Question 1

Materiality is determined by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 2

The period of time over which the cost of an asset is allocated to depreciation expense is called its useful life.

Accepted Answer

A) True 
 B)False

Question 3

If a depreciable asset's market value increases during the year,no depreciation expense should be recorded.

Accepted Answer

A) True 
 B)False

Question 4

An asset purchased on January 1,2015 for $60,000 that has an estimated life of 10 years will have a book value on December 31,2018 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 5

Regal Real Estate,which maintains its accounts on the basis of a fiscal year ending June 30,began the management of an office building on June 15 for an agreed annual fee of $4,800.The first payment is due on July 15.The adjusting entry required at June 30 is:

Accepted Answer

A) A debit to Management Fees Receivable for $200 and a credit to a revenue account for $200. 
B) A $200 debit to Unearned Management Fees and a $200 credit to Management Fees Earned. 
C) A debit to Cash for $200 and a credit to Management Fees Earned. 
D) A debit to Cash for $400 offset by a credit to a revenue account for $200 and a liability for $200. 
A) A debit to Management Fees Receivable for $200 and a credit to a revenue account for $200. 
B) A $200 debit to Unearned Management Fees and a $200 credit to Management Fees Earned. 
C) A debit to Cash for $200 and a credit to Management Fees Earned. 
D) A debit to Cash for $400 offset by a credit to a revenue account for $200 and a liability for $200.

Question 6

Accumulated Depreciation is:

Accepted Answer

A) An asset account. 
B) A revenue account. 
C) A contra-asset account. 
D) An expense account. 
A) An asset account. 
B) A revenue account. 
C) A contra-asset account. 
D) An expense account.

Question 7

The entry to record depreciation is an example of an adjusting entry:

Accepted Answer

A) To apportion a recorded cost. 
B) To apportion unearned revenue. 
C) To convert a liability to revenue. 
D) To record unrecorded revenue. 
A) To apportion a recorded cost. 
B) To apportion unearned revenue. 
C) To convert a liability to revenue. 
D) To record unrecorded revenue.

Question 8

Adjusting entries are prepared:

Accepted Answer

A) Before financial statements and after a trial balance has been prepared. 
B) After a trial balance has been prepared and after financial statements are prepared. 
C) After posting but before a trial balance is prepared. 
D) Anytime an accountant sees fit to prepare the entries. 
A) Before financial statements and after a trial balance has been prepared. 
B) After a trial balance has been prepared and after financial statements are prepared. 
C) After posting but before a trial balance is prepared. 
D) Anytime an accountant sees fit to prepare the entries.

Question 9

The adjusted trial balance may be used in place of the income statement.

Accepted Answer

A) True 
 B)False

Question 10

Before any month-end adjustments are made,the net income of Bennett Company is $76,000.The following adjustments are necessary: office supplies used,$3,160;services performed for clients but not yet recorded or collected,$3,640;interest accrued on note payable to bank,$3,040.After adjusting entries are made for the items listed above,Bennett Company's net income will be:

Accepted Answer

A) $66,160. 
B) $78,560. 
C) $73,440. 
D) $76,000 
A) $66,160. 
B) $78,560. 
C) $73,440. 
D) $76,000

Question 11

Before making month-end adjustments,net income of Bobwhite Company was $232,000 for March.Adjusting entries are necessary for the following items: -Depreciation for the month of March: $4,300.
-Rental income accrued during March,tenant to pay in April: $900.
-Supplies used in March: $300.
-Fees earned in March that had been collected in advance: $3,600.
After recording these adjustments,net income for March is:

Accepted Answer

A) $222,900. 
B) $227,700. 
C) $231,900. 
D) $235,600. 
A) $222,900. 
B) $227,700. 
C) $231,900. 
D) $235,600.

Question 12

The equipment had an estimated useful life of five years.Compute the book value of the equipment at March 31,after the proper March adjustment is recorded.

Accepted Answer

A) $10,833 
B) $15,167 
C) $25,567 
D) $10,400 
A) $10,833 
B) $15,167 
C) $25,567 
D) $10,400

Question 13

The adjusting entry to record estimated income taxes in a profitable period consists of a debit to Income Tax Payable and a credit to Income Tax Expense.

