chapter 3 acct 2810 multiple choice

Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. a. liabilities b. assets c. stockholders' equity d. expenses

d

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in a. the cash flows from financing activities section. b. the cash flows from investing activities section. c. a separate schedule. d. the cash flows from operating activities section.

d

For a corporation, stockholders' equity consists of a. assets plus liabilities. b. current assets plus long-term assets. c. intangible assets. d. capital stock and retained earnings.

d

If prepaid insurance expires over time, this asset account becomes a(n) a. liability. b. another asset. c. revenue. d. expense.

d

In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would a. decrease Unearned Service Revenue and decrease Cash. b. increase Accounts Receivable and increase Service Revenue. c. increase Cash and increase Service Revenue. d. decrease Unearned Service Revenue and increase Service Revenue.

d

On April 1, Bear, Inc. paid $2,400 for an insurance premium on a three-year insurance policy. At the end of December, Bear's fiscal year-end, what should be the balance in the prepaid insurance account? a. $2,700 b. $3,000 c. $2,400 d. $1,800

d

On the statement of cash flows, the cash flows from operating activities section would include a. receipts from the issuance of capital stock. b. receipts from the sale of investments. c. payments for the acquisition of investments. d. cash receipts from sales activities.

d

The __________ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis. a. accounting equation b. retained earnings statement c. intangible asset section d. classified balance sheet

d

The accrual basis of accounting recognizes a. revenues when cash is received and expenses when cash is paid. b. revenues when earned and expenses when cash is paid. c. revenues when cash is received and expenses when incurred. d. revenues when earned and expenses when incurred.

d

A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000 b. Net increase in assets and liabilities of $50,000 c. Net increase in assets of $50,000 and a net decrease in liabilities of $40,000 d. Net increase in assets of $60,000 and a net decrease in liabilities of $40,000

a

Accrued revenues would appear on the balance sheet as a. assets. b. liabilities. c. stockholders' equity. d. prepaid expenses.

a

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called a. current assets. b. intangible assets. c. fixed assets. d. notes receivable.

a

Depreciation Expense and Accumulated Depreciation are classified, respectively, as a. expense and contra asset. b. asset and contra liability. c. revenue and asset. d. contra asset and expense.

a

Fees receivable would appear on the balance sheet as a(n) a. asset. b. liability. c. fixed asset. d. unearned revenue.

a

Flyer Co. billed a client for flying lessons given in January. The payment was received in February. Under the accrual basis of accounting, when should Jedi record the revenue? a. January b. February c. Some in January and some in February d. Jedi should not record any revenue

a

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. b. added to net income in converting the net income reported on the income statement to cash flows from operating activities. c. added to cash received from the sale to determine cash flows from investing activities. d. deducted from cash received from the sale to determine cash flows from investing activities

a

Speedy Company's weekly payroll of $250 is paid on Fridays (five-day work week). Assume that the last day of the month falls on Thursday. Which of the following is the required month-end adjusting entry? a. Increase Salaries Expense $200 and increase Salaries Payable $200 b. Increase Salaries Expense $50 and increase Salaries Payable $50 c. Increase Salaries Payable $200 and increase Cash $200 d. Increase Salaries Expense $250 and increase Cash $250

a

The unearned rent account has a balance of $50,000. If $3,000 of the $50,000 is unearned at the end of the accounting period, the amount of the adjusting entry is a. $47,000. b. $53,000. c. $50,000. d. $3,000.

a

Using accrual accounting, expenses are recorded and reported only a. when they are incurred, whether or not cash is paid. b. when they are incurred and paid at the same time. c. if they are paid before they are incurred. d. if they are paid after they are incurred.

a

When cash is paid to suppliers on account, which section of the Statement of Cash Flows is affected? a. Cash Flow from Operating Activities. b. Cash Flow from Investing Activities. c. Cash Flow from Financing Activities d. There is no effect on the Statement of Cash Flows

a

When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected? a. Cash Flow from Operating Activities b. Cash Flow from Investing Activities c. Cash Flow from Financing Activities d. There is no effect on the Statement of Cash Flows.

a

Which of the following is NOT reported as revenue on the income statement? a. Unearned revenue b. Fees revenue c. Commissions revenue d. Rent revenue

a

Which of the following is an example of a deferred expense? a. Prepaid advertising b. Unearned revenue c. Accounts payable d. Accounts receivable

a

Which of the following is an example of an accrued expense? a. Salary owed but not yet paid b. Fees received but not yet earned c. Supplies on hand d. A two-year premium paid on a fire insurance policy

a

XYZ Co. paid $1,000 in dividends to stockholders. How does this transaction affect the accounts of XYZ? a. Cash will decrease by $1,000 and retained earnings will decrease by $1,000. b. Cash will decrease by $1,000 and expenses will increase $1,000. c. Cash will decrease by $1,000 and revenues will decrease $1,000. d. Net income will decrease by $1,000.

a

XYZ Co. received $3,000 in payments from clients for services billed in a previous month. Which accounts will be affected and by what amounts under the accrual basis of accounting? a. Cash will increase by $3,000 and accounts receivable decrease by $3,000. b. Cash will increase by $3,000 and revenues will increase $3,000. c. Accounts receivable will increase by $3,000 and revenue will increase by $3,000. d. Accounts receivable will increase by $3,000 and cash will increase by $3,000.

a

A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M's accounts? a. Increase accounts receivable and cash by $1,000,000 each b. Increase accounts receivable and revenues by $1,000,000 each c. Increase accounts receivable and unearned revenues by $1,000,000 each d. Increase cash and decrease accounts receivable by $1,000,000 each

b

Accrued expenses are ordinarily reported on the balance sheet as a. assets. b. liabilities. c. fixed assets. d. prepaid expenses.

b

Accumulated depreciation is __________ to get the carrying value. a. added to equipment b. subtracted from equipment c. added to accounts payable d. subtracted from accounts payable

b

As time passes, fixed assets, other than land, lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called a. equipment allocation. b. depreciation. c. accumulation. d. matching.

b

Cash receipts from interest and dividends are classified as a. investing activities. b. operating activities. c. either financing or investing activities. d. financing activities

b

Eagle Eye, Inc., a corporation, received an additional investment of $6,000 cash in exchange for shares of capital stock. How does this transaction affect Eagle Eye's accounts? a. Increase in stock expense and decrease cash by $6,000 each b. Increase capital stock and increase cash by $6,000 each c. Increase capital stock and increase revenue by $6,000 each d. Increase capital stock and decrease retained earnings by $6,000 each

b

On April 1, Smart, Inc. paid $7,200 for an insurance premium on a three-year insurance policy. How does this transaction affect Smart's accounts? a. Increase insurance expense and decrease cash by $7,200 each b. Increase prepaid insurance and decrease cash by $7,200 each c. Increase unearned insurance and decrease cash by $7,200 each d. Increase prepaid insurance and decrease retained earnings by $7,200 each

b

On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Green Pea, it is determined that $500 of supplies have been used up. What is the balance in the supplies account after adjustment? a. $0 b. $700 c. $500 d. $1,200

b

On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Green Pea, it is determined that $700 of supplies still remain. What is the balance in the supplies account after adjustment? a. $0 b. $700 c. $500 d. $1,200

b

Unearned rent, representing rent paid for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n) a. asset. b. liability. c. capital stock. d. revenue.

b

Using accrual accounting, revenue is recorded and reported only a. when cash is received without regard to when the services are rendered. b. when the services are rendered without regard to when cash is received. c. when cash is received at the time services are rendered. d. if cash is received after the services are rendered.

b

Which of the following accounts would likely be included in a deferral adjusting entry? a. Interest Revenue b. Unearned Revenue c. Salaries Payable d. Accounts Receivable

b

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? a. A decrease in inventory b. A decrease in accounts payable c. Preferred dividends declared and paid d. A decrease in accounts receivable

b

Which of the following should be shown on a statement of cash flows under the financing activity section? a. The purchase of a long-term investment in the common stock of another company b. The payment of cash to retire a long-term note c. The proceeds from the sale of a building d. The issuance of a long-term note to acquire land

b

Accounts receivable arising from trade transactions amounted to $50,000 and $56,000 at the beginning and end of the year, respectively. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method are a. $105,000. b. $111,000. c. $99,000. d. $156,000.

c

Current liabilities are usually due within a. one month or less. b. one week or less. c. one year or less. d. more than one year.

c

Deferred revenues (unearned revenues) are items initially recorded as liabilities, but expected to become __________ over time. a. liabilities b. assets c. revenues d. expenses

c

Expenses NOT related to the primary operations of the business are sometimes reported as a. administrative expense. b. operating expense. c. other expense. d. all of these.

c

St. Nick Corporation's Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800. There were $400 of supplies on hand at year-end. The yearend adjustment would include an increase in Toy-Making Supplies Expense for a. $1,000. b. $800. c. $600. d. $400.

c

The financial statements are affected by which type(s) of adjustments? a. Deferrals b. Accruals c. Both deferrals and accruals d. Neither deferrals nor accruals

c

UNI Co. received $1,000 from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI's accounts if UNI recognizes a liability? a. Cash is increased and revenue is increased. b. Cash is increased and revenue is decreased. c. Cash is increased and unearned revenue is increased. d. It is not recorded.

c

Updating accrual accounting records prior to preparing financial statements is called a. the closing process. b. converting to cash basis accounting. c. the adjustment process. d. going concern adjustments.

c

Which one of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. A gain on the sale of land b. A decrease in accounts payable c. An increase in accrued liabilities d. Dividends paid on common stock

c

3. __________ is/are created when a revenue or expense has NOT been recorded by the end of the accounting period. a. Prepaid advertising b. Premiums received in advance c. Unearned revenue d. Accruals

d

ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting? a. $5,000 b. $25,000 c. $20,000 d. $45,000

d

The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $1,500. The amount to be used for the appropriate adjusting entry is a. $6,700. b. $2,500. c. $9,200. d. $6,200.

d

Unearned revenue is what type of an account? a. Asset b. Revenue c. Stockholders' equity d. Liability

d

When an adjusting entry is made to record insurance expense and reduce the prepaid insurance account, which section of the statement of cash flows is affected? a. Cash Flow from Operating Activities b. Cash Flow from Investing Activities c. Cash Flow from Financing Activities d. There is no effect on the statement of cash flows.

d

When an entry is made to adjust the supplies account and recognize supplies expense for the period, which section of the statement of cash flows is affected? a. Cash Flow from Operating Activities b. Cash Flow from Investing Activities c. Cash Flow from Financing Activities d. There is no effect on the statement of cash flows.

d

Which asset is NOT depreciated as it usually does NOT lose its ability to provide service? a. Prepaid insurance b. Equipment c. Building d. Land

d

Which of the following is an example of an intangible asset? a. Goodwill b. Patents c. Copyrights d. All of these

d

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. An increase in inventory b. A decrease in accounts payable c. Preferred dividends declared and paid d. A decrease in accounts receivable

d

Which transaction would be recorded in a cash basis system of accounting? a. Purchase of equipment on credit b. Purchase of supplies on credit c. Sale of goods on credit d. Sale of goods for cash

d

X&Y Co. received $4,000 in payments from clients for services billed in a previous month. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Total assets increase by $4,000. b. Assets will increase by $4,000 and revenues will increase $4,000. c. Total assets will be decrease by $4,000. d. The net effect on assets is zero.

d