Question 1

Accrued expenses are expenses that have been:

Accepted Answer

A) paid but not incurred. 
B) not paid but incurred. 
C) not paid and not incurred. 
D) paid and incurred. 
A) paid but not incurred. 
B) not paid but incurred. 
C) not paid and not incurred. 
D) paid and incurred.

Question 2

Explain the difference between cash-basis and accrual accounting. Are adjusting entries necessary in both methods? Explain.

Accepted Answer

The cash basis of accounting recognizes

Question 3

When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income:

Accepted Answer

A) no effect. 
B) decrease. 
C) increase. 
D) Current income is correct but next period's income is incorrect. 
A) no effect. 
B) decrease. 
C) increase. 
D) Current income is correct but next period's income is incorrect.

Question 4

An accountant recognizes the impact of a business event when cash is received or paid in which basis of accounting?

Accepted Answer

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

Question 5

If a required accrued expense adjustment had not been made, the financial statements would have been affected as follows:

Accepted Answer

A) net income understated, assets overstated, liabilities unaffected, and owner's equity understated. 
B) net income overstated, assets unaffected, liabilities understated, and owner's equity overstated. 
C) net income understated, assets overstated, liabilities understated, and owner's equity unaffected. 
D) net income overstated, assets overstated, liabilities understated, and owner's equity overstated. 
A) net income understated, assets overstated, liabilities unaffected, and owner's equity understated. 
B) net income overstated, assets unaffected, liabilities understated, and owner's equity overstated. 
C) net income understated, assets overstated, liabilities understated, and owner's equity unaffected. 
D) net income overstated, assets overstated, liabilities understated, and owner's equity overstated.

Question 6

Accumulated amortization shows a beginning balance of $9,300 and an ending balance of $10,700. How much amortization expense was reported on the current year's income statement?

Accepted Answer

A) $9,300 
B) $1,200 
C) $1,400 
D) $10,700 
A) $9,300 
B) $1,200 
C) $1,400 
D) $10,700

Question 7

The ________ is/are transferred from the statement of owner's equity to the balance sheet.

Accepted Answer

A) net income 
B) beginning capital 
C) ending capital 
D) withdrawals 
A) net income 
B) beginning capital 
C) ending capital 
D) withdrawals

Question 8

Failure to record the adjusting entry for amortization:

Accepted Answer

A) overstates assets and overstates equity. 
B) understates assets and overstates equity. 
C) overstates assets and understates equity. 
D) understates assets and understates equity. 
A) overstates assets and overstates equity. 
B) understates assets and overstates equity. 
C) overstates assets and understates equity. 
D) understates assets and understates equity.

Question 9

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 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 unearned 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 unearned service revenue for $11,250.

Question 10

An accountant records revenue when earned under which basis of accounting?

Accepted Answer

A) cash-basis 
B) accrual 
C) tax 
D) financial 
A) cash-basis 
B) accrual 
C) tax 
D) financial

Question 11

At the end of the fiscal period, Wilf Carter Services omitted the adjusting entry for amortization on equipment. The effect of this error on the financial statements is to:

Accepted Answer

A) understate liabilities. 
B) understate owner's equity. 
C) overstate expenses. 
D) overstate assets. 
A) understate liabilities. 
B) understate owner's equity. 
C) overstate expenses. 
D) overstate assets.

Question 12

The following unadjusted account balances and adjustment data are for Global Advertising as of December 31, 2019: $$\begin{array} { l r } 
\text { Cash } & \$ 14,000 \
\text { Prepaid insurance } & 3,000 \
\text { Office supplies } & 900 \
\text { Office equipment } & 15,500 \
\text { Accumulated amort.-office equipment } & 4,500 \
\text { Accounts payable } & 1,600 \
\text { Salary payable } & 0 \
\text { Unearned service revenue } & 5,500 \
\text { Bill Johnson, Capital } & 14,900 \
\text { Bill Johnson, Withdrawals } & 11,000 \
\text { Service revenue } & 29,700 \
\text { Salary expense } & 11,800 \
\text { Amort. expense-office equipment } & 0 \
\text { Supplies expense } & 0 \
\text { Insurance expense } & 0
\end{array}$$ Adjustment data:
Office supplies on hand December 31, 2019, $500
Prepaid insurance expired during 2019, $275
Unearned service revenue, December 31, 2019, $1,500
Amortization on equipment for 2019, $2,800
Accrued salaries, $1,800
Fill in the trial balance, adjustments, and adjusted trial balance columns in the following table.

Accepted Answer

The answer of The following unadjusted account balances and adjustment...

Question 13

Failure to adjust for accrued revenue results in net income being understated and assets being understated.

Accepted Answer

A) True 
 B)False

Question 14

Adjusting journal entries impact both the income statement and the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Net income is reported on the income statement at $40,000. Adjusting entries for accrued revenues of $5,000 and unearned revenue earned during the current period of $2,000 were accidentally omitted. The correct net income is:

Accepted Answer

A) $33,000. 
B) $37,000. 
C) $47,000. 
D) $43,000. 
A) $33,000. 
B) $37,000. 
C) $47,000. 
D) $43,000.

Question 16

Accountants use the Accumulated Amortization account to show the cumulative sum of all amortization expense from the date of acquiring the asset.

