Question 1

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

Accepted Answer

A) True 
 B)False

Question 2

In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.

Accepted Answer

A) True 
 B)False

Question 3

Adjusting entries:

Accepted Answer

A)  Affect only income statement accounts.
B)  Affect only balance sheet accounts.
C)  Affect both income statement and balance sheet accounts.
D)  Affect cash accounts.
E)  Affect only equity accounts.

Question 4

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

Accepted Answer

A)  Recognition principle.
B)  Cost principle.
C)  Cash basis of accounting.
D)  Expense recognition (Matching)  principle.
E)  Time period principle.

Question 5

Accrued revenues at the end of one accounting period often result in cash _______________________ in the next period.

Accepted Answer

receipts (...

Question 6

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Accepted Answer

A)  Office Equipment.
B)  Accumulated Depreciation-Office Equipment.
C)  Depreciation Expense-Office Equipment.
D)  Retained Earnings.
E)  Salaries Payable.

Question 7

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Accepted Answer

A)  Increase an expense; increase a liability.
B)  Increase an asset; increase revenue.
C)  Decrease a liability; increase revenue.
D)  Increase an expense; decrease an asset.
E)  Increase an expense; decrease a liability.

Question 8

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Accepted Answer

A)  Debit Cash and credit Legal Fees Earned.
B)  Debit Cash and credit Unearned Legal Fees.
C)  Debit Unearned Legal Fees and credit Legal Fees Earned.
D)  Debit Legal Fees Earned and credit Unearned Legal Fees.
E)  Debit Unearned Legal Fees and credit Accounts Receivable.

Question 9

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n) :

Accepted Answer

A)  Accrued expense.
B)  Contra account.
C)  Accrued revenue.
D)  Intangible asset.
E)  Adjunct account.

Question 10

During the current year ended December 31, clients paid fees in advance for accounting services amounting to $15,000. These fees were recorded in an account called Unearned Accounting Fees. If $3,500 of these fees remains unearned on December 31 of this year, present the December 31 adjusting entry to bring the accounts up to date.

Accepted Answer

The answer of During the current year ended December 31,...

Question 11

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Accepted Answer

A)  Items that require contra accounts.
B)  Items that require adjusting entries.
C)  Asset and equity.
D)  Asset accounts.
E)  Income statement accounts.

Question 12

Failure to record depreciation expense will overstate assets and understate expenses.

Accepted Answer

A) True 
 B)False

Question 13

Kline Company, Inc. accrued wages of $7,350 that were earned by employees unpaid at the end of 2014. Assuming Kline uses reversing entries, which of the following entries is appropriate for reversing the accrued wages at the beginning of 2015?

Accepted Answer

A)  Debit Wages Expense $7,350; credit Cash $7,350.
B)  Debit Wages Expense $7,350; credit Wages Payable $7,350.
C)  Debit Wages Payable $7,350; credit Cash $7,350.
D)  Debit Cash $7,350; credit Wages Expense $7,350.
E)  Debit Wages Payable $7,350; credit Wages Expense $7,350.

Question 14

Another name for a temporary account is a(n) :

Accepted Answer

A)  Real account.
B)  Contra account.
C)  Accrued account.
D)  Balance column account.
E)  Nominal account.

Question 15

How is the current ratio calculated? How is it used to evaluate a company?

Accepted Answer

The current ratio is current assets divi...

Question 16

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

Accepted Answer

A)  all revenue and expense accounts have zero balances.
B)  the retained earnings account is debited for the amount of the net loss for the period.
C)  the income summary account is debited for the amount of net income for the period.
D)  all balance sheet accounts have zero balances.
E)  only permanent accounts appear on the post-closing trial balance.

Question 17

Unearned revenue is reported in the financial statements as:

Accepted Answer

A)  A revenue on the balance sheet.
B)  A liability on the balance sheet.
C)  An unearned revenue on the income statement.
D)  An asset on the balance sheet.
E)  A financing activity on the statement of cash flows.

Question 18

Two main accounting principles used in accrual accounting are matching and full closure.

Accepted Answer

A) True 
 B)False

Question 19

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

Accepted Answer

A)  Assets overstated and equity understated.
B)  Assets and equity both understated.
C)  Assets overstated, net income understated, and equity overstated.
D)  Assets, net income, and equity understated.
E)  Assets, net income, and equity overstated.

Question 20

Which of the following does not require an adjusting entry at year-end?

Accepted Answer

A)  Accrued interest on notes payable.
B)  Supplies used during the period.
C)  Cash invested by stockholder.
D)  Accrued wages.
E)  Expired portion of prepaid insurance.

Exam 3: Adjusting Accounts for Financial Statements

How is the current ratio calculated? How is it used to evaluate a company?

Correct Answer
verified
The current ratio is current assets divi...
View Answer

Kline Company, Inc. accrued wages of $7,350 that were earned by employees unpaid at the end of 2014. Assuming Kline uses reversing entries, which of the following entries is appropriate for reversing the accrued wages at the beginning of 2015?

Correct Answer
verified

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

Correct Answer
verified

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Correct Answer
verified

In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.

Correct Answer
verified

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Correct Answer
verified

Two main accounting principles used in accrual accounting are matching and full closure.

Correct Answer
verified

Adjusting entries:

Correct Answer
verified

Accrued revenues at the end of one accounting period often result in cash _______________________ in the next period.

Correct Answer
verified
receipts (...
View Answer

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

Correct Answer
verified

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

Correct Answer
verified

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n) :

Correct Answer
verified

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Correct Answer
verified

Correct Answer
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Which of the following does not require an adjusting entry at year-end?

Correct Answer
verified

Unearned revenue is reported in the financial statements as:

Correct Answer
verified

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Correct Answer
verified

Another name for a temporary account is a(n) :

Correct Answer
verified

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

Correct Answer
verified

Failure to record depreciation expense will overstate assets and understate expenses.

Correct Answer
verified

Exam 3: Adjusting Accounts for Financial Statements

How is the current ratio calculated? How is it used to evaluate a company?

Correct AnswerverifiedThe current ratio is current assets divi...View AnswerShow Answer

Kline Company, Inc. accrued wages of $7,350 that were earned by employees unpaid at the end of 2014. Assuming Kline uses reversing entries, which of the following entries is appropriate for reversing the accrued wages at the beginning of 2015?

Correct AnswerverifiedShow Answer

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

Correct AnswerverifiedShow Answer

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Correct AnswerverifiedShow Answer

In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.

Correct AnswerverifiedShow Answer

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Correct AnswerverifiedShow Answer

Two main accounting principles used in accrual accounting are matching and full closure.

Correct AnswerverifiedShow Answer

Adjusting entries:

Correct AnswerverifiedShow Answer

Accrued revenues at the end of one accounting period often result in cash _______________________ in the next period.

Correct Answerverifiedreceipts (...View AnswerShow Answer

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

Correct AnswerverifiedShow Answer

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

Correct AnswerverifiedShow Answer

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n) :

Correct AnswerverifiedShow Answer

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following does not require an adjusting entry at year-end?

Correct AnswerverifiedShow Answer

Unearned revenue is reported in the financial statements as:

Correct AnswerverifiedShow Answer

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Correct AnswerverifiedShow Answer

Another name for a temporary account is a(n) :

Correct AnswerverifiedShow Answer

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

Correct AnswerverifiedShow Answer

Failure to record depreciation expense will overstate assets and understate expenses.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The current ratio is current assets divi...
View Answer

Correct Answer
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receipts (...
View Answer

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