1

Which of the following statements about the need for adjustments is not correct?

Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance.

A company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required?

An accrual adjustment

Internal users if financial data include

managment

Which of the following would not be considered an operating activity?

A) Pay employees for work completed B) Purchase supplies on account C) Purchase equipment for cash D) Sell goods to customers Answer: C

Adjusting entries often involves cash

False

Dividends are subtracted from revenues on the income statement.

False

The period of time from buying goods and services to collecting cash from customers is the accounting cycle

False

The purpose of adjusting entries is to transfer net income and dividends to Retained Earnings

False

Which of the following would not be recorded as an accounting transaction?

Hiring a new employee

Expenses are reported in the

Income statment in the time period in which they are incurred

If a company borrows money from a bank and signs an agreement to repay the loan several years from now, in which account would the company report the amount borrowed?

Notes payable (long term)

The Buddy Burger Corporation owes $1.5 million to the Texas Wholesale Meat Company from whom Buddy Burger buys its burger meat. Which account would Buddy Burger use to report the amount owed?

Accounts Payable

Adjusting entries are typically prepared

At the end of the accounting period

A contra account is added to the account it offsets

False

Accounts Payable, Notes Payable, and Salaries and Wages Payable are examples of liabilities.

true

Net income is based on estimates

true

Accounting systems

) analyze, record, summarize, and the activities affecting its financial condition and performance

A company has $26,000 in its Land account, $10,000 in its Inventory account, and $6,000 in its Notes Payable (short-term) account. If its only other account is Common Stock, what is the balance of that account?

30,000

The separate entity assumption means

A companys financial statements reflect only the business activities of that company

During 2016, a company provided services for cash of $21,000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income (loss) for the year is:

A) $13,300 B) ($1,700) C) $22,700 D) $6,300 Answer: A

Which of the following represents a subtotal rather than an account?

A) Advertising Expense B) Service Revenue C) Supplies Expense D) Total Revenues Answer: D

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

Accrual basis accounting provides a better measure of operating performance than cash basis accounting.

When existing assets are used up in the ordinary course of business

An expense is recorded

Net income is the amount

By which revenues exceed expenses

Which of the following is not an asset

Common stock

Assets

Companies can choose to end their fiscal year on any date they feel is most relevant.

which of the following statements about fiscal year is correct

Companies can choose to end their fiscal year on any date they feel is most relevant.

The requirement that transactions be recorded at their exchange price at the transaction date is called the:

Cost principle

An example of an account that could be included in an accrual adjustment for revenue is:

Interest Receivable

At the end of the month, the adjusting journal entry to record the use of supplies would include a debit to:

Supplies Expense and a credit to Supplies.

Which of the following business organizations has only one owner?

Sole proprietorship

. Stockholders' equity is the difference between a company's assets and its liabilities.

True

. Unearned Revenue is reported on the balance sheet as a liability.

True

A deferral adjustment may involve one asset and one expense account.

True

A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company.

True

As a company uses supplies, an adjustment should be made to decrease an asset account and increase an expense account.

True

GAAP does not allow cash basis accounting to be used in external financial reports.

True

If total assets increase, then either total liabilities or total stockholders' equity must also increase.

True

It is possible for a company to be profitable, yet not have enough cash to pay its bills.

True

. Public corporations are businesses

Whose stock is bought and sold on a stock exchange

If an expense had been incurred but will be paid later then

a liability account is created or increased and an expense is recorded

If certain assets are partially used up during the accounting period, then:

an asset account is decreased and an expense is recorded.

Which of the following are the three basic elements of the balance sheet?

assets, liabilities, and stockholders' equity. Answer: D

Adjusting entries affect

both income statement and balance sheet accounts.

Creditors are

people or organizations to whom a business owes money.

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

ensure that revenues and expenses are recognized during the period they are earned and incurred.

Net income is increased when accounts receivable are collected.

false

financial statements are most commonly prepared

monthly quarterly and annually

The characteristic shared by all liabilities is that they:

obligate the company to do something in the future.