Question 1

Accrual accounting is not relevant under international financial reporting standards (IFRS).

Accepted Answer

A) True 
 B)False  False

Question 2

An accrued expense adjustment has the following effect on the financial statements:

Accepted Answer

A) increases expenses and increases net income. 
B) increases expenses and decreases assets. 
C) increases expenses and increases liabilities. 
D) decreases expenses and increases liabilities. 
A) increases expenses and increases net income. 
B) increases expenses and decreases assets. 
C) increases expenses and increases liabilities. 
D) decreases expenses and increases liabilities. C

Question 3

Jas Singh owns a construction business. Which of the following principles/objectives/assumptions requires the equipment used in the business to be amortized?

Accepted Answer

A) revenue recognition principle 
B) the reliability characteristic 
C) stable-monetary unit assumption 
D) matching objective 
A) revenue recognition principle 
B) the reliability characteristic 
C) stable-monetary unit assumption 
D) matching objective D

Question 4

An accrued expense adjustment entry has the following effect on the balance sheet:

Accepted Answer

A) decreases liabilities. 
B) increases assets. 
C) increases liabilities. 
D) correct this year but incorrect next year. 
A) decreases liabilities. 
B) increases assets. 
C) increases liabilities. 
D) correct this year but incorrect next year.

Question 5

Table 3-3
The unadjusted trial balance of Holitzner Roof Repairs appears below as at December 31, 2019. $\begin{array} { l r r } 
& \underline { \text { Debit } } & \underline { \text { Credit }} \
\text { Cash } & \$ 5,300 & \
\text { Accounts receivable } & 7,600 & \
\text { Roofing supplies } & 1,100 & \
\text { Equipment } & 6,000 & \
\text { Accumulated amortization } & & \$ 1,200 \
\text { Salaries payable } & & 1,100 \
\text { Interest payable } & & \
\text { Unearned service revenue } & & 300 \
\text { Note payable } & & 10,000 \
\text { Carmen Holitzner, capital } & & 6,400 \
\text { Carmen Holitzner, withdrawals } & & 600 \
\text { Service revenue } & & 3,000 \
\text { Salaries expense } & 500 & \
\text { Amortization expense } & & \
\text { Rent expense } & 2,100 & \
\text { Roofing supplies expense } & \underline{\quad\quad}
&\underline{\quad\quad}
  \
\text { Interest expense } & \underline {   \$ 2,600 } &\underline {   \$ 22,600 } \
\end{array}$
-Refer to Table 3-3. Given the following information, prepare the necessary adjusting entries at year end, December 31, 2019.
a)A physical count reveals only $520 of roofing supplies are on hand at December 31, 2019.
b)The equipment is amortized at a rate of $120 per month.
c)Unearned service revenue amounted to $200 at December 31, 2019.
d)Accrued salary expense at December 31, 2019, amounts to $150.
e)Interest accrued on the note payable at December 31, 2019, amounts to $50.

Accepted Answer

The answer of Table 3-3
The unadjusted trial balance of Holitzner...

Question 6

On April 1 of the current year, Wood Services received $15,000 for services to be performed evenly over the next 12 months. Wood Services initially recorded the $15,000 as unearned service revenue. The adjusting entry on December 31 of the current year will include a:

Accepted Answer

A) debit to service revenue for $11,250. 
B) debit to service revenue for $3,750. 
C) debit to unearned service revenue for $3,750. 
D) credit to service revenue for $11,250. 
A) debit to service revenue for $11,250. 
B) debit to service revenue for $3,750. 
C) debit to unearned service revenue for $3,750. 
D) credit to service revenue for $11,250.

Question 7

The adjusting entry to record $500 of expired insurance would include a debit to insurance expense.

Accepted Answer

A) True 
 B)False

Question 8

When an unearned revenue is initially recorded as a revenue, the adjusting entry would affect net income as follows:

Accepted Answer

A) decrease. 
B) no effect. 
C) increase. 
D) Current income is correct and next periods income is incorrect. 
A) decrease. 
B) no effect. 
C) increase. 
D) Current income is correct and next periods income is incorrect.

