Intermediate Accounting Chapters 1-3 exam
b. not necessarily violating either the income tax laws or generally accepted accounting principles
A company that uses accounting methods in preparing its tax returns that differ from the accounting methods used to prepare its financial statements is
b. an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period
A prepaid expense is
d. have been earned, but not yet collected or recorded.
Accrued revenues:
d. for all of these reasons. (To match the consumption of prepaid assets against current revenues, To record accrued expenses, To record estimated items, such as depreciation)
Adjusting entries are made
b. at the end of the accounting period
Adjusting journal entries are made
b. timeliness
All of the following items are classified as accounting assumptions and conventions except for
a. incurred but neither paid nor recorded
An accrued expense is an expense
c. an income statement account and a balance sheet account.
An adjusting entry always affects
b. associating cash flows
Expenses are recognized and matched against revenues on the basis of three principles. Which of the following is notone of these principles?
b. Insurance Expense 2,355 Prepaid Insurance 2,355 (divide 6280 by 24 (261.66) then multiply that by 9 months )
On April 1, 2019, Miller Company paid $6,280 for a two-year insurance policy. On that date, Miller recorded the purchase by debiting Prepaid Insurance and crediting Cash. The correct December 31, 2019, adjusting entry would be
d. credit to Insurance Expense for $5,442.
On August 1, 2019, Yellow Company paid $6,320 for a three-year insurance policy. On that date, an expense account was charged. In the adjusting entry on December 31, 2019, there would be a
b. Rent Revenue 16,667 Unearned Rent 16,667
On February 1, 2019, Apollo Company received $24,000 in advance for a three-year rental of land, and credited Rent Revenue for the entire amount. The correct December 31, 2019 adjusting entry would be
b. credit to Rent Revenue for $1,552
On June 1, 2019, Little Corporation received $5,320 in advance for a two-year rental of some land and properly credited Unearned Rent. In the adjusting entry at December 31, 2019, there would be a
b. Insurance Expense 3,750 Prepaid Insurance 3,750
On March 31, 2019, the Turi Company purchased a two-year fire insurance policy. Turi recorded the purchase by debiting Prepaid Insurance and crediting Cash for $10,000. Which of the following adjusting entries should Turi prepare at the end of 2019?
a. Interest Expense 36 Interest Payable 36
On May 1, 2019, Alang Corporation borrowed $3,600 on a two-year, 6% note payable. Interest is due and payable at the end of each six months. Alang makes all interest payments on schedule. The correct December 31, 2020, adjusting entry would be
a. cost of goods sold
Operating expenses would not include
b. Statements of Financial Accounting Standards
Prior to 2009, which of the following types of FASB Pronouncements carried the highest authority within GAAP by establishing the methods and procedures required on specific accounting issues?
c. an adjusted trial balance.
Prior to preparing the organization's financial statements, the accountant prepares
a. Unearned Revenue : Increase Rent Revenue : Increase
Rental receipts for the period July 1, 2019, through June 30, 2020, were collected on June 30, 2019. The effects of these economic events on the 2019 financial statements for unearned revenue and rent revenue are
c. Sub-paragraphs
The FASB Accounting Standards Codification includes six levels or components. Which of the following is not one of those levels?
b. to codify authoritative support such as results of academic research
The FASB Accounting Standards Codification is expected to provide all of the following benefits except:
d. $225,000
The Nathan's Company rents numerous properties throughout the year. Nathan's pays rents in advance in some cases, and in other cases rents are paid after the rental period expires. The following data are included in Nathan's December 31 balance sheets: During 2020, Nathan paid $200,000 in rentals. In its accrual basis income statement for the year ended December 31, 2020, Nathan should report rent expense of:
b. debit to Rental Revenue for $12,000
The Oliver Construction Company received $18,000 for six months rental income in advance on November 1, 2019, and credited the Rental Revenue account. The required adjusting entry on December 31, 2019, would include a
d. shareholders' equity.
The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year. This error would cause an overstatement of
a. an overstatement of assets.
The accountant failed to make the adjusting entry to record the depreciation for the year. This error would cause
c. an understatement of liabilities and an overstatement of shareholders' equity
The accountant failed to make the adjusting entry to record the unpaid wages of its employees as of December 31. This error will cause
d. IV Earned: NO Collected: YES
The balances in deferred (unearned) revenue accounts represent amounts that are
a. $1,400,000
The city of Anchorage sold land for its appraised value to the Big Bear Oil Company on June 1, 2014, that originally cost the city $950,000. On June 1, 2014, the land was appraised at a value of $1,400,000, and on December 31, 2014, the land's value was estimated to be $1,450,000. On Big Bear Oil Company's balance sheet at December 31, 2014, the land should be valued at
b. management
The financial statements are the responsibility of the
d. reduce all temporary accounts to zero.
The purpose of closing entries is to
a. going concern
The state legislature is currently debating a bill that, if passed, would require the Roberts Company to go out of business. Which of the following principles or assumptions related to the preparation of Roberts financial statements is most directly affected by this impending vote of the legislature?
b. neutrality and verifiability
The use of the historical cost principle is justified because the resulting information has the qualitative characteristics of
b. presented as a liability until earned.
When cash is debited for rents that are collected but are not yet earned, the amount credited should be
b. general journal
Where would the closing entries be found for a particular company?
b. Prepaid Rent
Which of the following accounts would not be closed to Income Summary during the year-end closing process?
c. recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period
Which of the following adjusting entries involves the recognition of an accrued expense?
d. none of these do (Regulation S-X, The FASB Conceptual Framework, Statements of Financial Accounting Standards)
Which of the following documents includes all of the accounting standards?
b. Sales Discounts Taken
Which of the following is a contra account?
c. A company returns inventory to the supplier and receives a refund of the purchase price.
Which of the following is a purchase return?
b. A customer returns merchandise for a refund.a
Which of the following is a sales return?
b. employees' salaries
Which of the following is an accrued expense?
c. equipment purchased for use in the business operations
Which of the following is an economic resource that should be depreciated over the accounting periods estimated to be benefited?
c. correction of an error in the general journal
Which of the following is not a type of adjusting entry?
d. monetary unit, entity, going concern, and recognition
Which of the following sets includes only accounting assumptions and conventions?
d. The six levels contained within the Codification framework are hierarchical in nature, such that the higher levels are considered to be more authoritative than the lower levels.
Which of the following statements about the FASB Accounting Standards Codification is false?
a. It only exists as an electronic database; paper copies are not available.
Which of the following statements about the FASB Accounting Standards Codification is true?
c. Post-closing trial balances only contain temporary accounts.
Which of the following statements regarding a post-closing trial balance is false?
c. U.S. GAAP represents a set of professional standards, and the requirement to follow U.S. GAAP is enforced through the AICPA Code of Professional Conduct.
Which of the following statements regarding the requirement to follow U.S. GAAP in financial reporting is true?
c. reporting entity
Which one of the following assumptions or principles most logically supports the preparation of a single set of consolidated financial statements that combines the financial information of several wholly owned but separately identifiable businesses?
a. debit Unearned Rent; credit Income Summary
With closing entries, you would expect to find all of the following except
