Question 1

Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2022.Interest expense for the year ended December 31, 2022 is

Accepted Answer

A)  $21,000.
B)  $24,000.
C)  $27,000.
D)  $36,000.

Question 2

Accepted Answer

Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2022 for $60,000.Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2022 is

Correct Answer
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Question 3

The time period assumption is often referred to as the expense recognition principle.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements concerning accrual-basis accounting is incorrect?

Accepted Answer

A)  Accrual-basis accounting follows the revenue recognition principle.
B)  Accrual-basis accounting is the method required by generally accepted accounting principles.
C)  Accrual-basis accounting recognizes expenses when they are paid.
D)  Accrual-basis accounting follows the expense recognition principle.

Question 5

The adjusted trial balance of Old 97 Automotive Service Company on June 30, 2022 includes the following accounts: Supplies, $300; Accumulated Depreciation, $9,500; Salaries Payable, $1,550, Notes Payable $6,750; Service Revenue, $22,100; Salaries and Wages Expense, $8,750; Depreciation Expense, $3,250; Supplies Expense, $1,000; Rent Expense, $400; Utilities Expense, $350; and Interest Expense $250.Prepare an income statement for the month of June.

Accepted Answer

The answer of The adjusted trial balance of Old 97...

Question 6

If the adjusting entry for depreciation expense is not made,

Accepted Answer

A)  assets will be understated.
B)  stockholders' equity will be understated.
C)  net income will be understated.
D)  expenses will be understated.

Question 7

The time period assumption is also referred to as the

Accepted Answer

A)  calendar assumption.
B)  cyclicity assumption.
C)  periodicity assumption.
D)  fiscal assumption.

Question 8

The following is selected information from Motley Corporation for the fiscal year ending October 31, 2022.  Based on the accrual basis of accounting, what is Motley Corporation's net income for the year ending October 31, 2022?

Accepted Answer

A)  $72,000
B)  $104,000
C)  $139,000
D)  $155,000

Question 9

The revenue recognition principle dictates that revenue should be recognized in the accounting period

Accepted Answer

A)  before it is earned.
B)  after it is earned.
C)  in which the performance obligation is satisfied.
D)  in which it is collected.

Question 10

Which of the following statements related to the adjusted trial balance is incorrect?

Accepted Answer

A)  It shows the balances of all accounts at the end of the accounting period.
B)  It is prepared before adjusting entries have been made.
C)  It proves the equality of the total debit balances and the total credit balances in the ledger.
D)  Financial statements can be prepared directly from the adjusted trial balance.

Question 11

Which of the following is a constraint in accounting?

Accepted Answer

A)  Comparability.
B)  Cost.
C)  Consistency.
D)  Relevance.

Question 12

From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

Accepted Answer

A)  accrual of expense.
B)  accrual of revenue.
C)  accrual of unearned revenue.
D)  prepayment for services.

Question 13

A small company may be able to justify using a cash-basis of accounting if they have

Accepted Answer

A)  sales under $1,000,000.
B)  no accountants on staff.
C)  few receivables and payables.
D)  all sales and purchases on account.

Question 14

Accrued expenses are

Accepted Answer

A)  paid and recorded in an asset account before they are used or consumed.
B)  paid and recorded in an asset account after they are used or consumed.
C)  incurred but not yet paid or recorded.
D)  incurred and already paid or recorded.

Question 15

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales.Which of the following qualities of useful information has Jackson most likely violated?

Accepted Answer

A)  Comparability
B)  Relevance
C)  Faithful representation
D)  Consistency

Question 16

Crue Company had the following transactions during 2022: 
Sales of $4,500 on account to 1.
Collected $2,500 for services to 1.
Paid $1,625 cash in salaries

Purchased airline tickets for $250 in December for a trip to take place in 2023
What is Crue's net income using cash-basis accounting?

Accepted Answer

A)  $625
B)  $875
C)  $5,125
D)  $5,375

Question 17

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 18

In its first period of operations, Lake of Fire Company purchased supplies costing $7,000 and debited Supplies for the full amount.At the end of the accounting period, a physical count of supplies revealed $1,900 still on hand.The appropriate adjusting journal entry to be made at the end of the period would be

Accepted Answer

A)  Debit Supplies Expense, $1,900; Credit Supplies, $1,900.
B)  Debit Supplies, $5,100; Credit Supplies Expense, $5,100.
C)  Debit Supplies Expense, $5,100; Credit Supplies, $5,100.
D)  Debit Supplies, $1,900; Credit Supplies Expense, $1,900.

Question 19

Live Wire Hot Rod Shop follows the revenue recognition principle.Live Wire services a car on July 31.The customer picks up the vehicle on August 1 and mails the payment to Live Wire on August 5.Live Wire receives the check in the mail on August 6.When should Live Wire show that the revenue was recognized?

Accepted Answer

A)  July 31
B)  August 1
C)  August 5
D)  August 6

Question 20

Characteristics associated with relevant accounting information are

Accepted Answer

A)  comparability and timeliness.
B)  predictive value and confirmatory value.
C)  neutral and verifiable.
D)  consistency and understandability.

Exam 3: Adjusting the Accounts

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales.Which of the following qualities of useful information has Jackson most likely violated?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following is selected information from Motley Corporation for the fiscal year ending October 31, 2022. Based on the accrual basis of accounting, what is Motley Corporation's net income for the year ending October 31, 2022?

Correct AnswerverifiedShow Answer

Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2022.Interest expense for the year ended December 31, 2022 is

Correct AnswerverifiedShow Answer

Characteristics associated with relevant accounting information are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the adjusting entry for depreciation expense is not made,

Correct AnswerverifiedShow Answer

The revenue recognition principle dictates that revenue should be recognized in the accounting period

Correct AnswerverifiedShow Answer

The time period assumption is also referred to as the

Correct AnswerverifiedShow Answer

A small company may be able to justify using a cash-basis of accounting if they have

Correct AnswerverifiedShow Answer

Which of the following statements concerning accrual-basis accounting is incorrect?

Correct AnswerverifiedShow Answer

Which of the following statements related to the adjusted trial balance is incorrect?

Correct AnswerverifiedShow Answer

A liability-revenue relationship exists with

Correct AnswerverifiedShow Answer

From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

Correct AnswerverifiedShow Answer

Which of the following is a constraint in accounting?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The time period assumption is often referred to as the expense recognition principle.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accrued expenses are

Correct AnswerverifiedShow Answer

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