Question 1

A company's current ratio is decreasing every year and currently stands at 1.00.This indicates:

Accepted Answer

A) an improving financial position. 
B) an improving liquidity position. 
C) a declining ability to pay current liabilities. 
D) an increase in profitability. 
A) an improving financial position. 
B) an improving liquidity position. 
C) a declining ability to pay current liabilities. 
D) an increase in profitability.

Question 2

A company has the following adjusted trial balance:   Which closing entry is needed?

Accepted Answer

A) Debit Service Revenue for $33,800 and credit Retained Earnings for $33,800 
B) Debit Rent Expense for $1,300 and credit Retained Earnings for $1,300 
C) Credit Retained Earnings for $1,900 and debit Cash for $1,900 
D) Debit Dividends for $800 and credit Retained Earnings for $800 
A) Debit Service Revenue for $33,800 and credit Retained Earnings for $33,800 
B) Debit Rent Expense for $1,300 and credit Retained Earnings for $1,300 
C) Credit Retained Earnings for $1,900 and debit Cash for $1,900 
D) Debit Dividends for $800 and credit Retained Earnings for $800

Question 3

Regarding income statement formats,which of the following statements is INCORRECT?

Accepted Answer

A) A single-step income statement lists all the revenues and gains together under a heading such as Revenues and Gains. 
B) A single-step income statement lists income tax expense separately from all other expenses. 
C) A multistep income statement reports a number of subtotals to highlight important relationships between revenues and expenses. 
D) A multistep income statement is the only format that allows users to evaluate the profitability of the business. 
A) A single-step income statement lists all the revenues and gains together under a heading such as Revenues and Gains. 
B) A single-step income statement lists income tax expense separately from all other expenses. 
C) A multistep income statement reports a number of subtotals to highlight important relationships between revenues and expenses. 
D) A multistep income statement is the only format that allows users to evaluate the profitability of the business.

Question 4

The adjusted trial balance lists only the balance sheet accounts and their final balances in a single place.

Accepted Answer

A) True 
 B)False

Question 5

On August 1 of the current year,Trevor Beck received $7,800 for legal services to be performed evenly throughout the next six months.The adjusting entry on December 31 of the current year would include a:

Accepted Answer

A) credit to Unearned Service Revenue of $6,500. 
B) debit to Unearned Service Revenue of $1,300. 
C) debit to Service Revenue of $1,300. 
D) credit to Service Revenue of $6,500. 
A) credit to Unearned Service Revenue of $6,500. 
B) debit to Unearned Service Revenue of $1,300. 
C) debit to Service Revenue of $1,300. 
D) credit to Service Revenue of $6,500.

Question 6

The managers of a company are concerned about how certain transactions will affect ratios used in loan agreements.

Accepted Answer

A) True 
 B)False

Question 7

The expense recognition principle states that expenses have future benefit to the company.

Accepted Answer

A) True 
 B)False

Question 8

A measure of a company's ability to pay current liabilities with current assets is the:

Accepted Answer

A) liability ratio. 
B) current ratio. 
C) debt ratio. 
D) asset ratio. 
A) liability ratio. 
B) current ratio. 
C) debt ratio. 
D) asset ratio.

Question 9

When using a worksheet to prepare the adjusted trial balance:

Accepted Answer

A) the unadjusted trial balance columns represent amounts from last period's financial statements. 
B) four columns are needed for the adjustments. 
C) the adjusted trial balance columns give the final account balances. 
D) the sum of the debits do not have to equal the sum of the credits in the side-by-side columns. 
A) the unadjusted trial balance columns represent amounts from last period's financial statements. 
B) four columns are needed for the adjustments. 
C) the adjusted trial balance columns give the final account balances. 
D) the sum of the debits do not have to equal the sum of the credits in the side-by-side columns.

Question 10

Which of the following is a CORRECT statement about the two bases of accounting?

Accepted Answer

A) Cash-basis accounting records revenues when they are earned. 
B) Cash-basis accounting records expenses only at the end of the month. 
C) GAAP requires accrual accounting. 
D) Only the largest companies in the United States use accrual accounting. 
A) Cash-basis accounting records revenues when they are earned. 
B) Cash-basis accounting records expenses only at the end of the month. 
C) GAAP requires accrual accounting. 
D) Only the largest companies in the United States use accrual accounting.

Question 11

If deferred revenue has been earned by the end of the current period but no adjustment is recorded,net income for the current period will be understated.

Accepted Answer

A) True 
 B)False

Question 12

Cash-basis accounting is a better representation of the time-period concept and the revenue principle.

Accepted Answer

A) True 
 B)False

Question 13

Under accrual accounting,the event that triggers revenue recognition for the sale of goods is the:

Accepted Answer

A) date a contract is signed. 
B) date the customer pays for the goods. 
C) date the customer orders the goods. 
D) delivery of goods to customer. 
A) date a contract is signed. 
B) date the customer pays for the goods. 
C) date the customer orders the goods. 
D) delivery of goods to customer.

Question 14

Adjusting entries:

Accepted Answer

A) are needed for all balance sheet accounts. 
B) must be made on a daily basis to record supplies used during that day. 
C) are needed because errors have been made in previous journal entries. 
D) are made before the financial statements can be prepared. 
A) are needed for all balance sheet accounts. 
B) must be made on a daily basis to record supplies used during that day. 
C) are needed because errors have been made in previous journal entries. 
D) are made before the financial statements can be prepared.

