Question 1

If a company is using accrual basis accounting,when should it record revenue?

Accepted Answer

A) when cash is received,even though services may be performed at a later date 
B) when services are performed,even though cash may be received at a later date 
C) when services are performed and cash is received 
D) when cash is received,30 days after the completion of the services

Question 2

Luminous Electrical performed services of $8,000 on January 24 and invoiced the customer.Luminous received the $8,000 on January 31.Provide the journal entry on January 24 when services were performed.(Ignore explanation. )

Accepted Answer

The answer of Luminous Electrical performed services of $8,000 on...

Question 3

The accountant for Sparks Electric failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year.Which of the following statements is true?

Accepted Answer

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

Question 4

The accountant for Hobson Electrical Repair failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year.Which of the following statements is true?

Accepted Answer

A) The total revenue will be overstated. 
B) The total revenue will be understated. 
C) The total expenses will be overstated. 
D) The total expenses will be understated.

Question 5

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

Accepted Answer

A) Cash 
B) Unearned Revenue 
C) Service Revenue 
D) Salaries Expense

Question 6

Which of the following entries would be made as the result of the revenue recognition principle?

Accepted Answer

A) 
 
B) 
 
C) 
 
D)

Question 7

Stancil Enterprises prepaid four months of office rent totaling $8,100 on October 1,2017.Assuming Stancil records deferred expenses using the alternative treatment,what would be the adjusting entry recorded on December 31,2017?

Accepted Answer

A) Debit Rent Expense and credit Prepaid Rent for $6,075 
B) No entry is needed since Rent Expense was recorded on October 1,2017 
C) Debit Prepaid Rent and credit Rent Expense for $2,025 
D) Debit Prepaid Rent and credit Rent Expense for $24,300

Question 8

The allocation of a plant asset's cost to expense over its useful life is called ________.

Accepted Answer

A) residual value 
B) book value 
C) accrued revenue 
D) depreciation

Question 9

Bright Lights Electrical performed services of $8,000 on January 24 and invoiced the customer.Bright Lights received the $8,000 on January 31.Provide the journal entry on January 31 when the cash was received.(Ignore explanation. )

Accepted Answer

The answer of Bright Lights Electrical performed services of $8,000...

Question 10

Adjusting entries are needed to correctly measure the ________.

Accepted Answer

A) ending balance in the Cash account 
B) net income (loss)on the balance sheet 
C) net income (loss)on the income statement 
D) beginning balance in the Cash account

Question 11

The accounts that are used in a worksheet are taken from and listed in the same order as the ________.

Accepted Answer

A) balance sheet 
B) audit report 
C) journal 
D) chart of accounts

Question 12

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

A) True 
 B)False

Question 13

What is the effect of the adjusting entry for Depreciation Expense?

Accepted Answer

A) It increases total liabilities and increases total expenses. 
B) It increases total assets and increases total expenses. 
C) It decreases total assets and increases total expenses. 
D) It decreases total liabilities and increases total expenses.

Question 14

Holland Company purchased manufacturing equipment for $10,920.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $80 per month.(Assume that the company uses the straight-line method. )

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a contra account?

Accepted Answer

A) Depreciation Expense 
B) Accumulated Depreciation 
C) Unearned Revenue 
D) Earned Revenue

Question 16

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

Accepted Answer

A) True 
 B)False

Question 17

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

Accepted Answer

A) True 
 B)False

Question 18

The revenue recognition principle guides accountants in ________.

Accepted Answer

A) ensuring only revenues received in cash are recorded 
B) determining when to record expenses 
C) determining when to record revenues 
D) ensuring expenses are deducted from revenues

Question 19

Prepaid Insurance is an asset account that appears on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 20

The asset account,Office Supplies had a beginning balance of $5,400.During the accounting period,office supplies were purchased,on account,for $5,400.A physical count,on the last day of the accounting period,shows $2,300 of office supplies on hand.What is the amount of Supplies Expense for the accounting period?

Accepted Answer

A) $5,400 
B) $2,300 
C) $8,500 
D) $3,100

Exam 3: The Adjusting Process

If a company is using accrual basis accounting,when should it record revenue?

Luminous Electrical performed services of $8,000 on January 24 and invoiced the customer.Luminous received the $8,000 on January 31.Provide the journal entry on January 24 when services were performed.(Ignore explanation. )

The accountant for Sparks Electric failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year.Which of the following statements is true?

The accountant for Hobson Electrical Repair failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year.Which of the following statements is true?

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

Which of the following entries would be made as the result of the revenue recognition principle?

Stancil Enterprises prepaid four months of office rent totaling $8,100 on October 1,2017.Assuming Stancil records deferred expenses using the alternative treatment,what would be the adjusting entry recorded on December 31,2017?

The allocation of a plant asset's cost to expense over its useful life is called ________.

Bright Lights Electrical performed services of $8,000 on January 24 and invoiced the customer.Bright Lights received the $8,000 on January 31.Provide the journal entry on January 31 when the cash was received.(Ignore explanation. )

Adjusting entries are needed to correctly measure the ________.

The accounts that are used in a worksheet are taken from and listed in the same order as the ________.

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

What is the effect of the adjusting entry for Depreciation Expense?

Holland Company purchased manufacturing equipment for $10,920.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $80 per month.(Assume that the company uses the straight-line method. )

Which of the following is a contra account?

In the case of deferred revenue,the cash is received first,and the revenue is earned later.

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

The revenue recognition principle guides accountants in ________.

Prepaid Insurance is an asset account that appears on the balance sheet.