Accepted Answer

A) True 
 B)False

Question 17

If a required unearned revenue adjustment had not been made, the financial statements would have been affected as follows:

Accepted Answer

A) net income understated, assets overstated, liabilities unaffected, and owner's equity overstated. 
B) net income overstated, assets unaffected, liabilities understated, and owner's equity unaffected. 
C) net income understated, assets unaffected, liabilities overstated, and owner's equity understated. 
D) net income overstated, assets overstated, liabilities overstated, and owner's equity unaffected. 
A) net income understated, assets overstated, liabilities unaffected, and owner's equity overstated. 
B) net income overstated, assets unaffected, liabilities understated, and owner's equity unaffected. 
C) net income understated, assets unaffected, liabilities overstated, and owner's equity understated. 
D) net income overstated, assets overstated, liabilities overstated, and owner's equity unaffected.

Question 18

Storemount Delivery reports the following transactions for May 2019:
May 1 Purchased a two-year insurance policy for cash, $1,800.
9 Performed a service on account, $800.
16 Paid wages to employees, $950.
18 Completed a job for a customer and collected $600 cash.
23 Collected $500 of the amount owed from May 9.
30 Accrued wages of $650.
Show the amount of revenue and expense recognized for each transaction during May 2019 under both the cash basis and the accrual basis of accounting by completing the following chart.
Cash-Basis Accounting $$\begin{array} { | c | c | c | } 
\hline \text { Date } & \text { Revenue } & \text { Expense } \
\hline & & \
\hline & & \
\hline & & \
\hline & & \
\hline & & \
\hline
\end{array}$$ Accrual Accounting $$\begin{array} { | l | l | l | } 
\hline \text { Date } & \text { Revenue } & \text { Expense } \
\hline & & \
\hline & & \
\hline & & \
\hline & & \
\hline & & \
\hline
\end{array}$$

Accepted Answer

Cash-Basis

Question 19

The concept that assists accountants in determining how often to prepare financial reports is the:

Accepted Answer

A) Cost principle. 
B) Time-period assumption. 
C) Recognition criteria for revenue. 
D) Matching objective. 
A) Cost principle. 
B) Time-period assumption. 
C) Recognition criteria for revenue. 
D) Matching objective.

Question 20

Sally Lee, a professional accountant, owns a computer used for the company's business. The matching objective requires that which of the following accounts appears on the income statement for the year ended December 31?

Accepted Answer

A) Amortization expense, computer 
B) Accumulated amortization, computer 
C) Depreciation receivable, computer 
D) Depreciation payable, computer 
A) Amortization expense, computer 
B) Accumulated amortization, computer 
C) Depreciation receivable, computer 
D) Depreciation payable, computer

Accrued expenses are expenses that have been:

Explain the difference between cash-basis and accrual accounting. Are adjusting entries necessary in both methods? Explain.

When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income:

An accountant recognizes the impact of a business event when cash is received or paid in which basis of accounting?

If a required accrued expense adjustment had not been made, the financial statements would have been affected as follows:

Accumulated amortization shows a beginning balance of $9,300 and an ending balance of $10,700. How much amortization expense was reported on the current year's income statement?

The ________ is/are transferred from the statement of owner's equity to the balance sheet.

Failure to record the adjusting entry for amortization:

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 service revenue. The adjusting entry on December 31 of the current year will include a:

An accountant records revenue when earned under which basis of accounting?

At the end of the fiscal period, Wilf Carter Services omitted the adjusting entry for amortization on equipment. The effect of this error on the financial statements is to:

Failure to adjust for accrued revenue results in net income being understated and assets being understated.

Adjusting journal entries impact both the income statement and the balance sheet.

Net income is reported on the income statement at $40,000. Adjusting entries for accrued revenues of $5,000 and unearned revenue earned during the current period of $2,000 were accidentally omitted. The correct net income is:

Accountants use the Accumulated Amortization account to show the cumulative sum of all amortization expense from the date of acquiring the asset.

If a required unearned revenue adjustment had not been made, the financial statements would have been affected as follows:

The concept that assists accountants in determining how often to prepare financial reports is the:

Sally Lee, a professional accountant, owns a computer used for the company's business. The matching objective requires that which of the following accounts appears on the income statement for the year ended December 31?

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

Accrued expenses are expenses that have been:

Explain the difference between cash-basis and accrual accounting. Are adjusting entries necessary in both methods? Explain.

When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income:

An accountant recognizes the impact of a business event when cash is received or paid in which basis of accounting?

If a required accrued expense adjustment had not been made, the financial statements would have been affected as follows:

Accumulated amortization shows a beginning balance of $9,300 and an ending balance of $10,700. How much amortization expense was reported on the current year's income statement?

The ________ is/are transferred from the statement of owner's equity to the balance sheet.

Failure to record the adjusting entry for amortization:

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 service revenue. The adjusting entry on December 31 of the current year will include a:

An accountant records revenue when earned under which basis of accounting?

At the end of the fiscal period, Wilf Carter Services omitted the adjusting entry for amortization on equipment. The effect of this error on the financial statements is to:

Failure to adjust for accrued revenue results in net income being understated and assets being understated.

Adjusting journal entries impact both the income statement and the balance sheet.

Net income is reported on the income statement at $40,000. Adjusting entries for accrued revenues of $5,000 and unearned revenue earned during the current period of $2,000 were accidentally omitted. The correct net income is:

Accountants use the Accumulated Amortization account to show the cumulative sum of all amortization expense from the date of acquiring the asset.

If a required unearned revenue adjustment had not been made, the financial statements would have been affected as follows:

The concept that assists accountants in determining how often to prepare financial reports is the:

Sally Lee, a professional accountant, owns a computer used for the company's business. The matching objective requires that which of the following accounts appears on the income statement for the year ended December 31?

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