Question 1

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

A)  An increase in inventory 
B)  A decrease in accounts payable 
C)  Preferred dividends declared and paid 
D)  A decrease in accounts receivable 
A)  An increase in inventory 
B)  A decrease in accounts payable 
C)  Preferred dividends declared and paid 
D)  A decrease in accounts receivable D

Question 2

Which asset is not depreciated as it usually does not lose its ability to provide service?

Accepted Answer

A)  Prepaid insurance 
B)  Equipment 
C)  Building 
D)  Land 
A)  Prepaid insurance 
B)  Equipment 
C)  Building 
D)  Land D

Question 3

If prepaid insurance expires over time, this asset account becomes a(n):

Accepted Answer

A)  liability. 
B)  another asset. 
C)  revenue. 
D)  expense. 
A)  liability. 
B)  another asset. 
C)  revenue. 
D)  expense. D

Question 4

In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would:

Accepted Answer

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

Question 5

At the end of the fiscal year, the following adjusting entries were omitted:
 (a) No adjusting entry was made to transfer the $ \$ 3,000 $ of prepaid insurance from the asset account to the expense account. 
 (b) No adjusting entry was made to record accrue d fees of $ \$ 500 $ for services provided to customers. Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does not affect the item.
 $\begin{array}{llll}
&&&\text { Error (a) }&\text { Error (b) }\
&\text { Overstated}&\text { Understated}& \text { Overstated }  &\text { Understated} \
(1)\text { Assets at December } 31 \text { would be } &\$ & \$ & \$ &\$ \
(2) \text { Liabilities at Dec. } 31 \text { would be }&\$ & \$ & \$ &\$ \
(3)\text { Net income for the year would }be&\$ & \$ & \$ &\$ \

(4)\text { Retained earnings at Dec. 31 would be}&\$ & \$ & \$ &\$ 
\end{array}$

Accepted Answer

None

Question 6

Identify the type of adjustment necessary (the type of item involved) and record the transaction for the event. Make sure to include the ending balances after adjustment.
Assume that on June 1, 2013, Tasty Sausage Corp. had paid $1,500 in advance for a 6-month insurance policy. The June 30 adjustment is:

Accepted Answer

Item: Expe

Question 7

The process that begins with the analysis of transactions and ends with preparing the accounting records for the next accounting period is called the accounting cycle.

Accepted Answer

A) True 
 B)False

Question 8

For a corporation, stockholders' equity consists of:

Accepted Answer

A)  assets plus liabilities. 
B)  current assets plus long-term assets. 
C)  intangible assets. 
D)  capital stock and retained earnings. 
A)  assets plus liabilities. 
B)  current assets plus long-term assets. 
C)  intangible assets. 
D)  capital stock and retained earnings.

Question 9

To determine cash payments for operating expenses for the cash flow statement using the direct method, depreciation expense is added to net income.

Accepted Answer

A) True 
 B)False

Question 10

River Corporation's accumulated depreciation increased by $12,000, while patents decreased by $3,500 between consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss on sale of land of $2,500. Accounts receivable increased $5,000, inventory decreased $3,200, prepaid expenses decreased $800, and account payable increased $2,000. Reconcile a net income of $55,000 to net cash flow from operating activities.

Accepted Answer

None

Question 11

The accrual basis of accounting recognizes:

Accepted Answer

A)  revenues when cash is received and expenses when cash is paid. 
B)  revenues when earned and expenses when cash is paid. 
C)  revenues when cash is received and expenses when incurred. 
D)  revenues when earned and expenses when incurred. 
A)  revenues when cash is received and expenses when cash is paid. 
B)  revenues when earned and expenses when cash is paid. 
C)  revenues when cash is received and expenses when incurred. 
D)  revenues when earned and expenses when incurred.

Question 12

Classify the following items as:
 a. accrued revenue (accrued asset)
b. deferre d revenue (une anned revenue)
c. accrued expense (accrued liability)
d. deferred expense (prepaid expense)
 (1)Three months rent paid in actvance
(2)Rent al income for six months received in advance
(3)Jobs completed but not yet billed at month-end
(4)Interest payable accued on a note, but not yet paid
(5)Telephone bill owed but not yet paid
(6)A three-year premium paid on auto fleet insurance policy

Accepted Answer

The answer of Classify the following items as:
 a. accrued...

Question 13

Identify the type of adjustment necessary (the type of item involved) and record the transaction for the event. Make sure to include the ending balances after adjustment.
Assume that on June 1, 2013, Tasty Sausage Corp. received $9,000 in advance to provide sausages over the next three months. The June 30 adjustment is:

Accepted Answer

Item: Reve

Question 14

Expenses on the income statement are assets used up or services consumed in the process of generating revenues.

Accepted Answer

A) True 
 B)False

Question 15

ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?

Accepted Answer

A)  $5,000 
B)  $25,000 
C)  $20,000 
D)  $45,000 
A)  $5,000 
B)  $25,000 
C)  $20,000 
D)  $45,000

Question 16

Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

Accepted Answer

A)  expense and contra asset. 
B)  asset and contra liability. 
C)  revenue and asset. 
D)  contra asset and expense. 
A)  expense and contra asset. 
B)  asset and contra liability. 
C)  revenue and asset. 
D)  contra asset and expense.

Question 17

Cash receipts from interest and dividends are classified as:

Accepted Answer

A)  investing activities. 
B)  operating activities. 
C)  either financing or investing activities. 
D)  financing activities. 
A)  investing activities. 
B)  operating activities. 
C)  either financing or investing activities. 
D)  financing activities.

Question 18

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

Accepted Answer

A)  deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. 
B)  added to net income in converting the net income reported on the income statement to cash flows from operating activities. 
C)  added to cash received from the sale to determine cash flows from investing activities. 
D)  deducted from cash received from the sale to determine cash flows from investing activities. 
A)  deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. 
B)  added to net income in converting the net income reported on the income statement to cash flows from operating activities. 
C)  added to cash received from the sale to determine cash flows from investing activities. 
D)  deducted from cash received from the sale to determine cash flows from investing activities.

Question 19

The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.

Accepted Answer

A)  accounting equation 
B)  retained earnings statement 
C)  intangible asset section 
D)  classified balance sheet 
A)  accounting equation 
B)  retained earnings statement 
C)  intangible asset section 
D)  classified balance sheet

Question 20

The unearned rent account has a balance of $50,000. If $3,000 of the $50,000 is unearned at the end of the accounting period, the amount of the adjusting entry is:

Accepted Answer

A)  $47,000. 
B)  $53,000. 
C)  $50,000. 
D)  $3,000. 
A)  $47,000. 
B)  $53,000. 
C)  $50,000. 
D)  $3,000.

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Which asset is not depreciated as it usually does not lose its ability to provide service?

If prepaid insurance expires over time, this asset account becomes a(n):

In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would:

The process that begins with the analysis of transactions and ends with preparing the accounting records for the next accounting period is called the accounting cycle.

For a corporation, stockholders' equity consists of:

To determine cash payments for operating expenses for the cash flow statement using the direct method, depreciation expense is added to net income.

The accrual basis of accounting recognizes:

Expenses on the income statement are assets used up or services consumed in the process of generating revenues.

ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?

Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

Cash receipts from interest and dividends are classified as:

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.

The unearned rent account has a balance of $50,000. If $3,000 of the $50,000 is unearned at the end of the accounting period, the amount of the adjusting entry is:

The Role of Accounting in Business

Basic Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 3: Accrual Accounting Concepts

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Which asset is not depreciated as it usually does not lose its ability to provide service?

If prepaid insurance expires over time, this asset account becomes a(n):

In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would:

The process that begins with the analysis of transactions and ends with preparing the accounting records for the next accounting period is called the accounting cycle.

For a corporation, stockholders' equity consists of:

To determine cash payments for operating expenses for the cash flow statement using the direct method, depreciation expense is added to net income.

The accrual basis of accounting recognizes:

Expenses on the income statement are assets used up or services consumed in the process of generating revenues.

ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?

Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

Cash receipts from interest and dividends are classified as:

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.

The unearned rent account has a balance of $50,000. If $3,000 of the $50,000 is unearned at the end of the accounting period, the amount of the adjusting entry is:

The Role of Accounting in Business

Basic Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters