Exam 4: Accrual Accounting Concepts

LR Corporation is a cash basis business.LR signed a six-month, 12% note payable of $10,000 on October 1, 2022.By recording the interest expense related to the note only when it is paid on April 1, 2023, LR will understate expenses by ________ on its year-end financial statements on December 31, 2022.

Which of the following accounts is adjusted but is not closed?

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

Accrued expenses are:

Which statement is correct?

Goods purchased for future use in the business, such as supplies, are called:

An adjusted trial balance:

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

Closing entries:

In a service-type business, revenue is recognized:

A company spends $20 million dollars for an office building.Over what period should the cost be written off?

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted.Which of the following statements is true?

Appalachian Ski Shop signs a three-month note payable to help finance increases in inventory for the winter ski season.The note is signed on October 1, 2022 in the amount of $30,000 with annual interest of 6%.What is the adjusting entry to be made on December 31, 2022 for the interest expense accrued to that date, assuming that no entries have been made previously to accrue interest?

The primary source used in the preparation of the financial statements is the:

Mary Richardo has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period.What adjusting entry must Mary make?

The Vintage Laundry Company purchased $8,500 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 $1,500 on hand.The adjusting entry that should be made by the company on June 30 is:

An adjusting entry always involves a balance sheet account and an income statement account.

The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.

An accumulated depreciation account:

A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season.The note is signed on November 1 in the amount of $50,000 with annual interest of 6%.What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?