Question 1

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 2

[The following information applies to the questions displayed below.]
Omega Company adjusts its accounts at the end of each month.The following information has been assembled in order to prepare the required adjusting entries at December 31:
(1)A one-year bank loan of $720,000 at an annual interest rate of 12% had been obtained on December 1.
(2)The company pays all employees up-to-date each Friday.Since December 31 fell on Tuesday,there was a liability to employees at December 31 for two day's pay amounting to $6,800.
(3)On December 1,rent on the office building had been paid for four months.The monthly rent is $6,000.
(4)Depreciation of office equipment is based on an estimated useful life of six years.The balance in the Office Equipment account is $9,360;no change has occurred in the account during the year.
(5)Fees of $9,800 were earned during the month for clients who had paid in advance.
-What amount of interest expense has accrued on the bank loan?

Accepted Answer

A) $6,400 
B) $7,000 
C) $7,200 
D) $7,800 
A) $6,400 
B) $7,000 
C) $7,200 
D) $7,800

Question 3

We can compare income of the current period with income of a previous period to determine whether the operating results are improving or declining:

Accepted Answer

A) Only if each accounting period covered is a full year. 
B) Only if the same accountant prepares the income statement each period. 
C) Only if the accounting periods are equal in length. 
D) Only if a manual accounting system is used in both periods. 
A) Only if each accounting period covered is a full year. 
B) Only if the same accountant prepares the income statement each period. 
C) Only if the accounting periods are equal in length. 
D) Only if a manual accounting system is used in both periods.

Question 4

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 5

Great Kids Co.began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly fee of $9,000.The first payment is to be received on February 15.The adjusting entry required by Great Kids Co.on January 30 includes:

Accepted Answer

A) A credit to Child Care Fees Earned of $4,500. 
B) A debit to Child Care Fees Receivable of $9,000. 
C) A debit to Unearned Child Care Revenue of $4,500. 
D) A debit to Fees Receivable of $9,000. 
A) A credit to Child Care Fees Earned of $4,500. 
B) A debit to Child Care Fees Receivable of $9,000. 
C) A debit to Unearned Child Care Revenue of $4,500. 
D) A debit to Fees Receivable of $9,000.

Question 6

Before any month-end adjustments are made,the net income of Russell Company is $38,000.However,the following adjustments are necessary: office supplies used,$3,160;services performed for clients but not yet recorded or collected,$3,040;interest accrued on a note payable to bank,$3,640.After adjusting entries are made for the items listed above,Russell Company's net income would be:

Accepted Answer

A) $38,000. 
B) $34,240. 
C) $41,160. 
D) $44,200. 
A) $38,000. 
B) $34,240. 
C) $41,160. 
D) $44,200.

Question 7

The balance of an unearned revenue account:

Accepted Answer

A) Appears in the balance sheet as a component of owners' equity. 
B) Appears in the income statement along with other revenue accounts. 
C) Appears in a separate section of the income statement for revenue not yet earned. 
D) Appears in the liability section of the balance sheet. 
A) Appears in the balance sheet as a component of owners' equity. 
B) Appears in the income statement along with other revenue accounts. 
C) Appears in a separate section of the income statement for revenue not yet earned. 
D) Appears in the liability section of the balance sheet.

Question 8

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.reported revenues...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

The purpose of adjusting entries is to:

Accepted Answer

A) Prepare the revenue and expense accounts for recording the revenue and expenses of the next accounting period. 
B) Record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions. 
C) Correct errors made during the accounting period. 
D) Update the owners' equity account for the changes in owners' equity that had been recorded in revenue and expense accounts throughout the period. 
A) Prepare the revenue and expense accounts for recording the revenue and expenses of the next accounting period. 
B) Record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions. 
C) Correct errors made during the accounting period. 
D) Update the owners' equity account for the changes in owners' equity that had been recorded in revenue and expense accounts throughout the period.

Question 12

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 13

Adjusting entries help achieve the goals of accrual accounting by applying which two accounting principles?

Accepted Answer

A) Business entity concept and realization principle 
B) Cost principle and the accounting equation 
C) Realization principle and matching principle 
D) Matching principle and safety principle 
A) Business entity concept and realization principle 
B) Cost principle and the accounting equation 
C) Realization principle and matching principle 
D) Matching principle and safety principle

Question 14

Recording depreciation expense is an example of an adjusting entry to accrue unpaid expenses resulting from expenses being incurred before cash is paid.

Accepted Answer

A) True 
 B)False

Question 15

Gordy's Corp.has seven employees.Each earns $800 per week for a five-day work week ending on Friday.This month,the last day of the month falls on a Thursday.The company should make an adjusting entry:

Accepted Answer

A) Debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480. 
B) Debiting Wage Expense for $640 and crediting Wages Payable for $640. 
C) Crediting Wage Expense for $4,480 and debiting Wages Payable for $4,480. 
D) Crediting Wage Expense for $640 and debiting Wages Payable for $640. 
A) Debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480. 
B) Debiting Wage Expense for $640 and crediting Wages Payable for $640. 
C) Crediting Wage Expense for $4,480 and debiting Wages Payable for $4,480. 
D) Crediting Wage Expense for $640 and debiting Wages Payable for $640.

Question 16

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 17

The accountant for Perfect Painting forgot the following two adjustments at the end of 2018: (a)The entry to record depreciation: $3,000.
(b)The entry to record the portion of fees received in advance,which have now been earned: $3,000.
As a result of these two omissions:

Accepted Answer

A) Net income for Perfect Painting for 2018 is overstated. 
B) Net income for Perfect Painting for 2018 is understated. 
C) Assets of Perfect Painting are overstated at December 31,2018. 
D) Liabilities of Perfect Painting are understated at December 31,2018. 
A) Net income for Perfect Painting for 2018 is overstated. 
B) Net income for Perfect Painting for 2018 is understated. 
C) Assets of Perfect Painting are overstated at December 31,2018. 
D) Liabilities of Perfect Painting are understated at December 31,2018.

Question 18

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 19

Immaterial items may be accounted for in the most convenient manner,without regard to other theoretical concepts.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 4: The Accounting Cycle: Accruals and Deferrals

Which of the following statements concerning materiality is true?

We can compare income of the current period with income of a previous period to determine whether the operating results are improving or declining:

Great Kids Co.began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly fee of $9,000.The first payment is to be received on February 15.The adjusting entry required by Great Kids Co.on January 30 includes:

The balance of an unearned revenue account:

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

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

The purpose of adjusting entries is to:

The normal balance of the Accumulated Depreciation account is:

Adjusting entries help achieve the goals of accrual accounting by applying which two accounting principles?

Recording depreciation expense is an example of an adjusting entry to accrue unpaid expenses resulting from expenses being incurred before cash is paid.

Gordy's Corp.has seven employees.Each earns $800 per week for a five-day work week ending on Friday.This month,the last day of the month falls on a Thursday.The company should make an adjusting entry:

Which statement is true about an adjusted trial balance?

The accountant for Perfect Painting forgot the following two adjustments at the end of 2018: (a)The entry to record depreciation: $3,000. (b)The entry to record the portion of fees received in advance,which have now been earned: $3,000. As a result of these two omissions:

Unearned revenue appears:

Immaterial items may be accounted for in the most convenient manner,without regard to other theoretical concepts.

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

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