Question 1

According to the text, the income statement is in fact a subset of the balance sheet, because information from the income statement columns flows into the balance sheet columns.

Accepted Answer

A) True 
 B)False

Question 2

The selection of historical cost over current value as the attribute to be measured for assets is an example of the trade-off of

Accepted Answer

A)  Reliability over relevance 
B)  Costs over benefit 
C)  Comparability over consistency 
D)  Understandability over verifiability

Question 3

Failure to record depreciation expense for the period results in which of the following?

Accepted Answer

A)  Net income being overstated 
B)  No effect on total assets 
C)  Stockholders' equity being overstated 
D)  Both a and c above

Question 4

For each transaction select the letter of the type of adjustment that would be required.
-The depreciation on office equipment used during the current year is recorded

Accepted Answer

A) Deferred expense 
B) Deferred revenue 
C) Accrued liability 
D) Accrued asset

Question 5

Select the correct revenue recognition principle for each of the following.
-Carpet cleaning

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 6

Cuisine Company received a 6-month, 6% note for $10,000 from its president on October 1, 2016.The note is due on March 31, 2017.If Cuisine's accounting period ends on December 31, how much interest revenue should Cuisine recognize during 2016 and 2017? ​ $\begin{array}{lr}
\underline{2016}& \underline{2017} \
\text { a. } \$ 450 & \$ 150 \
\text { b. } \$ 600 & \$ 0 \
\text { c. } \$ 300 & \$ 300 \
\text { d. } \$ 150 & \$ 150
\end{array}$

Accepted Answer

The answer of Cuisine Company received a 6-month, 6% note...

Question 7

Place Corp.purchased supplies at a cost of $12,000 during the year.At January 1, supplies on hand were $2,000.At December 31, supplies on hand are $1,000.Determine the amount of supplies expense for the year.

Accepted Answer

A)  $ 10,000 
B)  $ 12,000 
C)  $ 13,000 
D)  $ 14,000

Question 8

The basis of accounting that fails to take into consideration amounts earned that are not collected and expenses incurred but are not paid is the _________________________.

Accepted Answer

The answer of The basis of accounting that fails to...

Question 9

Which of the following statements does not present financial information based on the accrual basis of accounting?

Accepted Answer

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

Question 10

The _________________________ of accounting necessitates a number of adjustments at the end of an accounting period.

Accepted Answer

The answer of The _________________________ of accounting necessitates a number...

Question 11

Which one of the following statements is true?

Accepted Answer

A)  Recognition is concerned with the dollar amount of each economic effect that should be reported in the financial statements. 
B)  Measurement is concerned with how economic effects should be quantified. 
C)  The stability concept is concerned with identification of the specific entity for which economic effects are to be recognized and measured. 
D)  The monetary unit assumption is concerned with the valuation of economic effects in terms of current purchasing power.

Question 12

Balance sheet accounts are called real accounts.

Accepted Answer

A) True 
 B)False

Question 13

On October 31, Michael Corporation signed a one-year contract to provide services to Love Company for $80,000.Love will pay for the services on November 1.Using the accrual basis of accounting, when should Michael Corporation recognize revenue?

Accepted Answer

A)  November 1 of the current year when the cash is received from Harris 
B)  On October 31 of the next year when all services have been provided 
C)  Throughout the year as the revenue is earned 
D)  At December 31 of the current year, and October 31 of the next year

Question 14

The process of recording an item in the financial statements is called measurement.

Accepted Answer

A) True 
 B)False

Question 15

Income summary does not appear on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

Accepted Answer

A)  Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays. 
B)  Prepaid insurance is assigned to expense as the insurance expires. 
C)  A building is depreciated and its cost is assigned to the current and future accounting periods in which the building is expected to be used. 
D)  Merchandise inventory is assigned to cost of goods sold in the period the goods are sold.

Question 17

Failure to record amounts earned for services provided to customers but not yet paid results in which of the following

Accepted Answer

A)  Net income being overstated 
B)  No effect on total assets 
C)  Stockholders' equity being overstated 
D)  Total assets being understated

Question 18

The asset account, Supplies, has a balance of $700 on January 1.During January, the company purchased $16,000 of supplies on account and the liability was appropriately recorded.A count of supplies at the end of January indicates a balance of $900.Which one of the following is a correct amount to be reported on the company's financial statements for the month ending January 31? a. Supplies Expense- $\$ 15,800$
b. Supplies on Hand- $\$ 700$
c. Accounts Payable- $\$ 15,800$
d. Supplies Expense- $\$ 16,700$

Accepted Answer

The answer of The asset account, Supplies, has a balance...

Question 19

Most companies use the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 20

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for an insurance company?

Accepted Answer

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

Exam 4: Income Measurement and Accrual Accounting

According to the text, the income statement is in fact a subset of the balance sheet, because information from the income statement columns flows into the balance sheet columns.

The selection of historical cost over current value as the attribute to be measured for assets is an example of the trade-off of

Failure to record depreciation expense for the period results in which of the following?

For each transaction select the letter of the type of adjustment that would be required. -The depreciation on office equipment used during the current year is recorded

Select the correct revenue recognition principle for each of the following. -Carpet cleaning

Place Corp.purchased supplies at a cost of $12,000 during the year.At January 1, supplies on hand were $2,000.At December 31, supplies on hand are $1,000.Determine the amount of supplies expense for the year.

The basis of accounting that fails to take into consideration amounts earned that are not collected and expenses incurred but are not paid is the _________________________.

Which of the following statements does not present financial information based on the accrual basis of accounting?

The _________________________ of accounting necessitates a number of adjustments at the end of an accounting period.

Which one of the following statements is true?

Balance sheet accounts are called real accounts.

On October 31, Michael Corporation signed a one-year contract to provide services to Love Company for $80,000.Love will pay for the services on November 1.Using the accrual basis of accounting, when should Michael Corporation recognize revenue?

The process of recording an item in the financial statements is called measurement.

Income summary does not appear on the income statement.

Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

Failure to record amounts earned for services provided to customers but not yet paid results in which of the following

Most companies use the cash basis of accounting.

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for an insurance company?