2. If the company expensed the cost of the policy on January 1 2016 what is the monthly adjusting entry that should be recorded at January 31 2016?

Accepted Answer

None

Question 7

Alternative adjusting entries do not apply to

Accepted Answer

A)  accrued revenues and accrued expenses. 
B)  prepaid expenses. 
C)  unearned revenues. 
D)  prepaid expenses and unearned revenues. 
A)  accrued revenues and accrued expenses. 
B)  prepaid expenses. 
C)  unearned revenues. 
D)  prepaid expenses and unearned revenues.

Question 8

Which of the following statements is not true?

Accepted Answer

A)  Comparability means using the same accounting principles from year to year within a company. 
B)  Faithful representation is the quality of information that gives assurance that it is free from error. 
C)  Relevant accounting information must be capable of making a difference in the decision. 
D)  The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decision. 
A)  Comparability means using the same accounting principles from year to year within a company. 
B)  Faithful representation is the quality of information that gives assurance that it is free from error. 
C)  Relevant accounting information must be capable of making a difference in the decision. 
D)  The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decision.

Question 9

The expense recognition principle attempts to match ______________ with ______________.

Accepted Answer

The answer of The expense recognition principle attempts to match...

Question 10

Financial statements are prepared directly from the

Accepted Answer

A)  general journal. 
B)  ledger. 
C)  trial balance. 
D)  adjusted trial balance. 
A)  general journal. 
B)  ledger. 
C)  trial balance. 
D)  adjusted trial balance.

Question 11

Depreciation is a ______________ allocation process rather than a process of ______________.

Accepted Answer

The answer of Depreciation is a ______________ allocation process rather...

Question 12

In developing an accounting information system it is important to establish procedures whereby all transactions that affect the components of the accounting equation are recorded. Why then is it often necessary to adjust the accounts before financial statements are prepared even in a properly designed accounting system? Identify the major types of adjustments that are frequently made and give a specific example of each.

Accepted Answer

Account balances must be adjusted before

Question 13

A business pays weekly salaries of $35000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Wednesday is

Accepted Answer

A)  debit Salaries and Wages Payable $21000; credit Cash $21000. 
B)  debit Salaries and Wages Expense $21000; credit Cash $21000. 
C)  debit Salaries and Wages Expense $21000; credit Salaries and Wages Payable $21000. 
D)  debit Salaries and Wages Expense $14000; credit Salaries and Wages Payable $14000. 
A)  debit Salaries and Wages Payable $21000; credit Cash $21000. 
B)  debit Salaries and Wages Expense $21000; credit Cash $21000. 
C)  debit Salaries and Wages Expense $21000; credit Salaries and Wages Payable $21000. 
D)  debit Salaries and Wages Expense $14000; credit Salaries and Wages Payable $14000.

Question 14

All of the following are characteristics of accounting information except

Accepted Answer

A)  faithful representation. 
B)  comparability. 
C)  relevance. 
D)  flexibility. 
A)  faithful representation. 
B)  comparability. 
C)  relevance. 
D)  flexibility.

Question 15

SWC Bus Charter signed a four-month note payable in the amount of $30000 on September 1. The note requires interest at an annual rate of 5%. The amount of interest to be accrued at the end of September is

Accepted Answer

A)  $125. 
B)  $200. 
C)  $500. 
D)  $1500. 
A)  $125. 
B)  $200. 
C)  $500. 
D)  $1500.

Question 16

On July 1 2016 Accident Insurance Associates received $9000 from a client for a 3-year insurance policy.
Instructions
Prepare the necessary journal entries for Accident Insurance Associates on July 1 and December 31.

Accepted Answer

None

Question 17

The following ledger accounts are used by the Miami Ereghound Track: Accounts Receivable
Prepaid Advertising
Prepaid Rent

Unearned Ticket Revenue

Advertising Expense
Rent Expense

Ticket Revenue
Sales Revenue Instructions
For each of the following transactions below prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry if any required on September 30 the end of the fiscal year.
(a) On September 1 paid rent on the track facility for three months $213000.
(b) On September 1 sold season tickets for admission to the racetrack. The racing season is year-round with 25 racing days each month. Season ticket sales totaled $840000.
(c) On September 1 borrowed $300000 from First National Bank by issuing a 6% note payable due in three months.
(d) On September 5 programs for 20 racing days in September 25 racing days in October and 25 racing days in November were printed for $3500.
(e) The accountant for the concessions company reported that gross receipts for September were $160000. Eight percent is due to the track and will be remitted by October 10.

Accepted Answer

The answer of The following ledger accounts are used by...

Question 18

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 19

Buena Vista Social Club accumulates the following adjustment data at December 31.
1. Revenue of $1600 collected in advance has been recognized.
2. Salaries of $600 are unpaid.
3. Prepaid rent totaling $500 has expired.
4. Supplies of $450 have been used.
5. Revenue recognized but unbilled total $750.
6. Utility expenses of $250 are unpaid.
7. Interest of $300 has accrued on a note payable.
Instructions
(a) For each of the above items indicate:
1. The type of adjustment (prepaid expense unearned revenue accrued revenue or accrued expense).
2. The account relationship (asset/liability liability/revenue etc.).
3. The status of account balances before adjustment (understatement or overstatement).
4. The adjusting entry.
(b) Assume net income before the adjustments listed above was $15500. What is the adjusted net income?
Prepare your answer in the tabular form presented below. $\begin{array} { c c c c } 
& & \begin{array} { c } 
\text { Account Balances } \
\text { Before Adjustment } \
\text { (Under statement }
\end{array} & \
\begin{array} { c } 
\text { Type of }
\end{array} & \text { Account } & \text { Or Over statement) } & \text { Adjusting Entry } \
\hline
\end{array}$

Accepted Answer

The answer of Buena Vista Social Club accumulates the following...

Question 20

Expenses incurred but not yet paid or recorded are called

Accepted Answer

A)  prepaid expenses. 
B)  accrued expenses. 
C)  interim expenses. 
D)  unearned expenses. 
A)  prepaid expenses. 
B)  accrued expenses. 
C)  interim expenses. 
D)  unearned expenses.

Exam 3: Adjusting the Accounts

Which of the following reflects the balances of prepayment accounts prior to adjustment?

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

The expense recognition principle requires that efforts be matched with accomplishments.

In a service-type business revenue is considered recognized

Alternative adjusting entries do not apply to

Which of the following statements is not true?

The expense recognition principle attempts to match ______________ with ______________.

Financial statements are prepared directly from the

Depreciation is a ______________ allocation process rather than a process of ______________.

A business pays weekly salaries of $35000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Wednesday is

All of the following are characteristics of accounting information except

SWC Bus Charter signed a four-month note payable in the amount of $30000 on September 1. The note requires interest at an annual rate of 5%. The amount of interest to be accrued at the end of September is

On July 1 2016 Accident Insurance Associates received $9000 from a client for a 3-year insurance policy. Instructions Prepare the necessary journal entries for Accident Insurance Associates on July 1 and December 31.

Cash-basis accounting is allowed under

Expenses incurred but not yet paid or recorded are called

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

The expense recognition principle attempts to match with .

Depreciation is a allocation process rather than a process of .