Question 1

If a business pays rent in advance and increases the Prepaid Rent account the company receiving the rent payment will increase:

Accepted Answer

A) rent expense. 
B) prepaid rent. 
C) unearned rent revenue. 
D) accrued rent revenue. 
A) rent expense. 
B) prepaid rent. 
C) unearned rent revenue. 
D) accrued rent revenue.

Question 2

If Equipment has an unadjusted balance of $4000 and Accumulated Depreciation's unadjusted balance at December 30 2022 and estimated annual depreciation is $300 the year-end adjustment would contain a(n):

Accepted Answer

A) increase to Accumulated Depreciation Equipment for $300. 
B) decrease to Depreciation Expense Equipment for $300. 
C) decrease to Accumulated Depreciation Equipment for $300. 
D) decrease to Equipment for $300. 
A) increase to Accumulated Depreciation Equipment for $300. 
B) decrease to Depreciation Expense Equipment for $300. 
C) decrease to Accumulated Depreciation Equipment for $300. 
D) decrease to Equipment for $300.

Question 3

At the end of the fiscal year the usual adjustment for accrued salaries owed to employees was omitted.Which of the following statements is true?

Accepted Answer

A) Salaries and Wages Expense for the year is overstated. 
B) Liabilities at the end of the year are understated. 
C) Assets at the end of the year are understated. 
D) Stockholders' equity at the end of the year is understated. 
A) Salaries and Wages Expense for the year is overstated. 
B) Liabilities at the end of the year are understated. 
C) Assets at the end of the year are understated. 
D) Stockholders' equity at the end of the year is understated.

Question 4

Brokaw Industries signs a $40000 9% 6-month note payable on September 1 2021.How much interest expense will Brokaw report in its 2022 financial statements?

Accepted Answer

A) $600 
B) $1200 
C) $1800 
D) $0 
A) $600 
B) $1200 
C) $1800 
D) $0

Question 5

The following is selected information from L Corporation for the fiscal year ending October 31 2022. $\begin{array} { | l | r | } 
\hline \text { Cash received from customers } & \$ 300,000 \
\hline \text { Revenue recognized } & 440,000 \
\hline \text { Cash paid for expenses } & 170,000 \
\hline \begin{array} { c } 
\text { Cash paid for computers on November 1, 2021 that will } \
\text { be used for } 3 \text { years }
\end{array} & 48,000 \
\hline \begin{array} { l } 
\text { Expenses incurred including any depreciation }
\end{array} &216,000 \
\hline \begin{array} { l } 
\text { Proceeds from a bank loan, part of which was used to } \
\text { pay for the computers }
\end{array} &100,000 \
\hline
\end{array}$ Based on the accrual basis of accounting what is L Corporation's net income for the year ending October 31 2022?

Accepted Answer

A) $254000 
B) $224000 
C) $208000 
D) $270000 
A) $254000 
B) $224000 
C) $208000 
D) $270000

Question 6

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

Accepted Answer

A) True 
 B)False

Question 7

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:

Accepted Answer

A) market value. 
B) contra asset. 
C) book value. 
D) liability. 
A) market value. 
B) contra asset. 
C) book value. 
D) liability.

Question 8

If as of December 31 2022 rent of $150 for December had not been recorded or paid the adjustment would include a(an):

Accepted Answer

A) increase to Accumulated Rent for $150. 
B) decrease to Cash for $150. 
C) decrease to Rent Payable for $150 
D) increase to Rent Expense for $150 
A) increase to Accumulated Rent for $150. 
B) decrease to Cash for $150. 
C) decrease to Rent Payable for $150 
D) increase to Rent Expense for $150

Question 9

Which statement is correct concerning the adjusted tabular summary?

Accepted Answer

A) An adjusted tabular summary eliminates the need for the preparation of financial statements. 
B) The purpose of an adjusted tabular summary is to prove the equality of the basic accounting equation. 
C) An adjusted tabular summary will contain only balance sheet accounts. 
D) The adjusted tabular summary is prepared before the adjustments have been recorded. 
A) An adjusted tabular summary eliminates the need for the preparation of financial statements. 
B) The purpose of an adjusted tabular summary is to prove the equality of the basic accounting equation. 
C) An adjusted tabular summary will contain only balance sheet accounts. 
D) The adjusted tabular summary is prepared before the adjustments have been recorded.

