Question 1

Which of the following is classified as a current asset?

Accepted Answer

A) Office equipment. 
B) Patent. 
C) Unearned revenue. 
D) Office supplies. 
E) Land.

Question 2

Assets are often classified into current assets,long-term investments,plant assets,and intangible assets.

Accepted Answer

A) True 
 B)False

Question 3

All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet,including the net income or net loss.

Accepted Answer

A) True 
 B)False

Question 4

Identify the primary differences between accrual accounting and cash basis accounting.

Accepted Answer

The answer of Identify the primary differences between accrual accounting...

Question 5

Interim financial statements refer to financial reports:

Accepted Answer

A) That cover less than one year,usually spanning one,three,or six-month periods. 
B) That are prepared before any adjustments have been recorded. 
C) That show the assets above the liabilities and the liabilities above the equity. 
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid. 
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

Question 6

Depreciation expense is an example of an accrued expense.

Accepted Answer

A) True 
 B)False

Question 7

A company's fiscal year must correspond with the calendar year.

Accepted Answer

A) True 
 B)False

Question 8

On July 1 Olive Co.paid $7,500 cash for management services to be performed over a two-year period.Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.On July 1 Olive should record:

Accepted Answer

A) A debit to an expense and credit to a prepaid expense for $7,500. 
B) A debit to an expense and credit to Cash for $7,500. 
C) A debit to a prepaid expense and a credit to Cash for $7,500. 
D) A credit to a prepaid expense and a debit to Cash for $7,500. 
E) A debit to Cash for $7,500 and a credit to an expense for $7,500.

Question 9

An adjusting entry could be made for each of the following except:

Accepted Answer

A) Prepaid expenses. 
B) Depreciation. 
C) Stockholder investments. 
D) Unearned revenues. 
E) Accrued expenses.

Question 10

Before an adjusting entry is made to recognize the cost of expired insurance for the period,Prepaid Insurance and Insurance Expense are both overstated.

Accepted Answer

A) True 
 B)False

Question 11

The cash basis of accounting commonly increases the comparability of financial statements from period to period.

Accepted Answer

A) True 
 B)False

Question 12

Gracio Co.had the following transactions in the last two months of its year ended December 31.Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues.Also prepare adjusting entries at the end of the year.

Accepted Answer

The answer of Gracio Co.had the following transactions in the...

Question 13

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Accepted Answer

A) Land. 
B) Dividends. 
C) Accounts Payable. 
D) Unearned Revenue. 
E) Prepaid Insurance.

Question 15

Adjusting entries are made after the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Question 16

On December 1,Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Accepted Answer

A) a debit to Earned Fees for $3,600. 
B) a debit to Unearned Fees for $1,800. 
C) a credit to Unearned Fees for $1,800. 
D) a debit to Earned Fees for $1,800. 
E) a credit to Earned Fees for $3,600.

Question 17

Trekker Bikes' current assets are $300 million and its current liabilities are $125 million.Its current ratio is 0.417.

Accepted Answer

A) True 
 B)False

Question 18

Each adjusting entry affects one or more income statement account,one or more balance sheet account,and never cash.

Accepted Answer

A) True 
 B)False

Question 19

In preparing statements from the adjusted trial balance,the balance sheet must be prepared first.

Accepted Answer

A) True 
 B)False

Question 20

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees.If the company fails to make the end-of-period adjusting entry to move the portion of these fees that has been earned to a revenue account,one effect will be:

Accepted Answer

A) An overstatement of equity. 
B) An understatement of equity. 
C) An understatement of assets. 
D) An understatement of liabilities. 
E) An overstatement of assets.

Exam 3: Adjusting Accounts for Financial Statements

Which of the following is classified as a current asset?

Assets are often classified into current assets,long-term investments,plant assets,and intangible assets.

All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet,including the net income or net loss.

Identify the primary differences between accrual accounting and cash basis accounting.

Interim financial statements refer to financial reports:

Depreciation expense is an example of an accrued expense.

A company's fiscal year must correspond with the calendar year.

On July 1 Olive Co.paid $7,500 cash for management services to be performed over a two-year period.Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.On July 1 Olive should record:

An adjusting entry could be made for each of the following except:

Before an adjusting entry is made to recognize the cost of expired insurance for the period,Prepaid Insurance and Insurance Expense are both overstated.

The cash basis of accounting commonly increases the comparability of financial statements from period to period.

Gracio Co.had the following transactions in the last two months of its year ended December 31.Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues.Also prepare adjusting entries at the end of the year.

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Adjusting entries are made after the preparation of financial statements.

On December 1,Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Trekker Bikes' current assets are $300 million and its current liabilities are $125 million.Its current ratio is 0.417.

Each adjusting entry affects one or more income statement account,one or more balance sheet account,and never cash.

In preparing statements from the adjusted trial balance,the balance sheet must be prepared first.

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees.If the company fails to make the end-of-period adjusting entry to move the portion of these fees that has been earned to a revenue account,one effect will be: