Question 1

Lars Richards, CPA, has billed his clients for services performed. He subsequently receives payments from his clients. What entry will he make upon receipt of the payments?

Accepted Answer

A)   Debit Unearned Revenue and credit Service Revenue.
B)   Debit Cash and credit Accounts Receivable.
C)   Debit Accounts Receivable and credit Service Revenue.
D)   Debit Cash and credit Service Revenue.

Question 2

Accumulated depreciation is shown in the liability section of the balance sheet because its normal balance is a credit.

Accepted Answer

A) True 
 B)False

Question 3

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Accepted Answer

A)   Failure to make an adjustment does not affect the financial statements.
B)   Expenses will be overstated and profit and owner's equity will be understated.
C)   Assets will be overstated and profit and owner's equity will be understated.
D)   Assets will be overstated and profit and owner's equity will be overstated.

Question 4

In general, the shorter the time period, the difficulty of making the proper adjustments to accounts

Accepted Answer

A)   is increased.
B)   is decreased.
C)   is unaffected.
D)   depends on the number of transactions in the period.

Question 5

Financial statements should be prepared directly from the information in the unadjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 6

Shockey Electric Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Accepted Answer

A)   debit Office Supplies Expense, $1,600; credit Office Supplies, $1,600.
B)   debit Office Supplies, $2,400; credit Office Supplies Expense, $2,400.
C)   debit Office Supplies Expense, $2,400; credit Office Supplies, $2,400.
D)   debit Office Supplies, $1,600; credit Office Supplies Expense, $1,600.

Question 7

If an Interest Receivable account is debited in an adjusting entry, then the account credited will be Interest Revenue.

Accepted Answer

A) True 
 B)False

Question 8

The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an

Accepted Answer

A)   understated liability and an overstated owner's capital.
B)   overstated asset and an understated revenue.
C)   understated expense and an overstated revenue.
D)   understated asset and an understated revenue.

Question 9

A liability-revenue relationship exists with

Accepted Answer

A)   prepaid expense adjusting entries.
B)   accrued expense adjusting entries.
C)   unearned revenue adjusting entries.
D)   accrued revenue adjusting entries.

Question 10

In the accrual basis of accounting, expenses are recognized when the services are used or the goods are consumed, not when the cash is paid.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would NOT result in unearned revenue?

Accepted Answer

A)   rent collected in advance from tenants
B)   services performed on account
C)   sale of season tickets to hockey games
D)   sale of two-year magazine subscriptions

Question 12

If the debits equal the credits in the adjusted trial balance, it means that all of the entries have been made.

Accepted Answer

A) True 
 B)False

Question 13

An adjusted trial balance is necessary to prepare financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Shifter Corporation owes its employees $9,000 for the week ended September 30. The company will pay the employees October 5. The adjusting journal entry prepared on September 30 will include a debit to Salaries Expense and a credit to Cash for $9,000.

Accepted Answer

A) True 
 B)False

Question 15

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Accepted Answer

A)   profit to be understated.
B)   an overstatement of assets and an overstatement of liabilities.
C)   an understatement of expenses and an understatement of liabilities.
D)   an overstatement of expenses and an overstatement of liabilities.

Question 16

Under the accrual basis of accounting

Accepted Answer

A)   cash must be disbursed before an expense is recognized.
B)   profit is calculated by matching cash outflows against cash inflows.
C)   events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
D)   the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

Question 17

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 18

Accrued revenues are

Accepted Answer

A)   received and recorded as liabilities before they are earned.
B)   earned and recorded as liabilities before they are received.
C)   earned but not yet received or recorded.
D)   earned and already received and recorded.

Question 19

Accounts often need to be adjusted because

Accepted Answer

A)   there is difficulty in determining which period a transaction should be recorded.
B)   many transactions affect more than one accounting period.
C)   there are always errors made in recording transactions.
D)   management may direct expenses to be recorded in future periods to increase this period's profit.