Accepted Answer

A) True 
 B)False

Question 14

The realization principle underlies the accounting practices of depreciating plant assets and amortizing the cost of unexpired insurance policies.

Accepted Answer

A) True 
 B)False

Question 15

An example of a contra-asset account is:

Accepted Answer

A) Depreciation Expense. 
B) Accumulated Depreciation. 
C) Prepaid expenses. 
D) Unearned revenue. 
A) Depreciation Expense. 
B) Accumulated Depreciation. 
C) Prepaid expenses. 
D) Unearned revenue.

Question 16

Gourmet Shop purchased cash registers on April 1 for $12,000.If this asset has an estimated useful life of four years,what is the book value of the cash registers on May 31?

Accepted Answer

A) $ 250. 
B) $ 3,000. 
C) $ 9,000. 
D) $11,500. 
A) $ 250. 
B) $ 3,000. 
C) $ 9,000. 
D) $11,500.

Question 17

At March 31,the amount of supplies on hand is $520.What amount is reported in the March income statement for supplies expense?

Accepted Answer

A) $1,300 
B) $0 
C) $520 
D) $780 
A) $1,300 
B) $0 
C) $520 
D) $780

Question 18

Recently,Bon Appetite Café contracted and paid for a relatively expensive advertisement in Haute Cuisine magazine.Despite the fact that the ad will appear in Haute Cuisine three months after the end of Bon Appetite Café's current fiscal year,the Café's accountant recorded the disbursement to advertising expense.If no adjusting entry is made,how will this year's financial statements of Bon Appetite Café be affected?

Accepted Answer

A) Net income will be overstated and total assets will be understated. 
B) Net income will be overstated and total assets will be overstated. 
C) Net income will be understated and total assets will be understated 
D) Net income will be understated and total assets will be overstated. 
A) Net income will be overstated and total assets will be understated. 
B) Net income will be overstated and total assets will be overstated. 
C) Net income will be understated and total assets will be understated 
D) Net income will be understated and total assets will be overstated.

Question 19

No adjusting entry should consist of:

Accepted Answer

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

Question 20

Purpose of adjusting entries
The president of Crown Construction was informed that the first quarter financial statements would be available "as soon as the adjusting entries are made." Being a non-accountant,the president feels adjustments should not be necessary if the accounting department is operating in a competent manner.Does the need for adjusting entries at the end of the quarter imply that transactions are not being recorded properly? Explain.

Accepted Answer

No,the need for adjusting entries does n

Exam 4: The Accounting Cycle: Accruals and Deferrals

Materiality is determined by the Financial Accounting Standards Board.

The period of time over which the cost of an asset is allocated to depreciation expense is called its useful life.

If a depreciable asset's market value increases during the year,no depreciation expense should be recorded.

An asset purchased on January 1,2015 for $60,000 that has an estimated life of 10 years will have a book value on December 31,2018 of:

Regal Real Estate,which maintains its accounts on the basis of a fiscal year ending June 30,began the management of an office building on June 15 for an agreed annual fee of $4,800.The first payment is due on July 15.The adjusting entry required at June 30 is:

Accumulated Depreciation is:

The entry to record depreciation is an example of an adjusting entry:

Adjusting entries are prepared:

The adjusted trial balance may be used in place of the income statement.

The equipment had an estimated useful life of five years.Compute the book value of the equipment at March 31,after the proper March adjustment is recorded.

The adjusting entry to record estimated income taxes in a profitable period consists of a debit to Income Tax Payable and a credit to Income Tax Expense.

The realization principle underlies the accounting practices of depreciating plant assets and amortizing the cost of unexpired insurance policies.

An example of a contra-asset account is:

Gourmet Shop purchased cash registers on April 1 for $12,000.If this asset has an estimated useful life of four years,what is the book value of the cash registers on May 31?

At March 31,the amount of supplies on hand is $520.What amount is reported in the March income statement for supplies expense?

No adjusting entry should consist of:

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters