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Exam 3: Accrual Accounting Income

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Question 21

Multiple Choice

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Following the expense recognition principle, to recognize expenses along with the related revenues, means to:

A) add expenses and revenues together to compute net income or net loss.
B) recognize the expense of a period against the cash revenues during the period.
C) abandon the matching principle.
D) subtract expenses from the related revenues to compute net income or net loss.

E) B) and C)
F) None of the above

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Question 22

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All of the following accounts are closed EXCEPT for:

A) Cash.
B) Service Revenue.
C) Dividends.
D) Utilities Expense.

E) All of the above
F) A) and B)

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Question 23

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The amount of prepaid insurance that is used up during a period of time is recorded as Insurance Expense.

Prepaid Rent and Unearned Service Revenue are examples of accounts that do not need to be adjusted at the end of the accounting period.

Sendik's Food Store has the following Adjusted Trial Balance as of March 31, 2017. Determine the current ratio. Round your answer to two decimal places.

Expenses have a future benefit to the company.

Prepaid expenses will become ________ when their future benefits expire.

For the year ended, December 31, 2017, the Aldrich Chemical Company omitted the following adjusting journal entries in error. For each entry, indicate if net income will be overstated or understated by placing an "X" in the appropriate box.

Depreciation allocates the cost of land to expense over the useful life of the land.

Every adjusting entry must affect both the income statement and the balance sheet.

If a Trial Balance Worksheet is prepared, which columns are used to prepare the financial statements?

In an adjusting entry, the debit to the Unearned Revenue account represents the:

Christine's Cleaning Services, Inc. has the following adjusted trial balance as of March 31, 2017. Prepare a classified balance sheet as of that date.

The adjustments columns of the Trial Balance Worksheet summarize the:

In lieu of using the Trial Balance Worksheet to prepare the financial statements, an accountant can use the:

On October 1 of the current year, a company received $6600 for services to be performed evenly over the next six months. If no adjusting entry was made on December 31 of the current year:

On August 1, 2016, Brian Quinn received $9600 for legal services to be performed evenly throughout the next twelve months, beginning August 1, 2016. An adjusted trial balance prepared on December 31, 2016 will show a credit balance in Unearned Revenue in the amount of:

A classified balance sheet separates current assets from long-term assets and current liabilities from long-term liabilities.

When analyzing a company's debt ratio:

Which of the following is a CORRECT statement about the two bases of accounting?