Question 1

Which statement is true about an adjusted trial balance?

Accepted Answer

A)  It is prepared before adjusting entries. 
B)  Revenue accounts and expense accounts should not appear on the adjusted trial balance. 
C)  Balance sheet items are presented before income statement items. 
D)  Accumulated depreciation should equal depreciation expense. 
A)  It is prepared before adjusting entries. 
B)  Revenue accounts and expense accounts should not appear on the adjusted trial balance. 
C)  Balance sheet items are presented before income statement items. 
D)  Accumulated depreciation should equal depreciation expense.

Question 2

An adjusting entry to recognize that a fee received in advance has now been earned will cause an increase in total liabilities.

Accepted Answer

A) True 
 B)False

Question 3

Prepaid expenses are:

Accepted Answer

A)  Assets. 
B)  Income. 
C)  Liabilities. 
D)  Expenses. 
A)  Assets. 
B)  Income. 
C)  Liabilities. 
D)  Expenses.

Question 4

Which of the following statements is not true regarding prepaid expenses?

Accepted Answer

A)  Prepaid expenses represent assets. 
B)  Prepaid expenses are shown in a special section of the income statement. 
C)  Prepaid expenses become expenses only as goods or services are used up. 
D)  Prepaid expenses appear in the balance sheet. 
A)  Prepaid expenses represent assets. 
B)  Prepaid expenses are shown in a special section of the income statement. 
C)  Prepaid expenses become expenses only as goods or services are used up. 
D)  Prepaid expenses appear in the balance sheet.

Question 5

Employees are owed $750 for services since the last payday in March, to be paid the first week in April. The amount to be reported in the March income statement for salaries expense is:

Accepted Answer

A)  $7,800. 
B)  $750. 
C)  $7,050. 
D)  $8,550. 
A)  $7,800. 
B)  $750. 
C)  $7,050. 
D)  $8,550.

Question 6

Which of the following is not considered a basic type of adjusting entry?

Accepted Answer

A)  An entry to convert a liability to a revenue. 
B)  An entry to accrue unpaid expenses. 
C)  An entry to convert an asset to an expense. 
D)  An entry to convert an asset to a liability. 
A)  An entry to convert a liability to a revenue. 
B)  An entry to accrue unpaid expenses. 
C)  An entry to convert an asset to an expense. 
D)  An entry to convert an asset to a liability.

Question 7

Tuna Co. purchased a building in 2009 for $650,000 and debited an asset called "Buildings" for the entire amount. The company never depreciated the building although it had a useful life of 15 years. This action will cause:

Accepted Answer

A)  Net income to be understated. 
B)  Net income to be overstated. 
C)  Net income will not be affected. 
D)  Total assets will be understated. 
A)  Net income to be understated. 
B)  Net income to be overstated. 
C)  Net income will not be affected. 
D)  Total assets will be understated.

Question 8

Which of the following is not considered an end-of-period adjusting entry?

Accepted Answer

A)  The entry to record the portion of unexpired insurance which has become expense during the period. 
B)  An entry to record revenue which has been earned but has not yet been billed to customers. 
C)  The entry to record depreciation expense. 
D)  An entry to record repayment of a bank loan and to recognize related interest expense. 
A)  The entry to record the portion of unexpired insurance which has become expense during the period. 
B)  An entry to record revenue which has been earned but has not yet been billed to customers. 
C)  The entry to record depreciation expense. 
D)  An entry to record repayment of a bank loan and to recognize related interest expense.

Question 9

Adjusting Entries
Identify four types of timing differences between cash flows and the recognition of expenses or revenues that may require adjusting entries.

Accepted Answer

(1.) To convert assets to expe

Question 10

An expenditure that benefits year one but is paid for in year two should not be capitalized until year two.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements concerning materiality is true?

Accepted Answer

A)  Generally accepted accounting principles are violated if estimates are used in end-of-period adjustments. 
B)  Each year the Financial Accounting Standards Board (FAS
B)  publishes the dollar amount considered "material" for each industry. 
C)  Immaterial items should be handled in the most expedient manner, even if resulting financial statements are not completely precise. 
D)  Accountants should not waste time and money in recording transactions involving small dollar amounts. 
A)  Generally accepted accounting principles are violated if estimates are used in end-of-period adjustments. 
B)  Each year the Financial Accounting Standards Board (FAS
B)  publishes the dollar amount considered "material" for each industry. 
C)  Immaterial items should be handled in the most expedient manner, even if resulting financial statements are not completely precise. 
D)  Accountants should not waste time and money in recording transactions involving small dollar amounts.

Question 12

The United Shipping Co. made an adjusting entry accruing interest for $800 on a note payable for the month of January. The note required 12% per annum on the principal. The principal amount of the note payable must have been:

Accepted Answer

A)  $7,000. 
B)  $9,600. 
C)  $80,000. 
D)  $10,800. 
A)  $7,000. 
B)  $9,600. 
C)  $80,000. 
D)  $10,800.

Question 13

One of the purposes of adjusting entries is to convert assets to expenses.

