Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Three months before year-end, Billings Company signed a $100,000, 12%, 6-month note.Principal and interest will be paid at maturity.No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures.

Accepted Answer

A) True 
 B)False

Question 3

Under the accrual basis of accounting, at what point in time should a fast food restaurant recognize revenue?
_________________________

Accepted Answer

The answer of Under the accrual basis of accounting, at...

Question 4

During December, Filmore Inc.purchased $800 of supplies for use in its business.At the end of December, 20% of the supplies were still on hand, but only 75% had been paid.What amounts will appear on the company's balance sheet on December 31?

Accepted Answer

The answer of During December, Filmore Inc.purchased $800 of supplies...

Question 5

Closing entries serve two important purposes: 1) to return the balances in all temporary or nominal accounts to zero to start the next accounting period and 2) to transfer the net income or net loss) and the dividends of the period to the Retained Earnings account.

Accepted Answer

A) True 
 B)False

Question 6

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Accepted Answer

A) Assets decrease and stockholders' equity decreases. 
B) Assets increase and stockholders' equity increases. 
C) Assets decrease and liabilities decrease. 
D) Liabilities increase and stockholders' equity decreases.

Question 7

An) results when cash is paid before the related amount is reported on the income statement.

Accepted Answer

The answer of An) results when cash is paid before...

Question 8

Harvest Catering is a local catering service.Conceptually, when should Harvest recognize revenue from its catering service?

Accepted Answer

A) At the date the customer places the order 
B) At the date the meals are served 
C) At the date the invoice is mailed to the customer 
D) At the date the customer's payment is received

Question 9

All financial statements are prepared using the accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 10

Fox Auto sold merchandise to a customer for $3,000 on credit on March 10.The customer paid Fox Auto the amount due on March 31.Under the accrual basis of accounting, which of the following statements is true?

Accepted Answer

A) Fox Auto will recognize the revenue on March 31. 
B) The March 10th transaction increases revenue, but has no effect on assets because cash has not been received. 
C) Revenue is recognized after the cost of the merchandise sold has been paid by Fox Auto. 
D) The March 31st transaction has no effect on total assets under the accrual basis.

Question 11

As a general rule, revenue is recognized at the point of sale.Which one of the following situations illustrates this rule?

Accepted Answer

A) Products are sold to customers on credit with payment due in 30 days. 
B) Employees are paid wages the week after the wages are earned. 
C) Products are purchased for resale purposes. 
D) Interest is collected from amounts loaned to employees.

Question 12

is the allocation of the cost of a tangible, long-term asset over its useful life.

Accepted Answer

The answer of is the allocation of the cost of...

Question 13

Accumulated Depreciation

Accepted Answer

A) increases when the monthly adjustment for depreciation is recognized. 
B) decreases when the monthly adjustment for depreciation is recognized. 
C) is reported on the income statement with the expense accounts. 
D) is allocated as an expense during future periods.

Question 14

Which of the following statements is true concerning assets?

Accepted Answer

A) Assets represent future economic sacrifices. 
B) Assets are expired costs. 
C) Assets become expenses at the time they are paid in cash. 
D) Assets become expenses when their economic benefits expire.

Question 15

Claxton Corp.purchased equipment at a cost of $320,000 in January, 2010.As of January 1, 2014, depreciation of $160,000 had been recorded on this asset.Depreciation expense for 2014 is $40,000.After the adjustments are recorded and posted at December 31, 2014, what are the balances for the Equipment and Accumulated Depreciation?

Accepted Answer

The answer of Claxton Corp.purchased equipment at a cost of...

Question 16

Starlight Associates, Inc.recorded salary expense of $100,000 in 2015.However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2015.After the adjustments are recorded and posted at December 31, 2015, the balances in the Salaries Expense and Salaries Payable accounts will be:

Accepted Answer

The answer of Starlight Associates, Inc.recorded salary expense of $100,000...

Question 17

Mendes Company sells merchandise to customers.Mendes should normally recognize

Accepted Answer

A) Revenue and the related expenses in the same accounting period as earned whether payment is received or not 
B) Revenue when the cash is collected and the expenses when Mendes pays its creditor for the merchandise 
C) Revenue and expenses after all payments are collected 
D) Expenses in the period the merchandise is sold and defer revenue until the customer pays for the merchandise

Question 18

A cost can be an asset or expense depending on whether the future economic benefits have expired or not.

Accepted Answer

A) True 
 B)False

Question 19

Which account is always carried over from the unadjusted trial balance columns of a work sheet to the balance sheet columns of the work sheet without any adjustment?

Accepted Answer

A) Accumulated depreciation 
B) Depreciation expense 
C) Cash 
D) All of these are adjusted.

Question 20

An asset is always involved when revenue is recognized.

Accepted Answer

A) True 
 B)False

Exam 4: Income Measurement and Accrual Accounting

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

Three months before year-end, Billings Company signed a $100,000, 12%, 6-month note.Principal and interest will be paid at maturity.No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures.

Under the accrual basis of accounting, at what point in time should a fast food restaurant recognize revenue? _________________________

During December, Filmore Inc.purchased $800 of supplies for use in its business.At the end of December, 20% of the supplies were still on hand, but only 75% had been paid.What amounts will appear on the company's balance sheet on December 31?

Closing entries serve two important purposes: 1) to return the balances in all temporary or nominal accounts to zero to start the next accounting period and 2) to transfer the net income or net loss) and the dividends of the period to the Retained Earnings account.

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

An) results when cash is paid before the related amount is reported on the income statement.

Harvest Catering is a local catering service.Conceptually, when should Harvest recognize revenue from its catering service?

All financial statements are prepared using the accrual basis of accounting.

Fox Auto sold merchandise to a customer for $3,000 on credit on March 10.The customer paid Fox Auto the amount due on March 31.Under the accrual basis of accounting, which of the following statements is true?

As a general rule, revenue is recognized at the point of sale.Which one of the following situations illustrates this rule?

is the allocation of the cost of a tangible, long-term asset over its useful life.

Accumulated Depreciation

Which of the following statements is true concerning assets?

Mendes Company sells merchandise to customers.Mendes should normally recognize

A cost can be an asset or expense depending on whether the future economic benefits have expired or not.

Which account is always carried over from the unadjusted trial balance columns of a work sheet to the balance sheet columns of the work sheet without any adjustment?

An asset is always involved when revenue is recognized.