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Exam 3: The Accounting Information System

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Question 31

Multiple Choice

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Adjustments are often prepared

A) after the balance sheet date, but dated as of the balance sheet date.
B) after the balance sheet date, and dated after the balance sheet date.
C) before the balance sheet date, but dated as of the balance sheet date.
D) before the balance sheet date, and dated after the balance sheet date.

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Question 32

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External events do not include

A) interaction between an entity and its environment.
B) a change in the price of a good or service that an entity buys or sells, a flood or earthquake.
C) improvement in technology by a competitor.
D) using buildings and machinery in operations.

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Question 33

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A prepaid expense can best be described as an amount

An accrued expense can best be described as an amount

Allen Corp.'s liability account balances at June 30, 2007 included a 10% note payable in the amount of $2,400,000.The note is dated October 1, 2005 and is payable in three equal annual payments of $800,000 plus interest.The first interest and principal payment was made on October 1, 2006.In Allen's June 30, 2007 balance sheet, what amount should be reported as accrued interest payable for this note?

An unearned revenue can best be described as an amount

Pappy Corporation received cash of $13,500 on September 1, 2007 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent.The December 31, 2007 adjusting entry is

Which of the following must be considered in estimating depreciation on an asset for an accounting period?

Maso Company recorded journal entries for the issuance of common stock for $40,000, the payment of $13,000 on accounts payable, and the payment of salaries expense of $21,000.What net effect do these entries have on owners' equity?

Mune Company recorded journal entries for the payment of $50,000 of dividends, the $32,000 increase in accounts receivable for services rendered, and the purchase of equipment for $21,000.What net effect do these entries have on owners' equity?

Which of the following is a real (permanent) account?

Which of the following would not be a correct form for an adjusting entry?

Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries?

The first step in the accounting cycle is the journalizing of transactions and selected other events.

In November and December 2007, Lane Co., a newly organized magazine publisher, received $90,000 for 1,000 three-year subscriptions at $30 per year, starting with the January 2008 issue.Lane included the entire $90,000 in its 2007 income tax return.What amount should Lane report in its 2007 income statement for subscriptions revenue?

The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.