Question 1

Sabrina's Fabric Land bought $5,000 of equipment at the beginning of 2019. Amortization expense on the 2019 income statement is $400. What is the balance in accumulated amortization on December 31, 2019?

Accepted Answer

A) $5,000 
B) $400 
C) $4,600 
D) $0

Question 2

Prepaid rent shows a beginning balance of $3,600 and an ending balance of $2,900. The income statement for the current period reports rent expense of $3,200. What was the amount of rent purchased during the year?

Accepted Answer

A) $6,100 
B) $6,800 
C) $2,500 
D) $400

Question 3

Which of the following accounts would be used under the accrual basis of accounting, but not under the cash-basis of accounting?

Accepted Answer

A) cash 
B) unearned revenue 
C) equipment 
D) salary expense

Question 4

The cost of a property, plant, and equipment asset less its accumulated amortization is referred to as historical cost.

Accepted Answer

A) True 
 B)False

Question 5

Financial statements are prepared from:

Accepted Answer

A) an adjusted trial balance. 
B) an unadjusted trial balance. 
C) the general journal. 
D) the previous year's financial statements.

Question 6

The matching objective directs accountants as to when to record expenses on the income statement to be matched against liabilities on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual
-Recorded salaries earned by employees at end of month, payment to be made early next month.

Accepted Answer

A) accrual 
B) deferral

Question 8

Compute the amounts indicated for each of the following independent situations. $\begin{array} { | l | c | c | c | c | } 
\hline & \text { Situation } & & & \
\hline & \mathrm { A } & \mathrm { B } & \mathrm { C } & \mathrm { D } \
\hline \begin{array} { l } 
\text { Beginning prepaid } \
\text { insurance balance }
\end{array} & ? & \$ 1,300 & \$ 600 & \$ 3,300 \
\hline \begin{array} { l } 
\text { Cash payments for } \
\text { insurance during the year }
\end{array} & \$ 2,500 & ? & \$ 4,300 & \$ 2,600 \
\hline \begin{array} { l } 
\text { Ending prepaid insurance } \
\text { balance }
\end{array} & \$ 1,400 & \$ 4,250 & ? & \$ 600 \
\hline \begin{array} { l } 
\text { Insurance expense on the } \
\text { income statement }
\end{array} & \$ 2,600 & \$ 1,700 & \$ 1,150 & ? \
\hline
\end{array}$

Accepted Answer

The answer of Compute the amounts indicated for each of...

Question 9

On December 21, 2019, Mr. Bagger received and deposited $790 from a customer, Mrs. McCartney, who paid in advance of the work. He recorded the receipt by crediting a revenue account, Computer Service Fees Earned. As of December 31, none of the work had been completed. What, if any, is the required adjusting journal entry on December 31?

Accepted Answer

A) No entry is required 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Dr. Unearned Computer Service Fees } & 790 & \
\hline \text { Cr. Computer Service Fees Earned } & & 790 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | c | } 
\hline \text { Dr. Computer Service Fees Earned } & 790 & \
\hline \text { Cr. Accounts Receivable } & & 790 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Dr. Computer Service Fees Earned } & 790 & \
\hline \text { Cr. Unearned Computer Service } & & \
\text { Fees } & & 790 \
\hline
\end{array}$$

Question 10

The concept that assists accountants in determining when to recognize revenue in the accounts is the:

Accepted Answer

A) Cost principle. 
B) Time-period assumption. 
C) Recognition criteria for revenue. 
D) Matching objective.

Question 11

The balance in prepaid rent after adjustment represents:

Accepted Answer

A) a liability on the balance sheet. 
B) an expense on the income statement. 
C) revenue on the income statement. 
D) an asset on the balance sheet.

Question 12

Under the cash basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a(n):

Accepted Answer

A) prepaid asset account. 
B) deferred asset account. 
C) unearned revenue account. 
D) revenue account.

Question 13

Companies reporting under IFRS and ASPE go through the same adjusting process. What is the most significant difference between IFRS and ASPE in the terms used in the amortization journal entries?