Question 15

Deere Company holds a $14,400 note receivable dated July 1,2019,with 10% interest.What adjusting entry is needed on December 31,2019?

Accepted Answer

A) No entry is needed. 
B) Debit Interest Receivable for $144 and credit Interest Revenue for $144 
C) Debit Interest Receivable for $720 and credit Interest Revenue for $720 
D) Debit Interest Receivable for $1,440 and credit Interest Revenue for $1,440 
A) No entry is needed. 
B) Debit Interest Receivable for $144 and credit Interest Revenue for $144 
C) Debit Interest Receivable for $720 and credit Interest Revenue for $720 
D) Debit Interest Receivable for $1,440 and credit Interest Revenue for $1,440

Question 16

The balance sheet reports the retained earnings balance at the end of a fiscal year.What is the source of this ending balance of retained earnings?

Accepted Answer

A) Trial Balance Worksheet 
B) Adjusted Trial Balance 
C) Unadjusted Trial Balance 
D) Statement of Retained Earnings 
A) Trial Balance Worksheet 
B) Adjusted Trial Balance 
C) Unadjusted Trial Balance 
D) Statement of Retained Earnings

Question 17

In what order are the financial statements generally prepared?

Accepted Answer

A) balance sheet,income statement,and statement of retained earnings 
B) income statement,statement of retained earnings,and balance sheet 
C) income statement,balance sheet,and statement of retained earnings 
D) statement of retained earnings,balance sheet,and income statement 
A) balance sheet,income statement,and statement of retained earnings 
B) income statement,statement of retained earnings,and balance sheet 
C) income statement,balance sheet,and statement of retained earnings 
D) statement of retained earnings,balance sheet,and income statement

Question 18

The revenue principle determines when to record revenue and the amount of revenue to record.

Accepted Answer

A) True 
 B)False

Question 19

The McCarthy Company has the following adjusted trial balance as of December 31,2019:   What are total current assets at December 31,2019?

Accepted Answer

A) $6,700 
B) $4,700 
C) $45,800 
D) $4,100 
A) $6,700 
B) $4,700 
C) $45,800 
D) $4,100

Question 20

Why is the income statement prepared first and the balance sheet prepared last?

Accepted Answer

The income statement reports net income

A company's current ratio is decreasing every year and currently stands at 1.00.This indicates:

A company has the following adjusted trial balance: Which closing entry is needed?

Regarding income statement formats,which of the following statements is INCORRECT?

The adjusted trial balance lists only the balance sheet accounts and their final balances in a single place.

On August 1 of the current year,Trevor Beck received $7,800 for legal services to be performed evenly throughout the next six months.The adjusting entry on December 31 of the current year would include a:

The managers of a company are concerned about how certain transactions will affect ratios used in loan agreements.

The expense recognition principle states that expenses have future benefit to the company.

A measure of a company's ability to pay current liabilities with current assets is the:

When using a worksheet to prepare the adjusted trial balance:

Which of the following is a CORRECT statement about the two bases of accounting?

If deferred revenue has been earned by the end of the current period but no adjustment is recorded,net income for the current period will be understated.

Cash-basis accounting is a better representation of the time-period concept and the revenue principle.

Under accrual accounting,the event that triggers revenue recognition for the sale of goods is the:

Adjusting entries:

Deere Company holds a $14,400 note receivable dated July 1,2019,with 10% interest.What adjusting entry is needed on December 31,2019?

The balance sheet reports the retained earnings balance at the end of a fiscal year.What is the source of this ending balance of retained earnings?

In what order are the financial statements generally prepared?

The revenue principle determines when to record revenue and the amount of revenue to record.

The McCarthy Company has the following adjusted trial balance as of December 31,2019: What are total current assets at December 31,2019?

Why is the income statement prepared first and the balance sheet prepared last?

The Financial Statements

Transaction Analysis

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters

Exam 3: Accrual Accounting Income

A company's current ratio is decreasing every year and currently stands at 1.00.This indicates:

A company has the following adjusted trial balance: Which closing entry is needed?

Regarding income statement formats,which of the following statements is INCORRECT?

The adjusted trial balance lists only the balance sheet accounts and their final balances in a single place.

On August 1 of the current year,Trevor Beck received $7,800 for legal services to be performed evenly throughout the next six months.The adjusting entry on December 31 of the current year would include a:

The managers of a company are concerned about how certain transactions will affect ratios used in loan agreements.

The expense recognition principle states that expenses have future benefit to the company.

A measure of a company's ability to pay current liabilities with current assets is the:

When using a worksheet to prepare the adjusted trial balance:

Which of the following is a CORRECT statement about the two bases of accounting?

If deferred revenue has been earned by the end of the current period but no adjustment is recorded,net income for the current period will be understated.

Cash-basis accounting is a better representation of the time-period concept and the revenue principle.

Under accrual accounting,the event that triggers revenue recognition for the sale of goods is the:

Adjusting entries:

Deere Company holds a $14,400 note receivable dated July 1,2019,with 10% interest.What adjusting entry is needed on December 31,2019?

The balance sheet reports the retained earnings balance at the end of a fiscal year.What is the source of this ending balance of retained earnings?

In what order are the financial statements generally prepared?

The revenue principle determines when to record revenue and the amount of revenue to record.

The McCarthy Company has the following adjusted trial balance as of December 31,2019: What are total current assets at December 31,2019?

Why is the income statement prepared first and the balance sheet prepared last?

The Financial Statements

Transaction Analysis

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters