ACCT 201 - Chapter 3 - Prof Guidroz

A flower shop makes a large sale for $1,500 on June 30th. The customer is sent an invoice on July 5th, and a check is received on July 10th. The flower shop follows GAAP and applies the revenue recognition principle. When should the $1,500 of revenue be recognized? a. June 30th b. July 1st c. July 30th d. July 5th

a. June 30th

Financial statements are prepared directly from the: a. adjusted trial balance b. trial balance c. ledger d. general journal

a. adjusted trial balance

On March 1st, Kalka Company borrowed $5,000 in the form of a three-month note payable with an annual interest rate of 6 percent. The interest will be paid on May 31st at the same time the note is repaid. The Interest Expense accrued on March 31st will be a. $75 b. $25 c. $300 d. $100

b. $25

A company forgot to prepare the adjusting entry to record the current month's usage of Prepaid Rent. What is the resulting impact on the financial statements? a. assets will be overstated and net income will be overstated b. liabilities will be understated and expenses will be understated c. assets will be understated and expenses will be overstated d. assets will be overstated and liabilities will be overstated

a. assets will be overstated and net income will be overstated

On June 30, Wian Marketing Services is preparing its financial statements. $600 of fees were earned in June for which payment had NOT been collected prior to June 30. The adjusting entry at June 30 is: a. debit accounts receivable $600; credit fees earned $600 b. debit unearned fees $600; credit fees earned $600 c. debit fees earned $600; credit account receivable $600 d. debit fees earned $600; credit unearned fees $6000

a. debit accounts receivable $600; credit fees earned $600

Cathy Cline, an employee of the Wheeler Company, will NOT receive her paycheck until April 2. Based on services performed from March 15 to March 30, her salary was $800. The adjusting entry for Wheeler Company on March 31 is: a. debit salaries expense $800; credit salaries payable $800 b. debit salaries payable $800; credit cash $800 c. no entry is required d. debit salaries expense $800; credit cash $800

a. debit salaries expense $800; credit salaries payable $800

To record depreciation on a building, which account should be debited? a. depreciation expenses b. depreciation payable c. building d. accumulated depreciation

a. depreciation expense

Which of the following is an example of an adjusting journal entry for a deferral? a. expensing a part of the cost of a building b. expensing wages and salaries that will not be paid until the next period c. recording revenues that have been earned on account d. recording an expense in the same period in which it was paid

a. expensing a part of the cost of a building

On March 1st Supplies balance was $70. During March, $440 in supplies were purchased. On March 31st, a count of supplies showed that $50 of supplies remained. The required adjusting entry on March 31st would include a debit to Supplies Expense of a. $20 b. $460 c. $440 d. $420

b. $460

A(n) _________________ is (are) prepared ________________ adjusting entries have been journalized and posted a. trial balance; after b. adjusted trial balance; after c. adjusted trial balance; before d. company's financial statements; after

b. adjusted trial balance; after

An adjusting trail balance is created a. for only balance sheet accounts b. after preparing all adjusting entries c. after preparing all financial statements d. before the unadjusted trial balance

b. after preparing all adjusting entries

Deferrals occur when a. expenses are incurred before revenues are earned b. cash is received before services are preformed c. revenues are earned before cash is received d. expenses are incurred before cash is paid

b. cash is received before services are preformed

Gardner Company purchased a truck from Kutner Co. by issuing a 6-month 10% note payable for $30,000 on November 1. On December 31, the accrued expense adjusting entry is: a. debit interest expense $6,000; credit interest payable $6,000 b. debit interest expense $500; credit interest payable $500 c. no entry is required d. debit interest expense $3,000; credit interest payable $3,000

b. debit interest expense $500; credit interest payable $500

The matching principle (expense recognition) dictates that: a. each debit be matched with an equal credit b. expenses should be matched with revenues c. revenue should be recognized in the account period in which it is earned d. the fiscal year should match the calendar year

b. expenses should be matched with revenues

Which statement is true regarding the adjusted trail balance? a. it is a required financial statement under generally accepted accounting principles b. it proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made c. it is prepared after the financial statements are prepared d. it cannot be used to prepare financial statements

b. it proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made

The account unearned revenue is a(n): a. contra revenue account b. liability account c. asset account d. revenue account

b. liability account

The time period assumption divides the life of a business entity into a. weeks foe weekly financial reporting b. months, quarters or years, defined for convenience c. years that end with the last day of the same month each year, which may or may not be December 31st d. years that correspond with a calendar year