Question 9

The balance in unearned revenue after adjustment represents:

Accepted Answer

A) an asset on the balance sheet. 
B) an expense on the income statement. 
C) a liability on the balance sheet. 
D) revenue on the income statement. 
A) an asset on the balance sheet. 
B) an expense on the income statement. 
C) a liability on the balance sheet. 
D) revenue on the income statement.

Question 10

The January 1, 2019, balance in the Prepaid Insurance account was $3,150 and represented the unexpired portion of a two-year policy purchased October 1, 2018. What is the required year-end adjusting journal entry on December 31, 2019?

Accepted Answer

A)  $$\begin{array} { | r | r | } 
\hline \text { Pr. Insurance Expense } & 1,575 \
\hline \text { Cr. Prepaid Insurance } & 1,575 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Pr. Insurance Expense } & 1,800 \
\hline \text { Cr. Prepaid Insurance } & 1,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Dr. Prepaid Insurance } & 1,575 \
\hline \text { Cr. Insurance } & 1,575 \
 \text { Expense } & \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | } 
\hline \text { Dr. Prepaid Insurance } & 3,150 \
\hline \text { Cr. Insurance } & \
\text { Expense } & 3,150 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | r | r | } 
\hline \text { Pr. Insurance Expense } & 1,575 \
\hline \text { Cr. Prepaid Insurance } & 1,575 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Pr. Insurance Expense } & 1,800 \
\hline \text { Cr. Prepaid Insurance } & 1,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Dr. Prepaid Insurance } & 1,575 \
\hline \text { Cr. Insurance } & 1,575 \
 \text { Expense } & \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | } 
\hline \text { Dr. Prepaid Insurance } & 3,150 \
\hline \text { Cr. Insurance } & \
\text { Expense } & 3,150 \
\hline
\end{array}$$

Question 11

The process of allocating the cost of property, plant and equipment to expense over their useful lives is called amortization.

Accepted Answer

A) True 
 B)False

Question 12

On November 1, 2019, Two Sisters Company pays $36,000 cash for six months rent and debits prepaid rent at the time of the payment. The amount of the adjusting entry on December 31, 2019, would be:

Accepted Answer

A) $12,000. 
B) $24,000. 
C) $6,000. 
D) $0. 
A) $12,000. 
B) $24,000. 
C) $6,000. 
D) $0.

Question 13

Under accrual accounting receivables and payables are not recorded.

Accepted Answer

A) True 
 B)False

Question 14

Every adjusting entry affects an account on the income statement and an account on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

If an adjustment for prepaid insurance is not made at year end, net income will be:

Accepted Answer

A) unaffected. 
B) understated. 
C) overstated. 
D) correct this year but incorrect next year. 
A) unaffected. 
B) understated. 
C) overstated. 
D) correct this year but incorrect next year.

Question 16

The two most widely used methods of accounting are:

Accepted Answer

A) financial and managerial. 
B) cash-basis and financial. 
C) accrual and managerial. 
D) accrual and cash-basis. 
A) financial and managerial. 
B) cash-basis and financial. 
C) accrual and managerial. 
D) accrual and cash-basis.

Question 17

Unearned revenue recorded initially as revenue is adjusted by debiting a liability account.

Accepted Answer

A) True 
 B)False

Question 18

A company began operations and purchased $5,000 of supplies. By year end, $2,700 was still on hand. The adjusting entry at year end would include a:

Accepted Answer

A) debit to supplies of $5,000. 
B) credit to supplies for $2,700. 
C) credit to supplies for $2,300. 
D) debit to supplies expense for $2,700. 
A) debit to supplies of $5,000. 
B) credit to supplies for $2,700. 
C) credit to supplies for $2,300. 
D) debit to supplies expense for $2,700.

Question 19

A liability account is credited when a prepaid expense is recorded initially as an expense.

