Question 1

Which of the following transactions is most likely not to result in an adjusting entry at the end of the period?

Accepted Answer

A) Performance of a service for which payment was not received in advance. 
B) Purchase of inventory for sale in the subsequent period. 
C) Purchase of office equipment. 
D) Purchase of a two-year insurance policy.

Question 2

Net income results when expenses exceed revenues.

Accepted Answer

A) True 
 B)False

Question 3

Revenue should be recognized,even when collectibility is not reasonably assured.

Accepted Answer

A) True 
 B)False

Question 4

The going concern assumption helps solve the

Accepted Answer

A) matching issue. 
B) accounting period issue. 
C) revenue recognition issue. 
D) continuity issue.

Question 5

The adjusting entry for the expiration of prepaid advertising,originally recorded as an asset,

Accepted Answer

A) Advertising Expense - Debit; Prepaid Advertising - Credit 
B) Prepaid Advertising - Debit; Cash - Credit 
C) Advertising Expense - Debit; Cash - Credit 
D) Prepaid Advertising - Debit; Advertising Expense - Credit

Question 6

Which of the following accounts could increase as a result of adjusting entries?

Accepted Answer

A) Prepaid Insurance. 
B) Accounts Receivable. 
C) Unearned Fees. 
D) Office Equipment.

Question 7

Which of the following accounts would be found on the debit side of the adjusted trial balance?

Accepted Answer

A) Accumulated Depreciation-Equipment 
B) Owner's Capital 
C) Owner's Withdrawals 
D) Wages Payable

Question 8

All decreases in owner's equity are a result of expenses.

Accepted Answer

A) True 
 B)False

Question 9

Net income is misleading when revenue is overstated or expenses are understated by significant amounts.

Accepted Answer

A) True 
 B)False

Question 10

Accrual accounting is an application of the matching rule.

Accepted Answer

A) True 
 B)False

Question 11

The principal difference between depreciation expense and most other types of expenses is that

Accepted Answer

A) depreciation expense can be avoided if the asset is worth at least what the company paid for it. 
B) depreciation expense requires an annual outlay of cash. 
C) the total amount of depreciation expense for the asset is reported on the balance sheet. 
D) depreciation expense is subject to more precise measurement than most other expenses.

Question 12

A company recorded office supplies in an asset account when the supplies were purchased.Failure to take inventory and make an adjusting entry will result in an

Accepted Answer

A) understatement of liabilities. 
B) understatement of owner's equity. 
C) understatement of assets. 
D) overstatement of owner's equity.

Question 13

The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end. 2.Depreciation on a building being depreciated over 5 years is estimated to be $10,000 per year.The building was purchased at the beginning of the prior year for $50,000.
3)A one-year insurance policy was purchased for $4,800.Five months have passed since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed.
Which of the following statements is correct regarding the building?

Accepted Answer

A) The adjusting entry to record depreciation will include a credit to Accumulated Depreciation - Building $10,000. 
B) The book value of the building at the end of the current year is $30,000. 
C) The Accumulated Depreciation - Building account will have a balance of $20,000 at the end of the current year. 
D) All of these choices.

Question 14

Unearned Revenue was $600 at the end of February and $750 at the end of March.Service Revenue was $3,600 for the month of March.How much cash was received from revenue during March?

Accepted Answer

A) $4,950 
B) $3,450 
C) $2,250 
D) $3,750

Question 15

The Supplies account had a $720 debit balance at the end of the accounting period before adjustment for supplies used,and an inventory of $160 of unused supplies was on hand.Which of the following is the required adjusting entry?

Accepted Answer

A) Debit Supplies Expense $160 and credit Supplies $160. 
B) Debit Supplies Expense $560 and credit Supplies $560. 
C) Debit Supplies $160 and credit Supplies Expense $160. 
D) Debit Supplies $560 and credit Supplies Expense $560.

Question 16

Which of the following is not one of the conditions for recognition of an expense?

Accepted Answer

A) A price has been established or can be determined. 
B) There is an agreement to purchase goods or services. 
C) The goods will be delivered or the services will be provided within the accounting cycle. 
D) The goods or services are used to produce revenue.

Question 17

The primary purpose of an expense is to generate revenue.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following conditions is not a requirement by the SEC for the recognition of revenue?

Accepted Answer

A) Delivery has occurred or services have been rendered. 
B) Collectibility is reasonably certain. 
C) A written agreement has been signed. 
D) The seller's price to the buyer is fixed or determinable.

Question 19

Which of the following transactions will result in the recognition of an expense?

Accepted Answer

A) Interest accrued on a bank loan. 
B) A cash withdrawal by the owner. 
C) Payment on accounts payable. 
D) All of these choices.

Question 20

For each of the following oversights,state whether total assets will be understated,overstated,or not affected.
______ a.Failure to record revenue earned but not yet received
______ b.Failure to record expired rent
______ c.Failure to record accrued interest in the bank
______ d.Failure to record depreciation
______ e.Failure to record accrued wages
______ f.Failure to convert unearned revenue to earned revenue

Accepted Answer

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

Exam 3: Adjusting the Accounts

Which of the following transactions is most likely not to result in an adjusting entry at the end of the period?

Net income results when expenses exceed revenues.

Revenue should be recognized,even when collectibility is not reasonably assured.

The going concern assumption helps solve the

The adjusting entry for the expiration of prepaid advertising,originally recorded as an asset,

Which of the following accounts could increase as a result of adjusting entries?

Which of the following accounts would be found on the debit side of the adjusted trial balance?

All decreases in owner's equity are a result of expenses.

Net income is misleading when revenue is overstated or expenses are understated by significant amounts.

Accrual accounting is an application of the matching rule.

The principal difference between depreciation expense and most other types of expenses is that

A company recorded office supplies in an asset account when the supplies were purchased.Failure to take inventory and make an adjusting entry will result in an

Unearned Revenue was $600 at the end of February and $750 at the end of March.Service Revenue was $3,600 for the month of March.How much cash was received from revenue during March?

The Supplies account had a $720 debit balance at the end of the accounting period before adjustment for supplies used,and an inventory of $160 of unused supplies was on hand.Which of the following is the required adjusting entry?

Which of the following is not one of the conditions for recognition of an expense?

The primary purpose of an expense is to generate revenue.

Which of the following conditions is not a requirement by the SEC for the recognition of revenue?

Which of the following transactions will result in the recognition of an expense?