Question 1

The bookkeeper for City Rentals closed the books before the accountant had had a chance to prepare the financial statements. Use the bookkeeper's closing entries to prepare, in good form, a statement of retained earnings for the year ended December 31, 2019, the first year of operations for this company.
Closing Entries:

Accepted Answer

The answer of The bookkeeper for City Rentals closed the...

Question 2

On December 31, 2019, a company signed a one-year contract to provide services to a particular customer for $12,000. The customer will pay for the services during January 2020. Using the accrual basis of accounting, when should the company recognize revenue?

Accepted Answer

A) In January 2020, when the cash is received. 
B) On December 31, 2020, after all services have been provided. 
C) Equally throughout 2020, as the revenue is earned. 
D) On December 31, 2019, when the contract is signed.

Question 3

-Refer to Cabana Club. Prepare all closing entries necessary based on the income statement for the year ended December 31, 2020.

Accepted Answer

The answer of 
-Refer to Cabana Club. Prepare all closing...

Question 4

The financial statements are prepared after

Accepted Answer

A) business transactions are recorded. 
B) adjustments are recorded. 
C) the accounts are closed. 
D) the adjusted trial balance is prepared.

Question 5

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.)
-The cost of salaries earned by employees, but not paid at the end of the accounting period, is recorded

Accepted Answer

A) a deferred (prepaid) expense 
B) a deferred (unearned) revenue 
C) an accrued expense 
D) an accrued revenue

Question 6

A company forgot to record four adjustments during the current year. Which one of the following omissions of adjustments will understate net income?

Accepted Answer

A) Sales made during the last week of the period are not recorded. 
B) Interest on monies borrowed has not yet been recorded. 
C) Prepaid insurance is not reduced for the portion of the policy that has expired during the period. 
D) Income taxes owed but not yet paid are ignored.

Question 7

Which one of the following adjustments will increase assets?

Accepted Answer

A) Interest incurred on money borrowed during the period but not yet paid to the bank is accrued. 
B) Rent revenue is recorded for amounts owed by a tenant but not yet paid. 
C) The use of supplies is recorded. 
D) Depreciation for the period is recorded.

Question 8

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.)
-The cost of supplies used during the year is recorded

Accepted Answer

A) a deferred (prepaid) expense 
B) a deferred (unearned) revenue 
C) an accrued expense 
D) an accrued revenue

Question 9

Select the correct revenue recognition principle for each of the following. (Choices may be used more than once.)
-Prepaid Subscriptions

Accepted Answer

A) Recognize revenue over the passage of time. 
B) Recognize revenue when the customer takes possession of the product. 
C) Recognize revenue when cash is collected. 
D) Recognize revenue when service is performed.

Question 10

The adjustment necessary to record the expense and the associated increase in the company's liabilities is ____________________.

Accepted Answer

The answer of The adjustment necessary to record the expense...

Question 11

Which statement presents financial information not based on accrual accounting?

Accepted Answer

A) Balance Sheet 
B) Income Statement 
C) Statement of Cash Flows 
D) Statement of Retained Earnings

Question 12

What is the revenue recognition principle?

Accepted Answer

The answer of What is the revenue recognition principle?...

Question 13

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.)
-Insurance is earned in the current period, although collections from customers had been received in a previous period

Accepted Answer

A) a deferred (prepaid) expense 
B) a deferred (unearned) revenue 
C) an accrued expense 
D) an accrued revenue

Question 14

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.)
-Salaries Payable

Accepted Answer

A) a deferred (prepaid) expense 
B) a deferred (unearned) revenue 
C) an accrued expense 
D) an accrued revenue

Question 15

-Refer to Cabana Club. Identify three specific expenses that might be accrued as a result of adjusting journal entries. Show what these entries would look like in journal format. Ignore amounts.

Accepted Answer

The answer of 
-Refer to Cabana Club. Identify three specific...

Question 16

When revenue is earned after the earlier receipt of cash, an adjustment that increases a revenue account and decreases a liability account is recorded.

Accepted Answer

A) True 
 B)False

Question 17

The worksheet facilitates preparation of the income statement, retained earnings statement and balance sheet but not the cash flow statement.

Accepted Answer

A) True 
 B)False

Question 18

A company borrowed $100,000 from Better Bank on November 1, 2019. The terms of the loan (note) is 6% interest due in 4 months.
A)Prepare the necessary journal entry on November 1, 2019, to record the loan.
B)Prepare the necessary adjusting entry for this loan on December 31, 2019.

Accepted Answer

The answer of A company borrowed $100,000 from Better Bank...

Question 19

Why does the accrual basis of accounting require adjustments, while the cash basis does not?

Accepted Answer

The answer of Why does the accrual basis of accounting...

Question 20

When is revenue from the sale of merchandise normally recognized?

Accepted Answer

A) On the date the sale is made. 
B) On the date the customer pays for the merchandise. 
C) Either on the date on which the sale occurs, or the date on which the customer pays. 
D) When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit.

Exam 3: Accrual Accounting

On December 31, 2019, a company signed a one-year contract to provide services to a particular customer for $12,000. The customer will pay for the services during January 2020. Using the accrual basis of accounting, when should the company recognize revenue?

-Refer to Cabana Club. Prepare all closing entries necessary based on the income statement for the year ended December 31, 2020.

The financial statements are prepared after

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -The cost of salaries earned by employees, but not paid at the end of the accounting period, is recorded

A company forgot to record four adjustments during the current year. Which one of the following omissions of adjustments will understate net income?

Which one of the following adjustments will increase assets?

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -The cost of supplies used during the year is recorded

Select the correct revenue recognition principle for each of the following. (Choices may be used more than once.) -Prepaid Subscriptions

The adjustment necessary to record the expense and the associated increase in the company's liabilities is ____________________.

Which statement presents financial information not based on accrual accounting?

What is the revenue recognition principle?

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -Insurance is earned in the current period, although collections from customers had been received in a previous period

Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) -Salaries Payable

-Refer to Cabana Club. Identify three specific expenses that might be accrued as a result of adjusting journal entries. Show what these entries would look like in journal format. Ignore amounts.

When revenue is earned after the earlier receipt of cash, an adjustment that increases a revenue account and decreases a liability account is recorded.

The worksheet facilitates preparation of the income statement, retained earnings statement and balance sheet but not the cash flow statement.

A company borrowed $100,000 from Better Bank on November 1, 2019. The terms of the loan (note) is 6% interest due in 4 months. A)Prepare the necessary journal entry on November 1, 2019, to record the loan. B)Prepare the necessary adjusting entry for this loan on December 31, 2019.

Why does the accrual basis of accounting require adjustments, while the cash basis does not?

When is revenue from the sale of merchandise normally recognized?