Question 1

Adjusting entries:

Accepted Answer

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

Question 2

The adjusted trial balance contains information pertaining to:

Accepted Answer

A)  All general ledger accounts.
B)  Balance sheet accounts only.
C)  Revenue accounts only.
D)  Income statement accounts only.
E)  Asset accounts only.F) A) and B)
G) A) and D)

Question 3

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Accepted Answer

A)  Cash basis accounting.
B)  Revenue recognition accounting.
C)  Current basis accounting.
D)  Accrual basis accounting.
E)  Operating cycle accounting.F) B) and E)
G) C) and D)

Question 4

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

Accepted Answer

A)  Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
B)  Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
C)  Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
D)  Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.
E)  Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.F) A) and B)
G) A) and D)

Question 5

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

Accepted Answer

A)  Revenue recognition and going-concern.
B)  Revenue recognition and monetary unit.
C)  Expense recognition (matching) and cost.
D)  Revenue recognition and Expense recognition (matching) .
E)  Expense recognition (matching) and business entity.F) C) and E)
G) All of the above

Question 6

Discuss the importance of periodic reporting and the time period assumption.

Accepted Answer

For information to be valuable to decisi...

Question 7

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Accepted Answer

A)  Debit Office Supplies $254 and credit Office Supplies Expense $254.
B)  Debit Office Supplies $105 and credit Supplies Expense $254.
C)  Debit Office Supplies $105 and credit Office Supplies Expense $105.
D)  Debit Office Supplies Expense $254 and credit Office Supplies $254.
E)  Debit Office Supplies Expense $105 and credit Office Supplies $105.F) A) and D)
G) A) and C)

Question 8

Discuss how accrual accounting enhances the usefulness of financial statements.

Accepted Answer

The accrual accounting method recognizes...

Question 9

Profit margin reflects the percent of profit in each dollar of revenue.

Accepted Answer

A) True 
 B)False

Question 10

Earned but uncollected revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Accepted Answer

A) True 
 B)False

Question 11

The expense recognition (matching)principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Accepted Answer

A) True 
 B)False

Question 12

Complete the following by filling in the blanks:
1()The Prepaid Insurance account had a $545 debit balance at the beginning of the current year;
$650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $________ of insurance expense.
2()The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset, office supplies, at $275; consequently, if all supplies were accounted for,
$ of office supplies must have been purchased during the year.

Accepted Answer

(1)$775 = $545 + $65...

Question 13

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

Accepted Answer

A)  It will understate assets by $9,000.
B)  It will overstate assets and liabilities by $9,000.
C)  It will understate net income by $9,000.
D)  It will have no effect on income.
E)  It will understate expenses and overstate net income by $9,000.F) A) and E)
G) D) and E)

Question 14

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

Accepted Answer

A) True 
 B)False

Question 15

A company purchased new furniture at a cost of $14,000 on September 30. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Accepted Answer

A)  $12,500.00
B)  $13,625.00
C)  $13,562.50
D)  $12,250.00
E)  $13,500.00F) A) and B)
G) C) and D)

Question 16

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Accepted Answer

A)  debit Salary Expense, $9,000; credit Cash, $9,000
B)  debit Salary Expense, $9,000; credit Fees Earned, $9,000
C)  debit Salary Expense, $9,000; credit Salaries Payable, $9,000
D)  debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
E)  debit Salaries Payable, $9,000; credit Salary Expense $9,000F) A) and B)
G) None of the above

Question 17

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Accepted Answer

A) True 
 B)False

Question 18

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

Accepted Answer

A) True 
 B)False

Question 19

Interim financial statements refer to financial reports:

Accepted Answer

A)  That show the assets above the liabilities and the liabilities above the equity.
B)  That cover less than one year, usually spanning one, three, or six-month periods.
C)  That are prepared before any adjustments have been recorded.
D)  Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.
E)  Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.F) A) and B)
G) B) and E)

Question 20

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Accepted Answer

Adjusting entries bring assets, liabilit...

Exam 3: Adjusting Accounts and Preparing Financial Statements

Discuss how accrual accounting enhances the usefulness of financial statements.

Correct Answer
verified
The accrual accounting method recognizes...
View Answer

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Correct Answer
verified

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Correct Answer
verified

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

Correct Answer
verified

Earned but uncollected revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Correct Answer
verified

Discuss the importance of periodic reporting and the time period assumption.

Correct Answer
verified
For information to be valuable to decisi...
View Answer

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

Correct Answer
verified

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

Correct Answer
verified

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Correct Answer
verified
Adjusting entries bring assets, liabilit...
View Answer

Profit margin reflects the percent of profit in each dollar of revenue.

Correct Answer
verified

Adjusting entries:

Correct Answer
verified

Correct Answer
verified
(1)$775 = $545 + $65...
View Answer

The adjusted trial balance contains information pertaining to:

Correct Answer
verified

The expense recognition (matching)principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Correct Answer
verified

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Correct Answer
verified

A company purchased new furniture at a cost of $14,000 on September 30. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Correct Answer
verified

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

Correct Answer
verified

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

Correct Answer
verified

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Correct Answer
verified

Interim financial statements refer to financial reports:

Correct Answer
verified

Exam 3: Adjusting Accounts and Preparing Financial Statements

Discuss how accrual accounting enhances the usefulness of financial statements.

Correct AnswerverifiedThe accrual accounting method recognizes...View AnswerShow Answer

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Correct AnswerverifiedShow Answer

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Correct AnswerverifiedShow Answer

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

Correct AnswerverifiedShow Answer

Earned but uncollected revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Correct AnswerverifiedShow Answer

Discuss the importance of periodic reporting and the time period assumption.

Correct AnswerverifiedFor information to be valuable to decisi...View AnswerShow Answer

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

Correct AnswerverifiedShow Answer

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Correct AnswerverifiedAdjusting entries bring assets, liabilit...View AnswerShow Answer

Profit margin reflects the percent of profit in each dollar of revenue.

Correct AnswerverifiedShow Answer

Adjusting entries:

Correct AnswerverifiedShow Answer

Correct Answerverified(1)$775 = $545 + $65...View AnswerShow Answer

The adjusted trial balance contains information pertaining to:

Correct AnswerverifiedShow Answer

The expense recognition (matching)principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Correct AnswerverifiedShow Answer

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Correct AnswerverifiedShow Answer

A company purchased new furniture at a cost of $14,000 on September 30. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Correct AnswerverifiedShow Answer

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

Correct AnswerverifiedShow Answer

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

Correct AnswerverifiedShow Answer

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Correct AnswerverifiedShow Answer

Interim financial statements refer to financial reports:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The accrual accounting method recognizes...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
For information to be valuable to decisi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Adjusting entries bring assets, liabilit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(1)$775 = $545 + $65...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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