Accepted Answer

A) True 
 B)False

Question 14

Unearned revenue appears:

Accepted Answer

A)  As income on the income statement. 
B)  As an asset on the balance sheet. 
C)  As a liability on the balance sheet. 
D)  As a part of the retained earnings. 
A)  As income on the income statement. 
B)  As an asset on the balance sheet. 
C)  As a liability on the balance sheet. 
D)  As a part of the retained earnings.

Question 15

If Hot Bagel Co. estimates depreciation on an automobile to be $578 for the year, the company should make the following adjusting entry:

Accepted Answer

A)  Debit Accumulated Depreciation $578 and credit Depreciation Expense $578. 
B)  Debit Depreciation Expense $578 and credit Automobile $578. 
C)  Debit Depreciation Expense $578 and credit Accumulated Depreciation $578. 
D)  Debit Automobile $578 and credit Depreciation Expense $578. 
A)  Debit Accumulated Depreciation $578 and credit Depreciation Expense $578. 
B)  Debit Depreciation Expense $578 and credit Automobile $578. 
C)  Debit Depreciation Expense $578 and credit Accumulated Depreciation $578. 
D)  Debit Automobile $578 and credit Depreciation Expense $578.

Question 16

End-of-period adjustments-effect on net income
Ocean View, Inc. reported revenues of $645,000 and expenses of $360,000 for the month of May, before making any month-end adjusting entries. The following data are provided regarding adjusting entries:
(A.) Portion of insurance expiring in May, $2,520.
(B.) A customer has used the facilities for two weeks in May; the fee of $4,200 has not yet been billed.
(C.) Amount owed for salaries accrued in the last week of May, $1,650.
(D.) Depreciation on equipment for May $1,290.
(E.) Supplies used in May, $13,125.
(F.) Fees collected in advance which have been earned during May, $23,400.
Complete the schedule to determine the net income of Ocean View Inc. for May after these adjustments have been recorded. Begin your schedule with income before adjusting entries and then show the effect of each adjustment to arrive at net income after adjustment.

Accepted Answer

The answer of End-of-period adjustments-effect on net income
Ocean View, Inc....

Question 17

According to service contracts, $4,810 of the Unearned Service Revenue has been earned in March. The amount of Service Revenue Earned to be reported in the March income statement is:

Accepted Answer

A)  $16,510. 
B)  $21,320. 
C)  $11,700. 
D)  $20,410. 
A)  $16,510. 
B)  $21,320. 
C)  $11,700. 
D)  $20,410.

Question 18

The normal balance of the Accumulated Depreciation account is:

Accepted Answer

A)  A debit balance. 
B)  A credit balance. 
C)  Either a debit balance or a credit balance. 
D)  There is no normal balance for this account. 
A)  A debit balance. 
B)  A credit balance. 
C)  Either a debit balance or a credit balance. 
D)  There is no normal balance for this account.

Question 19

An asset purchased on January 1, 2006 for $60,000 that has an estimated life of 10 years will have a book value on December 31, 2009 of:

Accepted Answer

A)  $60,000. 
B)  $24,000. 
C)  $36,000. 
D)  $42,000. 
A)  $60,000. 
B)  $24,000. 
C)  $36,000. 
D)  $42,000.

Question 20

On the adjusted trial balance, retained earnings is:

Accepted Answer

A)  Stated at the period-end amount. 
B)  Stated at the period-beginning amount. 
C)  Adjusted for all revenues and expenses for the period. 
D)  Adjusted for the period's dividends. 
A)  Stated at the period-end amount. 
B)  Stated at the period-beginning amount. 
C)  Adjusted for all revenues and expenses for the period. 
D)  Adjusted for the period's dividends.

Exam 4: The Accounting Cycle: Accruals and Deferrals

Which statement is true about an adjusted trial balance?

An adjusting entry to recognize that a fee received in advance has now been earned will cause an increase in total liabilities.

Prepaid expenses are:

Which of the following statements is not true regarding prepaid expenses?

Employees are owed $750 for services since the last payday in March, to be paid the first week in April. The amount to be reported in the March income statement for salaries expense is:

Which of the following is not considered a basic type of adjusting entry?

Tuna Co. purchased a building in 2009 for $650,000 and debited an asset called "Buildings" for the entire amount. The company never depreciated the building although it had a useful life of 15 years. This action will cause:

Which of the following is not considered an end-of-period adjusting entry?

Adjusting Entries Identify four types of timing differences between cash flows and the recognition of expenses or revenues that may require adjusting entries.

An expenditure that benefits year one but is paid for in year two should not be capitalized until year two.

Which of the following statements concerning materiality is true?

The United Shipping Co. made an adjusting entry accruing interest for $800 on a note payable for the month of January. The note required 12% per annum on the principal. The principal amount of the note payable must have been:

One of the purposes of adjusting entries is to convert assets to expenses.

Unearned revenue appears:

If Hot Bagel Co. estimates depreciation on an automobile to be $578 for the year, the company should make the following adjusting entry:

According to service contracts, $4,810 of the Unearned Service Revenue has been earned in March. The amount of Service Revenue Earned to be reported in the March income statement is:

The normal balance of the Accumulated Depreciation account is:

An asset purchased on January 1, 2006 for $60,000 that has an estimated life of 10 years will have a book value on December 31, 2009 of:

On the adjusted trial balance, retained earnings is:

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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