Question 1

Becki Jean Corporation issued a one-year, 9%, $200,000 note on April 30, 2010. Interest expense for the year ended December 31, 2010 was

Accepted Answer

A)  $18,000. 
B)  $13,500. 
C)  $12,000. 
D)  $10,500. 
A)  $18,000. 
B)  $13,500. 
C)  $12,000. 
D)  $10,500.

Question 2

Match the items below by entering the appropriate code letter in the space provided.
A. Time period assumption 
B. Fiscal year G. Depreciation
C. Revenue recognition principle 
D. Prepaid expenses 
E. Matching principle 
F. Accrued revenues
H. Accumulated depreciation
I. Accrued expenses
J. Book value
1. A twelve month accounting period
2. Expenses paid before they are incurred
3. Cost less accumulated depreciation
4. Divides the economic life of a business into artificial time periods
5. Efforts are related to accomplishments
6. A contra asset account
7. Recognition of revenue when it is recorded when earned
8. Revenues earned but not yet received
9. Expenses incurred but not yet paid
10. A cost allocation process
Answers to Matching

Accepted Answer

1. B 6. H
2. D 7. C

Question 3

A company spends $10 million dollars for an office building. Over what period should the cost be written off?

Accepted Answer

A)  When the $10 million is expended in cash 
B)  All in the first year 
C)  Over the useful life of the building 
D)  After $10 million in revenue is earned 
A)  When the $10 million is expended in cash 
B)  All in the first year 
C)  Over the useful life of the building 
D)  After $10 million in revenue is earned

Question 4

Daly Investments purchased an 18-month insurance policy on May 31, 2010 for $3,600. The December 31, 2010 balance sheet would report Prepaid Insurance of

Accepted Answer

A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $1,400. 
C)  $2,200. 
D)  $3,600. 
A)  $0 because Prepaid Insurance is reported on the Income Statement. 
B)  $1,400. 
C)  $2,200. 
D)  $3,600.

Question 5

Speedy Clean Laundry purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is

Accepted Answer

A)  Debit Laundry Supplies Expense, $2,000; Credit Laundry Supplies, $2,000. 
B)  Debit Laundry Supplies, $2,000; Credit Laundry Supplies Expense, $2,000. 
C)  Debit Laundry Supplies, $4,500; Credit Laundry Supplies Expense, $4,500. 
D)  Debit Laundry Supplies Expense, $4,500; Credit Laundry Supplies, $4,500. 
A)  Debit Laundry Supplies Expense, $2,000; Credit Laundry Supplies, $2,000. 
B)  Debit Laundry Supplies, $2,000; Credit Laundry Supplies Expense, $2,000. 
C)  Debit Laundry Supplies, $4,500; Credit Laundry Supplies Expense, $4,500. 
D)  Debit Laundry Supplies Expense, $4,500; Credit Laundry Supplies, $4,500.

Question 6

The matching principle states that expenses should be matched with revenues. Another way of stating the principle is to say that

Accepted Answer

A)  assets should be matched with liabilities. 
B)  efforts should be matched with accomplishments. 
C)  owner withdrawals should be matched with owner contributions. 
D)  cash payments should be matched with cash receipts. 
A)  assets should be matched with liabilities. 
B)  efforts should be matched with accomplishments. 
C)  owner withdrawals should be matched with owner contributions. 
D)  cash payments should be matched with cash receipts.

Question 7

The time period assumption is also referred to as the

Accepted Answer

A)  calendar assumption. 
B)  cyclicity assumption. 
C)  periodicity assumption. 
D)  fiscal assumption. 
A)  calendar assumption. 
B)  cyclicity assumption. 
C)  periodicity assumption. 
D)  fiscal assumption.

Question 8

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

Accepted Answer

A)  Debit Unearned 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 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 9

The balance in the Prepaid Rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December1. The adjusting entry required on December 31 is to

Accepted Answer

A)  debit Rent Expense, $5,000; credit Prepaid Rent, $5,000. 
B)  debit Rent Expense, $10,000; credit Prepaid Rent $10,000. 
C)  debit Prepaid Rent, $5,000; credit Rent Expense, $5,000. 
D)  debit Prepaid Rent, $10,000; credit Rent Expense, $10,000. 
A)  debit Rent Expense, $5,000; credit Prepaid Rent, $5,000. 
B)  debit Rent Expense, $10,000; credit Prepaid Rent $10,000. 
C)  debit Prepaid Rent, $5,000; credit Rent Expense, $5,000. 
D)  debit Prepaid Rent, $10,000; credit Rent Expense, $10,000.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

Accepted Answer

A) True 
 B)False

Question 13

Southwestern City College sold season tickets for the 2010 football season for $160,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

Accepted Answer

A)  is not required. No adjusting entries will be made until the end of the season in November. 
B)  will include a debit to Cash and a credit to Ticket Revenue for $40,000. 
C)  will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $60,000. 
D)  will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $53,333. 
A)  is not required. No adjusting entries will be made until the end of the season in November. 
B)  will include a debit to Cash and a credit to Ticket Revenue for $40,000. 
C)  will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $60,000. 
D)  will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $53,333.

Question 14

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

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 time period assumption states that

Accepted Answer

A)  a transaction can only affect one period of time. 
B)  estimates should not be made if a transaction affects more than one time period. 
C)  adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. 
D)  the economic life of a business can be divided into artificial time periods. 
A)  a transaction can only affect one period of time. 
B)  estimates should not be made if a transaction affects more than one time period. 
C)  adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. 
D)  the economic life of a business can be divided into artificial time periods.

Question 17

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

Accepted Answer

A)  an expense should be recorded when the bill is received. 
B)  an expense should be recorded when the cash is paid out. 
C)  an adjusting entry should be made recognizing the expense. 
D)  it is optional whether to record the expense before the bill is received. 
A)  an expense should be recorded when the bill is received. 
B)  an expense should be recorded when the cash is paid out. 
C)  an adjusting entry should be made recognizing the expense. 
D)  it is optional whether to record the expense before the bill is received.

Question 18

Which of the following reflect 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 19

A company shows a balance in Salaries Payable of $40,000 at the end of the month. The next payroll amounting to $45,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

Accepted Answer

The answer of A company shows a balance in Salaries...

Question 20

The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is

Accepted Answer

A)  $4,500. 
B)  $2,500. 
C)  $9,700. 
D)  $5,700. 
A)  $4,500. 
B)  $2,500. 
C)  $9,700. 
D)  $5,700.

Exam 3: Adjusting the Accounts

Becki Jean Corporation issued a one-year, 9%, $200,000 note on April 30, 2010. Interest expense for the year ended December 31, 2010 was

A company spends $10 million dollars for an office building. Over what period should the cost be written off?

Daly Investments purchased an 18-month insurance policy on May 31, 2010 for $3,600. The December 31, 2010 balance sheet would report Prepaid Insurance of

Speedy Clean Laundry purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is

The matching principle states that expenses should be matched with revenues. Another way of stating the principle is to say that

The time period assumption is also referred to as the

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

The balance in the Prepaid Rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December1. The adjusting entry required on December 31 is to

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

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

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

Southwestern City College sold season tickets for the 2010 football season for $160,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

If an adjustment is needed for unearned revenues, the

The time period assumption states that

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

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

A company shows a balance in Salaries Payable of $40,000 at the end of the month. The next payroll amounting to $45,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is

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