Accepted Answer

The answer of Companies reporting under IFRS and ASPE go...

Question 14

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual
-Estimated current month's utilities bill and recorded the amount. The bill is to be received and paid next month.

Accepted Answer

A) accrual 
B) deferral

Question 15

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual
-Supplies were used during the month.

Accepted Answer

A) accrual 
B) deferral

Question 16

Lynnwood Services prepaid 24 months of rent in advance on October 1, 2019. Lynnwood Services debited rent expense for the entire amount of $12,000. The adjusting entry on December 31, 2019, would include a:

Accepted Answer

A) debit to prepaid rent for $1,500. 
B) debit to prepaid rent for $10,500. 
C) credit to rent expense for $1,500. 
D) debit to rent expense for $10,500.

Question 17

The matching objective directs accountants to measure expenses.

Accepted Answer

A) True 
 B)False

Question 18

The heading of the income statement includes in the proper order:

Accepted Answer

A) title of the statement; name of the entity, date of the statement. 
B) name of the entity; title of the statement; date of the statement. 
C) title of the statement; name of the entity, period covered by the statement. 
D) name of the entity; title of the statement; period covered by the statement.

Question 19

The steps in the accounting cycle (excluding the preparation of the worksheet)are listed below in random order. List the steps in the proper sequence, inserting the number 1 to 11. a) Prepare a post-closing trial balance $\underline{\quad\quad} $
b) Prepare an adjusted trial balance$\underline{\quad\quad} $
c) Analyse transactions as they occur$\underline{\quad\quad} $
d) Prepare an unadjusted trial balance$\underline{\quad\quad} $
e) Compute the adjusted balance in each of the ledger accounts$\underline{\quad\quad} $
f) Post the journal entries to the ledger accounts$\underline{\quad\quad} $
g) Joumalize and post the adjusting journal entries$\underline{\quad\quad} $
h) Joumalize and post the closing entries$\underline{\quad\quad} $
i) Prepare financial statements$\underline{\quad\quad} $
j) Compute the unadjusted balance in each of the ledger accounts$\underline{\quad\quad} $
k) Journalize the transactions$\underline{\quad\quad} $

Accepted Answer

The answer of The steps in the accounting cycle (excluding...

Question 20

The recognition criteria for revenues tell accountants when to record revenue by making a journal entry and the amount of revenue to record.

Accepted Answer

A) True 
 B)False

Exam 3: Measuring Business Income: The Adjusting Process

Sabrina's Fabric Land bought $5,000 of equipment at the beginning of 2019. Amortization expense on the 2019 income statement is $400. What is the balance in accumulated amortization on December 31, 2019?

Prepaid rent shows a beginning balance of $3,600 and an ending balance of $2,900. The income statement for the current period reports rent expense of $3,200. What was the amount of rent purchased during the year?

Which of the following accounts would be used under the accrual basis of accounting, but not under the cash-basis of accounting?

The cost of a property, plant, and equipment asset less its accumulated amortization is referred to as historical cost.

Financial statements are prepared from:

The matching objective directs accountants as to when to record expenses on the income statement to be matched against liabilities on the balance sheet.

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Recorded salaries earned by employees at end of month, payment to be made early next month.

The concept that assists accountants in determining when to recognize revenue in the accounts is the:

The balance in prepaid rent after adjustment represents:

Under the cash basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a(n) :

Companies reporting under IFRS and ASPE go through the same adjusting process. What is the most significant difference between IFRS and ASPE in the terms used in the amortization journal entries?

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Estimated current month's utilities bill and recorded the amount. The bill is to be received and paid next month.

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Supplies were used during the month.

Lynnwood Services prepaid 24 months of rent in advance on October 1, 2019. Lynnwood Services debited rent expense for the entire amount of $12,000. The adjusting entry on December 31, 2019, would include a:

The matching objective directs accountants to measure expenses.

The heading of the income statement includes in the proper order:

The recognition criteria for revenues tell accountants when to record revenue by making a journal entry and the amount of revenue to record.