Question 1

Compute the amounts indicated for each of the following independent situations. $\begin{array} { | l | c | c | c | c | } 
\hline & \text { Situation } & & & \
\hline & \mathrm { A } & \mathrm { B } & \mathrm { C } & \mathrm { D } \
\hline \text { Beginning supp lies balance } & ? & \$ 2,100 & \$ 1,500 & \$ 1,400 \
\hline \begin{array} { l } 
\text { Payments for supp lies } \
\text { during the year }
\end{array} & & & & \
\text { Ending supplies balance } & \$ 2,500 & \$ 4,500 & ? & \$ 1,700 \
\hline \begin{array} { l } 
\text { Supp lies expense on the } \
\text { income statement }
\end{array} & \$ 1,600 & \$ 1,600 & \$ 1,800 & ? \
\hline
\end{array}$

Accepted Answer

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

Question 2

A prepaid expense recorded initially as an expense is adjusted by crediting the asset account.

Accepted Answer

A) True 
 B)False

Question 3

For each of the following, state whether you agree or disagree with the accounting treatment. What concepts support your view?
a)A company records all revenue when earned, whether it has been collected or not.
b)Payment of a three-year insurance policy is charged to insurance expense and not adjusted.
c)Because the December telephone bill did not arrive until January, no telephone expense was recorded for December.
d)Management of Classic Cars requires the accountants to prepare monthly financial statements.

Accepted Answer

The answer of For each of the following, state whether...

Question 4

The concept that requires that accountants accrue revenue at the end of the accounting period for work performed but not yet billed is the:

Accepted Answer

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

Question 5

Accruals involve the recording of an expense or a revenue account:

Accepted Answer

A) either before or at the same time the cash is paid or received. 
B) after the cash is paid or received. 
C) at the same time the cash is paid or received. 
D) before the cash is paid or received.

Question 6

Accrual accounting provides several opportunities for unethical accounting.

Accepted Answer

A) True 
 B)False

Question 7

An asset account is debited when unearned revenue is recorded initially as a revenue.

Accepted Answer

A) True 
 B)False

Question 8

Deferrals involve the recording of an expense or a revenue account:

Accepted Answer

A) either before or after the cash is paid or received. 
B) after the cash is paid or received. 
C) before the cash is paid or received. 
D) either before or at the same time the cash is paid or received.

Question 9

The type of account and normal balance of accumulated amortization is:

Accepted Answer

A) liability; credit. 
B) asset; debit. 
C) contra asset; credit. 
D) contra asset; debit.

Question 10

On September 1, 2019, a company paid $8,400 in advance for two years insurance and debited prepaid insurance. The December 31, 2019, adjusting entry should include a debit to:

Accepted Answer

A) insurance expense for $1,400. 
B) insurance expense for $7,000. 
C) prepaid insurance for $2,800. 
D) prepaid insurance for $1,400.

Question 11

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual
-Recorded service revenue received in advance from clients.

Accepted Answer

A) accrual 
B) deferral

Question 12

The concept of accrual accounting is accepted around the world.

Accepted Answer

A) True 
 B)False

Question 13

Based on the partial trial balance and the partial adjusted trial balance shown below, prepare the six missing adjusting entries. The adjusting entries should be dated December 31.
Unadjusted
Account Trial Balance Adjusted Trial Balance $$\begin{array} { | l | r | r | r | r | } 
\hline &  { \text { Debit } } & \text { Credit } & { \text { Debit } } & \text { Credit } \
\hline \text { Accounts Receivable } & 101,600 & & 110,000 & \
\hline \text { Supp lies } & 5,000 & & 3,800 & \
\hline \text { Prepaid Insurance } & 10,600 & & 5,800 & \
\hline \text { Accumulated Amortization } & & 55,300 & & 57,300 \
\hline \text { Salary Payable } & & & & 1,500 \
\hline \text { Unearned Service Revenue } & & 13,500 & & 13,000 \
\hline \text { Service Revenue } & & 215,900 & & 224,800 \
\hline \text { Salary Expense } & 110,600 & & 112,100 & \
\hline \text { Insurance Expense } & & & 4,800 & \
\hline \text { Supp lies Expense } & & & 1,200 & \
\hline \text { Amortization Expense } & & & 2,000 & \
\hline
\end{array}$$

Accepted Answer

The answer of Based on the partial trial balance and...

Question 14

The primary difference between deferred and accrued expenses is that accrued expenses:

Accepted Answer

A) have been paid but deferred expenses haven't. 
B) have not been paid but deferred expenses have. 
C) involve assets instead of liabilities. 
D) There is no difference between deferred and accrued expenses.

Question 15

Adjusting entries only involve income statement accounts.

Accepted Answer

A) True 
 B)False

Question 16

Nuyen Services Company records the payment of $500 cash for a previously accrued expense and the accrual of $325 for another expense. The impact of these two entries on total expenses and net income is:

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Total Expenses } & \text { Net Income } \
\hline \text { increase by } \$ 825 & \text { decrease by } \$ 325 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Total Expenses } & \text { Net Income } \
\hline \text { increase by } \$ 825 & \text { decrease by } \$ 825 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Total Expenses } & \text { Net Income } \
\hline \text { increase by } \$ 325 & \text { decrease by } \$ 325 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Total Expenses } & \text { Net Income } \
\hline \text { increase by } \$ 325 & \text { decrease by } \$ 825 \
\hline
\end{array}$$

Question 17

If the adjusting entry to record the current periods prepaid rent expired is omitted:

Accepted Answer

A) current assets will be overstated. 
B) current assets will be understated. 
C) current liabilities will be overstated. 
D) current liabilities will be understated.

Question 18

State the effect on net income, total assets, and total liabilities if the following adjustments were not made.
a)Service revenue earned but not yet collected, $2,400.
b)Utilities expense incurred but not yet recorded, $1,200.
c)Unearned revenue earned during the period, $5,600.
d)Supplies used during the period, $1,700.
e)Amortization on buildings, $26,000. $\begin{array} { | c | c | c | c | } 
\hline \text { Item } & \begin{array} { c } 
\text { Effect on } \
\text { Net Income }
\end{array} & \begin{array} { c } 
\text { Effect on } \
\text { Total Assets }
\end{array} & \begin{array} { c } 
\text { Effect on Total } \
\text { Liabilities }
\end{array} \
\hline \text { a) } & & & \
\hline \text { b) } & & & \
\hline \text { c) } & & & \
\hline \text { d) } & & & \
\hline \text { e) } & & & \
\hline
\end{array}$

Accepted Answer

The answer of State the effect on net income, total...

Question 19

Robert Rogers, a professional accountant, performed accounting services for a client in December. A bill was mailed to the client on December 30. Robert received a cheque in the mail on January 5. The recognition criteria for revenues requires that which of the following accounts appears on the balance sheet at December 31?

Accepted Answer

A) Prepaid expense 
B) Accounts receivable 
C) Unearned revenue 
D) Accounts payable

Question 20

Revenue that has been earned but not yet collected is called an accrued revenue.

Accepted Answer

A) True 
 B)False

Exam 3: Measuring Business Income: The Adjusting Process

A prepaid expense recorded initially as an expense is adjusted by crediting the asset account.

The concept that requires that accountants accrue revenue at the end of the accounting period for work performed but not yet billed is the:

Accruals involve the recording of an expense or a revenue account:

Accrual accounting provides several opportunities for unethical accounting.

An asset account is debited when unearned revenue is recorded initially as a revenue.

Deferrals involve the recording of an expense or a revenue account:

The type of account and normal balance of accumulated amortization is:

On September 1, 2019, a company paid $8,400 in advance for two years insurance and debited prepaid insurance. The December 31, 2019, adjusting entry should include a debit to:

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Recorded service revenue received in advance from clients.

The concept of accrual accounting is accepted around the world.

The primary difference between deferred and accrued expenses is that accrued expenses:

Adjusting entries only involve income statement accounts.

Nuyen Services Company records the payment of $500 cash for a previously accrued expense and the accrual of $325 for another expense. The impact of these two entries on total expenses and net income is:

If the adjusting entry to record the current periods prepaid rent expired is omitted:

Revenue that has been earned but not yet collected is called an accrued revenue.