Accepted Answer

A) True 
 B)False

Question 20

Net income appears on the:

Accepted Answer

A) balance sheet. 
B) income statement. 
C) statement of owner's equity. 
D) income statement and the statement of owner's equity. 
A) balance sheet. 
B) income statement. 
C) statement of owner's equity. 
D) income statement and the statement of owner's equity.

Accrual accounting is not relevant under international financial reporting standards (IFRS).

An accrued expense adjustment has the following effect on the financial statements:

Jas Singh owns a construction business. Which of the following principles/objectives/assumptions requires the equipment used in the business to be amortized?

An accrued expense adjustment entry has the following effect on the balance sheet:

On April 1 of the current year, Wood Services received $15,000 for services to be performed evenly over the next 12 months. Wood Services initially recorded the $15,000 as unearned service revenue. The adjusting entry on December 31 of the current year will include a:

The adjusting entry to record $500 of expired insurance would include a debit to insurance expense.

When an unearned revenue is initially recorded as a revenue, the adjusting entry would affect net income as follows:

The balance in unearned revenue after adjustment represents:

The January 1, 2019, balance in the Prepaid Insurance account was $3,150 and represented the unexpired portion of a two-year policy purchased October 1, 2018. What is the required year-end adjusting journal entry on December 31, 2019?

The process of allocating the cost of property, plant and equipment to expense over their useful lives is called amortization.

On November 1, 2019, Two Sisters Company pays $36,000 cash for six months rent and debits prepaid rent at the time of the payment. The amount of the adjusting entry on December 31, 2019, would be:

Under accrual accounting receivables and payables are not recorded.

Every adjusting entry affects an account on the income statement and an account on the balance sheet.

If an adjustment for prepaid insurance is not made at year end, net income will be:

The two most widely used methods of accounting are:

Unearned revenue recorded initially as revenue is adjusted by debiting a liability account.

A company began operations and purchased $5,000 of supplies. By year end, $2,700 was still on hand. The adjusting entry at year end would include a:

A liability account is credited when a prepaid expense is recorded initially as an expense.

Net income appears on the:

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters

Exam 3: Measuring Business Income: The Adjusting Process

Accrual accounting is not relevant under international financial reporting standards (IFRS).

An accrued expense adjustment has the following effect on the financial statements:

Jas Singh owns a construction business. Which of the following principles/objectives/assumptions requires the equipment used in the business to be amortized?

An accrued expense adjustment entry has the following effect on the balance sheet:

On April 1 of the current year, Wood Services received $15,000 for services to be performed evenly over the next 12 months. Wood Services initially recorded the $15,000 as unearned service revenue. The adjusting entry on December 31 of the current year will include a:

The adjusting entry to record $500 of expired insurance would include a debit to insurance expense.

When an unearned revenue is initially recorded as a revenue, the adjusting entry would affect net income as follows:

The balance in unearned revenue after adjustment represents:

The January 1, 2019, balance in the Prepaid Insurance account was $3,150 and represented the unexpired portion of a two-year policy purchased October 1, 2018. What is the required year-end adjusting journal entry on December 31, 2019?

The process of allocating the cost of property, plant and equipment to expense over their useful lives is called amortization.

On November 1, 2019, Two Sisters Company pays $36,000 cash for six months rent and debits prepaid rent at the time of the payment. The amount of the adjusting entry on December 31, 2019, would be:

Under accrual accounting receivables and payables are not recorded.

Every adjusting entry affects an account on the income statement and an account on the balance sheet.

If an adjustment for prepaid insurance is not made at year end, net income will be:

The two most widely used methods of accounting are:

Unearned revenue recorded initially as revenue is adjusted by debiting a liability account.

A company began operations and purchased $5,000 of supplies. By year end, $2,700 was still on hand. The adjusting entry at year end would include a:

A liability account is credited when a prepaid expense is recorded initially as an expense.

Net income appears on the:

Accounting and the Business Environment

Recording Business Transactions

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters