Question 1

The book value of an asset may also be called the market value of the asset.

Accepted Answer

A) True 
 B)False  False

Question 2

Materiality is a matter of professional judgment.

Accepted Answer

A) True 
 B)False  True

Question 3

An adjusting entry involving recognition of accrued revenue is necessary at the end of March in which of the following situations?

Accepted Answer

A)  Midwood Consultants received payment in February for consulting services rendered in March. 
B)  Midwood Consultants began working for a client on March 15; bills will be sent monthly beginning April 15. 
C)  Midwood Consultants made payment in January for office rent for the first three months of the year. 
D)  On March 31, a major customer paid his bill for a consulting job completed in February. 
A)  Midwood Consultants received payment in February for consulting services rendered in March. 
B)  Midwood Consultants began working for a client on March 15; bills will be sent monthly beginning April 15. 
C)  Midwood Consultants made payment in January for office rent for the first three months of the year. 
D)  On March 31, a major customer paid his bill for a consulting job completed in February. B

Question 4

Materiality
(A.) Identify several factors considered by an accountant in deciding whether an item is "material."
(B.) Does the concept of materiality complicate or simplify the process of making adjusting entries? Give an illustration to support your answer.

Accepted Answer

(A.) Factors to be considered include th

Question 5

How much is owed the employees for their wages?

Accepted Answer

A)  $0. 
B)  $2,560. 
C)  $5,120. 
D)  $12,800. 
A)  $0. 
B)  $2,560. 
C)  $5,120. 
D)  $12,800.

Question 6

Under accrual accounting, salaries earned by employees but not yet paid should be expensed:

Accepted Answer

A)  In the period in which they are earned. 
B)  In the period in which they are paid. 
C)  In the period with the higher earnings. 
D)  In the period with the lower earnings. 
A)  In the period in which they are earned. 
B)  In the period in which they are paid. 
C)  In the period with the higher earnings. 
D)  In the period with the lower earnings.

Question 7

At January 31, the amount of supplies still on hand was determined to be $675. What amount should be reported in the January income statement for supplies expense? $__________

Accepted Answer

$2,700 - $

Question 8

How much depreciation expense should be recognized for December?

Accepted Answer

A)  $206. 
B)  $2,472. 
C)  $12,360. 
D)  $19,800. 
A)  $206. 
B)  $2,472. 
C)  $12,360. 
D)  $19,800.

Question 9

Failure to make the appropriate adjustment to the Salary Expense account will:

Accepted Answer

A)  Understate net income for December by $6,800. 
B)  Understate net income for January by $6,800. 
C)  Overstate total liabilities at December 31. 
D)  Overstate the balance in Cash at December 31. 
A)  Understate net income for December by $6,800. 
B)  Understate net income for January by $6,800. 
C)  Overstate total liabilities at December 31. 
D)  Overstate the balance in Cash at December 31.

Question 10

On December 31, Louis Jeweler's made an adjusting entry to record $4,200 accrued interest payable on its mortgage. On January 10, the mortgage payment was made. This payment included interest charges of $6,300, $2,100 of which were applicable to the period from January 1 through January 10. When recording this mortgage payment, the accountant should:

Accepted Answer

A)  Debit Interest Expense $2,100 and debit Accrued Interest Payable $4,200. 
B)  Debit Interest Expense $6,300. 
C)  Debit Accrued Interest Payable $6,300. 
D)  Debit Interest Expense $2,100 and credit Accrued Interest Payable $4,200. 
A)  Debit Interest Expense $2,100 and debit Accrued Interest Payable $4,200. 
B)  Debit Interest Expense $6,300. 
C)  Debit Accrued Interest Payable $6,300. 
D)  Debit Interest Expense $2,100 and credit Accrued Interest Payable $4,200.

Question 11

Which of the following accounting principles is concerned with offsetting revenue with the expenses incurred in producing that revenue?

Accepted Answer

A)  Realization principle. 
B)  Materiality. 
C)  Matching. 
D)  Depreciation. 
A)  Realization principle. 
B)  Materiality. 
C)  Matching. 
D)  Depreciation.

Question 12

Which of the following would not be a proper application of the concept of materiality by Millridge Corporation?

Accepted Answer

A)  Transactions involving small dollar amounts are not recorded in Millridge's accounting records. 
B)  Estimates of supplies on hand are used to determine the supplies expense for the period. 
C)  On a monthly basis, utility bills are expensed in the month paid, rather than in the month in which services are used. 
D)  Immaterial items are ignored in making end-of-period adjusting entries. 
A)  Transactions involving small dollar amounts are not recorded in Millridge's accounting records. 
B)  Estimates of supplies on hand are used to determine the supplies expense for the period. 
C)  On a monthly basis, utility bills are expensed in the month paid, rather than in the month in which services are used. 
D)  Immaterial items are ignored in making end-of-period adjusting entries.

Question 13

The purpose of adjusting entries is to:

Accepted Answer

A)  Adjust the Retained Earnings account for the revenue, expense, and dividends recorded during the accounting period. 
B)  Adjust daily the balances in asset, liability, revenue, and expense accounts for the effects of business transactions. 
C)  Apply the realization principle and the matching principle to trans?actions affecting two or more accounting periods. 
D)  Prepare revenue and expense accounts for recording the transactions of the next accounting period. 
A)  Adjust the Retained Earnings account for the revenue, expense, and dividends recorded during the accounting period. 
B)  Adjust daily the balances in asset, liability, revenue, and expense accounts for the effects of business transactions. 
C)  Apply the realization principle and the matching principle to trans?actions affecting two or more accounting periods. 
D)  Prepare revenue and expense accounts for recording the transactions of the next accounting period.

Question 14

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause?

Accepted Answer

A)  Failure to record depreciation expense for the period. 
B)  No entry made to record purchase of land for cash on the last day of the year. 
C)  Failure to record payment of an account payable on the last day of the year. 
D)  Failure to make an adjusting entry to record revenue which had been earned but not yet billed to customers. 
A)  Failure to record depreciation expense for the period. 
B)  No entry made to record purchase of land for cash on the last day of the year. 
C)  Failure to record payment of an account payable on the last day of the year. 
D)  Failure to make an adjusting entry to record revenue which had been earned but not yet billed to customers.

Question 15

Adjusting entries are only required when errors are made.

Accepted Answer

A) True 
 B)False

Question 16

Adjusting entries-effect on elements of financial statements
Galaxy Entertainment prepares monthly financial statements. On July 31, the accountant made adjusting entries to record:
(A.) Depreciation for the month of July.
(B.) The portion of prepaid rent for outdoor stage and seating which had expired in July.
(C.) Earning of ticket revenue for July which had been subscribed in advance. (When patrons purchase the Summer Jazz Series tickets in advance, the accountant credits Unearned Ticket Revenue.)
(D.) Amount owed to Universal from the caterer who sold food and beverages during the July performances. The amount due will be paid to the company on August 8.
(E.) Amount owed to the musicians which had accrued since the last pay day in July.
Indicate the effect of each of these adjusting entries on the major elements of the company's financial statements-that is, on revenue, expenses, net income, assets, liabilities, and owners' equity. Organize your answer in tabular form, using the column headings shown below and the symbols + for increase, - for decrease, and NE for no effect.

Accepted Answer

The answer of Adjusting entries-effect on elements of financial statements
Galaxy...

Question 17

Adjusting entries-effect on elements of financial statements
Whoop-It-Up, Inc. prepares monthly financial statements. On March 31, the company's accountant made adjusting entries to record:
(A) Depreciation for the month of March.
(B) Amount owed to Whoop-It-Up, Inc for March from the concessionaire operating a juice bar in the facility. The amount due will be remitted to Whoop-It-Up, Inc during the first week in April.
(C) Cost of supplies used in March. (When purchased, the cost of supplies is debited to an asset account.)
(D) Earning of a portion of annual membership fees which had been collected in advance. (When customers purchase annual memberships, an Unearned Revenue account is credited.)
(E) Accrued interest for March owed on a bank loan obtained March 1. No interest expense has yet been recorded.
Indicate the effect of each of these adjusting entries on the major elements of the company's financial statements-that is, on revenue, expenses, net income, assets, liabilities, and owner's equity. Organize your answer in tabular form, using the column headings shown below and the symbols + for increase, - for decrease, and NE for no effect.

Accepted Answer

The answer of Adjusting entries-effect on elements of financial statements
Whoop-It-Up,...

Question 18

If an asset was purchased on January 1, 2006 for $140,000 with an estimated life of 5 years, what is the accumulated depreciation at December 31, 2009?

Accepted Answer

A)  $28,000. 
B)  $112,000. 
C)  $56,000. 
D)  $84,000. 
A)  $28,000. 
B)  $112,000. 
C)  $56,000. 
D)  $84,000.

Question 19

Shop supplies are expensed when:

Accepted Answer

A)  Consumed. 
B)  Purchased. 
C)  Paid for. 
D)  Ordered. 
A)  Consumed. 
B)  Purchased. 
C)  Paid for. 
D)  Ordered.

Question 20

Before month-end adjustments are made, the January 31 trial balance of Rover Excursions contains revenue of $27,900 and expenses of $17,340. Adjustments are necessary for the following items: F1F1F1S1F1F1F10 Portion of prepaid rent applicable to January: $2,700.
F1F1F1S1F1F1F10 Depreciation for January: $1,440.
F1F1F1S1F1F1F10 Portion of fees collected in advance earned in January: $3,300.
F1F1F1S1F1F1F10 Fees earned in January; not yet billed to customers: $1,950.
Net income for January is:

Accepted Answer

A)  $10,560. 
B)  $17,070. 
C)  $7,770. 
D)  (some other amount) 
A)  $10,560. 
B)  $17,070. 
C)  $7,770. 
D)  (some other amount)

Exam 4: The Accounting Cycle: Accruals and Deferrals

The book value of an asset may also be called the market value of the asset.

Materiality is a matter of professional judgment.

An adjusting entry involving recognition of accrued revenue is necessary at the end of March in which of the following situations?

Materiality (A.) Identify several factors considered by an accountant in deciding whether an item is "material." (B.) Does the concept of materiality complicate or simplify the process of making adjusting entries? Give an illustration to support your answer.

How much is owed the employees for their wages?

Under accrual accounting, salaries earned by employees but not yet paid should be expensed:

At January 31, the amount of supplies still on hand was determined to be $675. What amount should be reported in the January income statement for supplies expense? $__________

How much depreciation expense should be recognized for December?

Failure to make the appropriate adjustment to the Salary Expense account will:

Which of the following accounting principles is concerned with offsetting revenue with the expenses incurred in producing that revenue?

Which of the following would not be a proper application of the concept of materiality by Millridge Corporation?

The purpose of adjusting entries is to:

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause?

Adjusting entries are only required when errors are made.

If an asset was purchased on January 1, 2006 for $140,000 with an estimated life of 5 years, what is the accumulated depreciation at December 31, 2009?

Shop supplies are expensed when:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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