Question 10

Adjustments are:

Accepted Answer

A) not necessary if the accounting system is operating properly. 
B) usually required before financial statements are prepared. 
C) made whenever management desires to change an account balance. 
D) made to balance sheet accounts only. 
A) not necessary if the accounting system is operating properly. 
B) usually required before financial statements are prepared. 
C) made whenever management desires to change an account balance. 
D) made to balance sheet accounts only.

Question 11

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following accounts will reflect the account's beginning balance on the adjusted tabular summary?

Accepted Answer

A) Prepaid rent 
B) Retained earnings 
C) Prepaid insurance 
D) Unearned revenue 
A) Prepaid rent 
B) Retained earnings 
C) Prepaid insurance 
D) Unearned revenue

Question 13

Mary Richardo CPA has billed her clients for services performed.She subsequently receives payments from her clients.What transaction will she record upon receipt of the payments?

Accepted Answer

A) decrease Unearned Service Revenue and increase Service Revenue 
B) increase Cash and decrease Accounts Receivable 
C) increase Accounts Receivable and increase Service Revenue 
D) Increase Cash and increase Service Revenue 
A) decrease Unearned Service Revenue and increase Service Revenue 
B) increase Cash and decrease Accounts Receivable 
C) increase Accounts Receivable and increase Service Revenue 
D) Increase Cash and increase Service Revenue

Question 14

A company shows a balance in Salaries and Wages Payable of $50000 at the end of the month.The next payroll amounting to $75000 is to be paid in the following month.To record the payment of salaries the company would

Accepted Answer

A) increase Salaries and Wages Expense $75000 increase Salaries and Wages Payable $ 75000 
B) increase Salaries and Wages Expense $75000 decrease Cash $75000 
C) increase Salaries and Wages Expense $25000 decrease Cash $25000 
D) decrease Salaries and Wages Payable $50000 increase Salaries and Wages Expense $25000
Decrease Cash $75000 
A) increase Salaries and Wages Expense $75000 increase Salaries and Wages Payable $ 75000 
B) increase Salaries and Wages Expense $75000 decrease Cash $75000 
C) increase Salaries and Wages Expense $25000 decrease Cash $25000 
D) decrease Salaries and Wages Payable $50000 increase Salaries and Wages Expense $25000
Decrease Cash $75000

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Adjustments are often made because some business events are not recorded as they occur.

Accepted Answer

A) True 
 B)False

Question 17

Failure to prepare an adjustment at the end of the period to record an accrued expense would cause:

Accepted Answer

A) net income to be understated. 
B) an overstatement of assets and an overstatement of liabilities. 
C) an understatement of expenses and an understatement of liabilities. 
D) an overstatement of expenses and an overstatement of liabilities. 
A) net income to be understated. 
B) an overstatement of assets and an overstatement of liabilities. 
C) an understatement of expenses and an understatement of liabilities. 
D) an overstatement of expenses and an overstatement of liabilities.

Question 18

Oakville Inc.purchased a 12-month insurance policy on March 1 2022 for $2400.At March 31 2022 the adjustment to record expiration of this asset will include:

Accepted Answer

A) an increase to Prepaid Insurance and a decrease to Cash for $2400. 
B) an increase to Prepaid Insurance and a decrease to Insurance Expense for $240. 
C) an increase to Insurance Expense and a decrease to Prepaid Insurance for $200. 
D) an increase to Insurance Expense and a decrease to Cash for $200. 
A) an increase to Prepaid Insurance and a decrease to Cash for $2400. 
B) an increase to Prepaid Insurance and a decrease to Insurance Expense for $240. 
C) an increase to Insurance Expense and a decrease to Prepaid Insurance for $200. 
D) an increase to Insurance Expense and a decrease to Cash for $200.

Question 19

Why do generally accepted accounting principles require the application of the revenue recognition principle?

Accepted Answer

A) Failure to apply the revenue recognition principle could lead to a misstatement of revenue. 
B) It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. 
C) Recording revenue when cash is received is an objective application of the revenue recognition principle. 
D) Accounting software has made the revenue recognition principle easy to apply. 
A) Failure to apply the revenue recognition principle could lead to a misstatement of revenue. 
B) It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. 
C) Recording revenue when cash is received is an objective application of the revenue recognition principle. 
D) Accounting software has made the revenue recognition principle easy to apply.

Question 20

On August 15 2022 Kinney Industries signs a $200000 8% twelve-month note payable.The adjustment to accrue interest on December 31 2022 would increase

Accepted Answer

A) Interest Expense $6000 Interest Payable $6000 
B) Interest Expense $5333.33 Interest Payable $5333.33 
C) Interest Expense $16000 Interest Payable $16000 
D) Interest Expense $10000 Interest Payable $10000 
A) Interest Expense $6000 Interest Payable $6000 
B) Interest Expense $5333.33 Interest Payable $5333.33 
C) Interest Expense $16000 Interest Payable $16000 
D) Interest Expense $10000 Interest Payable $10000

If a business pays rent in advance and increases the Prepaid Rent account the company receiving the rent payment will increase:

If Equipment has an unadjusted balance of $4000 and Accumulated Depreciation's unadjusted balance at December 30 2022 and estimated annual depreciation is $300 the year-end adjustment would contain a(n):

At the end of the fiscal year the usual adjustment for accrued salaries owed to employees was omitted.Which of the following statements is true?

Brokaw Industries signs a $40000 9% 6-month note payable on September 1 2021.How much interest expense will Brokaw report in its 2022 financial statements?

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:

If as of December 31 2022 rent of $150 for December had not been recorded or paid the adjustment would include a(an):

Which statement is correct concerning the adjusted tabular summary?

Adjustments are:

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Which of the following accounts will reflect the account's beginning balance on the adjusted tabular summary?

Mary Richardo CPA has billed her clients for services performed.She subsequently receives payments from her clients.What transaction will she record upon receipt of the payments?

A company shows a balance in Salaries and Wages Payable of $50000 at the end of the month.The next payroll amounting to $75000 is to be paid in the following month.To record the payment of salaries the company would

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

Adjustments are often made because some business events are not recorded as they occur.

Failure to prepare an adjustment at the end of the period to record an accrued expense would cause:

Oakville Inc.purchased a 12-month insurance policy on March 1 2022 for $2400.At March 31 2022 the adjustment to record expiration of this asset will include:

Why do generally accepted accounting principles require the application of the revenue recognition principle?

On August 15 2022 Kinney Industries signs a $200000 8% twelve-month note payable.The adjustment to accrue interest on December 31 2022 would increase

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters

Exam 4: Accrual Accounting Concepts

If a business pays rent in advance and increases the Prepaid Rent account the company receiving the rent payment will increase:

If Equipment has an unadjusted balance of $4000 and Accumulated Depreciation's unadjusted balance at December 30 2022 and estimated annual depreciation is $300 the year-end adjustment would contain a(n):

At the end of the fiscal year the usual adjustment for accrued salaries owed to employees was omitted.Which of the following statements is true?

Brokaw Industries signs a $40000 9% 6-month note payable on September 1 2021.How much interest expense will Brokaw report in its 2022 financial statements?

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:

If as of December 31 2022 rent of $150 for December had not been recorded or paid the adjustment would include a(an):

Which statement is correct concerning the adjusted tabular summary?

Adjustments are:

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Which of the following accounts will reflect the account's beginning balance on the adjusted tabular summary?

Mary Richardo CPA has billed her clients for services performed.She subsequently receives payments from her clients.What transaction will she record upon receipt of the payments?

A company shows a balance in Salaries and Wages Payable of $50000 at the end of the month.The next payroll amounting to $75000 is to be paid in the following month.To record the payment of salaries the company would

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

Adjustments are often made because some business events are not recorded as they occur.

Failure to prepare an adjustment at the end of the period to record an accrued expense would cause:

Oakville Inc.purchased a 12-month insurance policy on March 1 2022 for $2400.At March 31 2022 the adjustment to record expiration of this asset will include:

Why do generally accepted accounting principles require the application of the revenue recognition principle?

On August 15 2022 Kinney Industries signs a $200000 8% twelve-month note payable.The adjustment to accrue interest on December 31 2022 would increase

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters