Question 1

The Sally Company has the following data available at December 31,2019:  At December 31,2019,what are the total current liabilities?

Accepted Answer

A) $7,300 
B) $11,600 
C) $13,800 
D) $17,100

Question 2

On November 1,2018,a company using accrual accounting,pays $900,000 for a television advertising campaign.Commercials will run evenly over six months beginning on November 1,2018.How much Advertising Expense will be reported on an income statement prepared for the year ended December 31,2018?

Accepted Answer

A) $300,000 
B) $450,000 
C) $600,000 
D) $900,000

Question 3

A current ratio of less than 1.0 means that current assets exceed current liabilities.

Accepted Answer

A) True 
 B)False

Question 4

A company purchased medical equipment for $130,000 on January 1,2018.The company determined that the yearly depreciation expense is $13,000.What will be the ending balance in the Accumulated Depreciation-Medical Equipment at December 31,2020?

Accepted Answer

A) $13,000 
B) $39,000 
C) $78,000 
D) $130,000

Question 5

The following accounts and balances are taken from Brown Company's adjusted trial balance:
  After the closing entries are posted,what is the balance of Retained Earnings? Show your computations.

Accepted Answer

The answer of The following accounts and balances are taken...

Question 6

The statement of retained earnings reports the amount of dividends declared over a period of time.What is the source of the amount of dividends declared?

Accepted Answer

A) Balance Sheet 
B) Income Statement 
C) Adjusted Trial Balance 
D) Cash Dividend Statement

Question 7

On December 31,2019,salaries owed to employees total $4,050.These will be paid on January 4,2020.An adjusted trial balance prepared on December 31,2019,includes which of the following?

Accepted Answer

A) Salaries Expense,$4,050 and Salaries Payable,$4,050 
B) Salaries Payable,$4,050 and Unearned Salaries Revenue,$4,050 
C) Unearned Salaries,$4,050 
D) Unearned Salaries,$4,050 and Salaries Payable,$4,050

Question 8

Why are adjusting entries prepared?

Accepted Answer

A) Because some accounts are not up to date. 
B) Because some day to day transactions have not been recorded. 
C) Because the unadjusted trial balance is not quite ready for preparing the financial statements. 
D) A and C

Question 9

Under cash-basis accounting,income statements and balance sheets may be misstated.

Accepted Answer

A) True 
 B)False

Question 10

An accountant failed to record the adjusting entry for accrued revenues.How does this error affect the balance sheet?

Accepted Answer

A) The assets at the end of the period will be overstated. 
B) The assets at the end of the period will be understated. 
C) The liabilities at the end of the period will be overstated. 
D) The liabilities at the end of the period will be understated.

Question 11

State whether each of the following transactions improves,hurts,or has no effect on the current ratio and debt ratio.

Accepted Answer

The answer of State whether each of the following transactions...

Question 12

A company has current assets of $77,000,long-term assets of $150,000,current liabilities of $44,000,and long-term liabilities of $35,000.The current ratio is:

Accepted Answer

A) 0.81. 
B) 3.46. 
C) 1.75. 
D) 2.20.

Question 13

On December 1,2019,Carrie's Day Care receives $4,200 in advance for an agreement to care for Susan's children for the months of December,January,and February.Carrie's Day Care will make an adjusting entry on December 31,2019 to:

Accepted Answer

A) credit Revenue for $4,200. 
B) debit Unearned Revenue for $1,400. 
C) credit Revenue for $2,800. 
D) credit Prepaid Revenue for $2,800.

Question 14

On September 1,Barnes Enterprises prepaid $18,000 for six months' rent.The rental period begins on September 1.Barnes adjusts the accounts only at December 31,the end of this fiscal year.
Prepare the journal entry for September 1 and the adjusting entry for December 31.Omit explanations.

Accepted Answer

The answer of On September 1,Barnes Enterprises prepaid $18,000 for...

Question 15

The ________ basis of accounting records revenues ONLY when cash is received.

Accepted Answer

A) deferral 
B) cash 
C) accrual 
D) hybrid

Question 16

Inventory is more liquid than accounts receivable because the company must first sell the goods.

Accepted Answer

A) True 
 B)False

Question 17

The revenue principle deals with the following:

Accepted Answer

A) when to record revenue and where to record this revenue. 
B) where to record revenue and the amount of revenue to record. 
C) when to record revenue and the amount of revenue to record. 
D) when to record revenue and when to record related expenses.

Question 18

Liquidity measures how quickly an item can be converted into cash.

Accepted Answer

A) True 
 B)False

Question 19

An accrual adjustment is made for payment of an item in advance of use.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following combinations of ratios is preferable?

Accepted Answer

A) a low current ratio and a high debt ratio 
B) a high current ratio and a low debt ratio 
C) a low current ratio and a low debt ratio 
D) a high current ratio and a high debt ratio

Exam 3: Accrual Accounting Income

The Sally Company has the following data available at December 31,2019: At December 31,2019,what are the total current liabilities?

On November 1,2018,a company using accrual accounting,pays $900,000 for a television advertising campaign.Commercials will run evenly over six months beginning on November 1,2018.How much Advertising Expense will be reported on an income statement prepared for the year ended December 31,2018?

A current ratio of less than 1.0 means that current assets exceed current liabilities.

A company purchased medical equipment for $130,000 on January 1,2018.The company determined that the yearly depreciation expense is $13,000.What will be the ending balance in the Accumulated Depreciation-Medical Equipment at December 31,2020?

The following accounts and balances are taken from Brown Company's adjusted trial balance: After the closing entries are posted,what is the balance of Retained Earnings? Show your computations.

The statement of retained earnings reports the amount of dividends declared over a period of time.What is the source of the amount of dividends declared?

On December 31,2019,salaries owed to employees total $4,050.These will be paid on January 4,2020.An adjusted trial balance prepared on December 31,2019,includes which of the following?

Why are adjusting entries prepared?

Under cash-basis accounting,income statements and balance sheets may be misstated.

An accountant failed to record the adjusting entry for accrued revenues.How does this error affect the balance sheet?

State whether each of the following transactions improves,hurts,or has no effect on the current ratio and debt ratio.

A company has current assets of $77,000,long-term assets of $150,000,current liabilities of $44,000,and long-term liabilities of $35,000.The current ratio is:

On December 1,2019,Carrie's Day Care receives $4,200 in advance for an agreement to care for Susan's children for the months of December,January,and February.Carrie's Day Care will make an adjusting entry on December 31,2019 to:

On September 1,Barnes Enterprises prepaid $18,000 for six months' rent.The rental period begins on September 1.Barnes adjusts the accounts only at December 31,the end of this fiscal year. Prepare the journal entry for September 1 and the adjusting entry for December 31.Omit explanations.

The ________ basis of accounting records revenues ONLY when cash is received.

Inventory is more liquid than accounts receivable because the company must first sell the goods.

The revenue principle deals with the following:

Liquidity measures how quickly an item can be converted into cash.

An accrual adjustment is made for payment of an item in advance of use.

Which of the following combinations of ratios is preferable?