Question 20

Accumulated Depreciation is

Accepted Answer

A)   an expense account.
B)   an owner's equity account.
C)   a liability account.
D)   a contra asset account.

Exam 3: Adjusting the Accounts

The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an

Correct Answer
verified

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Correct Answer
verified

Accrued revenues are

Correct Answer
verified

Shifter Corporation owes its employees $9,000 for the week ended September 30. The company will pay the employees October 5. The adjusting journal entry prepared on September 30 will include a debit to Salaries Expense and a credit to Cash for $9,000.

Correct Answer
verified

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Correct Answer
verified

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Correct Answer
verified

Lars Richards, CPA, has billed his clients for services performed. He subsequently receives payments from his clients. What entry will he make upon receipt of the payments?

Correct Answer
verified

Accumulated depreciation is shown in the liability section of the balance sheet because its normal balance is a credit.

Correct Answer
verified

Financial statements should be prepared directly from the information in the unadjusted trial balance.

Correct Answer
verified

In the accrual basis of accounting, expenses are recognized when the services are used or the goods are consumed, not when the cash is paid.

Correct Answer
verified

Accumulated Depreciation is

Correct Answer
verified

An adjusted trial balance is necessary to prepare financial statements.

Correct Answer
verified

A liability-revenue relationship exists with

Correct Answer
verified

In general, the shorter the time period, the difficulty of making the proper adjustments to accounts

Correct Answer
verified

If an Interest Receivable account is debited in an adjusting entry, then the account credited will be Interest Revenue.

Correct Answer
verified

Which of the following would NOT result in unearned revenue?

Correct Answer
verified

Correct Answer
verified

If the debits equal the credits in the adjusted trial balance, it means that all of the entries have been made.

Correct Answer
verified

Accounts often need to be adjusted because

Correct Answer
verified

Under the accrual basis of accounting

Correct Answer
verified

Exam 3: Adjusting the Accounts

The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an

Correct AnswerverifiedShow Answer

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause

Correct AnswerverifiedShow Answer

Accrued revenues are

Correct AnswerverifiedShow Answer

Shifter Corporation owes its employees $9,000 for the week ended September 30. The company will pay the employees October 5. The adjusting journal entry prepared on September 30 will include a debit to Salaries Expense and a credit to Cash for $9,000.

Correct AnswerverifiedShow Answer

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Correct AnswerverifiedShow Answer

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Correct AnswerverifiedShow Answer

Lars Richards, CPA, has billed his clients for services performed. He subsequently receives payments from his clients. What entry will he make upon receipt of the payments?

Correct AnswerverifiedShow Answer

Accumulated depreciation is shown in the liability section of the balance sheet because its normal balance is a credit.

Correct AnswerverifiedShow Answer

Financial statements should be prepared directly from the information in the unadjusted trial balance.

Correct AnswerverifiedShow Answer

In the accrual basis of accounting, expenses are recognized when the services are used or the goods are consumed, not when the cash is paid.

Correct AnswerverifiedShow Answer

Accumulated Depreciation is

Correct AnswerverifiedShow Answer

An adjusted trial balance is necessary to prepare financial statements.

Correct AnswerverifiedShow Answer

A liability-revenue relationship exists with

Correct AnswerverifiedShow Answer

In general, the shorter the time period, the difficulty of making the proper adjustments to accounts

Correct AnswerverifiedShow Answer

If an Interest Receivable account is debited in an adjusting entry, then the account credited will be Interest Revenue.

Correct AnswerverifiedShow Answer

Which of the following would NOT result in unearned revenue?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the debits equal the credits in the adjusted trial balance, it means that all of the entries have been made.

Correct AnswerverifiedShow Answer

Accounts often need to be adjusted because

Correct AnswerverifiedShow Answer

Under the accrual basis of accounting

Correct AnswerverifiedShow Answer

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