b. months, quarters or years, defined for convenience

Which of the following is an example of an accrual? a. record wage expense that is incurred and paid in the same period b. record revenues that will be paid by a customer in a subsequent period c. record rent expense that was pre-paid d. record revenues that were paid by a customer in an earlier period

b. record revenues that will be paid by a customer in a subsequent period

On May 1, 2013, Maricel Advertising Company received $3,000 from Kathy Siska for advertising services to be completed by April 30, 2014. At December 31, 2013, $2,000 of the fees have been earned. The adjusting entry on December 31, 2013 by Maricel will include a: a. $1,000 credit to unearned fees b. $2,000 credit to unearned fees c. $2,000 debit to unearned fees d. $1,000 debit to fees earned

c. $2,000 debit to unearned fees

When a customer pays for magazine subscriptions in advance, the journal entry involves a debit to which account for the publishing company? a. subscription revenue b. unearned revenue c. cash d. accounts receivable

c. cash

The beginning balance of Supplies for Lu Inc. was $900. During the year, additional supplies were purchased for $450. At the end of the year a count indicates $700 of supplies on hand. The adjusting entry at December 31 is: a. debit supplies $650; credit supplies expense $650 b. debit supplies $450; credit supplies expense 450 c. debit supplies expense $650; credit supplies $650 d. debit supplies expense $250; credit supplies $250

c. debit supplies expense $650; credit supplies $650

What will happen if a business does not make an adjusting entry at the end of the period to record an accrued expense? a. it will cause net income to be understated b. it will cause an overstatement of assets and an overstatement of liabilities c. it will cause an understatement of expenses and an understatement of liabilities d. it will cause an overstatement of expenses and an overstatement of liabilities

c. it will cause an understatement of expenses and an understatement of liabilities

The revenue recognition principle recognizes that: a. the fiscal year should correspond with the calendar year b. the economic life of a business can be divided into artificial time periods c. revenue should be recognized in the accounting period in which services are preformed d. expenses should be matched with revenues

c. revenue should be recognized in the accounting period in which services are preformed

According to the Revenue Recognition Principle, revenues are recognized a. when a customer pays for a service b. when a customer acknowledges that the service was provided c. when a company provides a service d. when the company makes an obligation to provide a service

c. when a company provides a service

Dana bought Chris a gift card to a popular restaurant for $40 on July 27th. Dana gave it to Chris on August 20th. Chris used the gift card as partial payment for a meal at the restaurant on September 2nd. In what month should the $40 be recorded as revenue by the restaurant? a. August b. July c. GAAP allows the restaurant to determine the month d. September

d. September

Demaet Cruise Lines purchased a five-year insurance policy for its ships on April 1, 2013 for $100,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2013 is: a. debit insurance expense $20,000; credit prepaid insurance $20,000 b. debit insurance expense $5,000; credit prepaid insurance $5,000 c. debit prepaid insurance $15,000; credit insurance expense $15,000 d. debit insurance expense $15,000; credit prepaid insurance $15,000

d. debit insurance expense $15,000; credit prepaid insurance $15,000

An adjusting entry for unearned revenue will a. decrease revenues and decrease assets b. increase assets and increase revenues c. increase liabilities and increase revenues d. decrease liabilities and increase revenues

d. decrease liabilities and increase revenues

Salary and Wages Expense should have been accrued on December 31st, but the entry was not made. The result of this oversight is that a. net income is understated b. stockholders' equity is understated c. assets are understated d. liabilities are understated

d. liabilities are understated

The Expense Recognition Principle requires that expenses be recognized in the period when they are a. matched with a liability b. matched with an asset c. paid for d. matched with revenues

d. matched with revenues

A journal entry includes a debit to Salary and Wages Expense of $5,000; a debit to Salary and Wages Payable of $3,000; and a credit to Cash for $8,000. Why would this entry be appropriate? a. the entry reflects total wage and salary expense this period of $8,000 b. the entry is an accrual of $3,000 and deferral of $5,000 c. the entry is and accrual of $3,000 in wage and salary expense d. the entry reflects $5,000 payment of wages and salaries for the current period and $3,000 for wages and salaries accrued previously

d. the entry reflects $5,000 payment of wages and salaries for the current period and $3,000 for wages and salaries accrued previously