Question 1

The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following accounts probably would be greater in amount on an adjusted trial balance than on a trial balance?

Accepted Answer

A) Wages Payable 
B) Unearned Revenue 
C) Prepaid Advertising 
D) Painting Supplies 
A) Wages Payable 
B) Unearned Revenue 
C) Prepaid Advertising 
D) Painting Supplies A

Question 3

The recognition of an expense does not depend on the payment of cash.

Accepted Answer

A) True 
 B)False  True

Question 4

Due to the recording of adjusting entries,the dollar amount of Cash on the trial balance is usually less than the dollar amount of Cash on the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 5

Revenue is produced when accounts receivable are collected.

Accepted Answer

A) True 
 B)False

Question 6

When preparing financial statements,the accountant assumes that the business will continue to operate for at least 5 years,unless there is evidence to the contrary.

Accepted Answer

A) True 
 B)False

Question 7

An adjusting entry made to record salaries earned but not yet paid or recorded is made with which of the following entries?

Accepted Answer

A) Salaries Expense - Debit;Cash - Credit 
B) Salaries Payable - Debit;Salaries Expense - Credit 
C) Salaries Expense - Debit;Salaries Payable - Credit 
D) Cash - Debit;Salaries Expense - Credit 
A) Salaries Expense - Debit;Cash - Credit 
B) Salaries Payable - Debit;Salaries Expense - Credit 
C) Salaries Expense - Debit;Salaries Payable - Credit 
D) Cash - Debit;Salaries Expense - Credit

Question 8

Use this information pertaining to Tucson Company to answer the following question. 
1)The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end.
2)Depreciation on a building being depreciated over 5 years is estimated to be $10,000 per year.The building was purchased at the beginning of the prior year for $50,000.
3)A one-year insurance policy was purchased for $4,800.Five months have passed since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed.
Which of the following statements is correct regarding the building?

Accepted Answer

A) The adjusting entry to record depreciation will include a credit to Accumulated Depreciation - Building $10,000. 
B) The book value of the building at the end of the current year is $30,000. 
C) The Accumulated Depreciation - Building account will have a balance of $20,000 at the end of the current year. 
D) All of these choices. 
A) The adjusting entry to record depreciation will include a credit to Accumulated Depreciation - Building $10,000. 
B) The book value of the building at the end of the current year is $30,000. 
C) The Accumulated Depreciation - Building account will have a balance of $20,000 at the end of the current year. 
D) All of these choices.

Question 9

In the space below,state whether each situation is a deferral or an accrual.
______a.Unrecorded interest on savings bonds is $765.
______b.Property taxes that have been incurred but that have not yet been paid or recorded amount to $1,034.
______c.Legal fees of $2,890 were collected in advance.By year end,70 percent were still unearned.
______d.Prepaid Insurance had a $900 balance prior to adjustment.By year end,25 percent was still unexpired.
______e.Salaries earned by employees by year end but not yet paid or recorded amounted to $1,655.
______f.Services totaling $690 have been performed but not yet recorded or billed.

Accepted Answer

a.Accrual
b.Accrual

Question 10

An adjusting entry can include a debit to a(n)

Accepted Answer

A) expense and a credit to an asset. 
B) cash and a credit to a revenue. 
C) liability and a credit to cash. 
D) liability and a credit to an asset. 
A) expense and a credit to an asset. 
B) cash and a credit to a revenue. 
C) liability and a credit to cash. 
D) liability and a credit to an asset.

Question 11

Net income results when expenses exceed revenues.

Accepted Answer

A) True 
 B)False

Question 12

A contra account is an account whose balance is subtracted from an associated account in the financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is one of the conditions for recognition of an expense?

Accepted Answer

A) There is a reasonable expectation that cash will be received. 
B) The expense can be recognized only when cash is paid. 
C) The goods will be delivered or the services will be provided within the accounting cycle. 
D) The goods or services are used to produce revenue. 
A) There is a reasonable expectation that cash will be received. 
B) The expense can be recognized only when cash is paid. 
C) The goods will be delivered or the services will be provided within the accounting cycle. 
D) The goods or services are used to produce revenue.

Question 14

Which of the following is not an application of accrual accounting?

Accepted Answer

A) Recognizing revenues when earned and expenses when incurred. 
B) Applying the matching rule. 
C) Adjusting the accounts. 
D) Recording on the basis of actual receipt and payment of cash. 
A) Recognizing revenues when earned and expenses when incurred. 
B) Applying the matching rule. 
C) Adjusting the accounts. 
D) Recording on the basis of actual receipt and payment of cash.

Question 15

Which of the following is an example of an accrual?

Accepted Answer

A) Purchase of equipment. 
B) Prepaid insurance. 
C) Salaries earned but not yet paid. 
D) All of these choices. 
A) Purchase of equipment. 
B) Prepaid insurance. 
C) Salaries earned but not yet paid. 
D) All of these choices.

Question 16

Use this information pertaining to Tucson Company to answer the following question. 
1)The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,800.Five months have passed since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed.
-The adjusting entry to record the accrued interest on the note is

Accepted Answer

A) Interest Expense 200 Interest Receivable 200 
B) Interest Payable 200 Interest Expense 200 
C) Interest Receivable 200 Interest Income 200 
D) Interest Income 200 Interest Receivable 200 
A) Interest Expense 200 Interest Receivable 200 
B) Interest Payable 200 Interest Expense 200 
C) Interest Receivable 200 Interest Income 200 
D) Interest Income 200 Interest Receivable 200

Question 17

The cash basis of accounting is prohibited for income tax purposes.

Accepted Answer

A) True 
 B)False

Question 18

The continuity assumption states that the business will continue to operate indefinitely.

Accepted Answer

A) True 
 B)False

Question 19

A deferral is the recognition of an expense that has arisen but has not yet been recorded.

Accepted Answer

A) True 
 B)False

Question 20

When a direct cause-and-effect relationship cannot be established between revenues and costs,the costs are

Accepted Answer

A) not expensed and remain as assets on the balance sheet. 
B) expensed among the accounting periods that benefit from the costs. 
C) expensed immediately in their entirety. 
D) expensed equally each year. 
A) not expensed and remain as assets on the balance sheet. 
B) expensed among the accounting periods that benefit from the costs. 
C) expensed immediately in their entirety. 
D) expensed equally each year.

Exam 3: Measuring Business Income: Adjusting the Accounts

The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting.

Which of the following accounts probably would be greater in amount on an adjusted trial balance than on a trial balance?

The recognition of an expense does not depend on the payment of cash.

Due to the recording of adjusting entries,the dollar amount of Cash on the trial balance is usually less than the dollar amount of Cash on the adjusted trial balance.

Revenue is produced when accounts receivable are collected.

When preparing financial statements,the accountant assumes that the business will continue to operate for at least 5 years,unless there is evidence to the contrary.

An adjusting entry made to record salaries earned but not yet paid or recorded is made with which of the following entries?

An adjusting entry can include a debit to a(n)

Net income results when expenses exceed revenues.

A contra account is an account whose balance is subtracted from an associated account in the financial statements.

Which of the following is one of the conditions for recognition of an expense?

Which of the following is not an application of accrual accounting?

Which of the following is an example of an accrual?

The cash basis of accounting is prohibited for income tax purposes.

The continuity assumption states that the business will continue to operate indefinitely.

A deferral is the recognition of an expense that has arisen but has not yet been recorded.

When a direct cause-and-effect relationship cannot be established between revenues and costs,the costs are

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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