Practice Problems 4

The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.

F

Without an adjusting entry for accrued interest expense, liabilities and interest expense are understated, and net income and stockholders' equity are overstated.

T

The accounting cycle begins with the journalizing of the transactions

F

The post-closing trial balance will contain only permanent—balance sheet—accounts

T

Cash is a temporary account

F

Closing entries deal primarily with the balances of permanent accounts

F

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

F

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in: a. January. b. February. c. the period when the workers receive their checks. d. either January or February depending on when the pay period ends.

A

Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue earned $16,000 Accounts receivable 3,000 Expenses incurred 7,250 Accounts payable (related to expenses) 750 Supplies purchased with cash 1,800 a. $8,750 b. $11,000 c. $6,500 d. $9,200

A

One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.

A

Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): a. revenue. b. liability. c. expense. d. prepaid expense.

A

Accounts often need to be adjusted because: a. there are never enough accounts to record all the transactions. b. many transactions affect more than one time period. c. there are always errors made in recording transactions. d. management can't decide what they want to report.

B

A contra asset account is subtracted from a related account in the balance sheet.

T

A liability—revenue account relationship exists with an unearned rent revenue adjusting entry.

T

Accounts receivable is a permanent account

T

Accrued revenues are revenues that have been recognized but not yet recorded

T

Adjusting entries are often made because some business events are not recorded as they occur.

T

An adjusting entry always involves a balance sheet account and an income statement account.

T

An adjusting entry to a prepaid expense is required to recognize expired expenses

T

An expense account is closed with a credit to the expense account and a debit to the Income Summary account.

T

Asset prepayments become expenses when they expire.

T

Closing entries result in the transfer of net income or net loss into the Retained Earnings account*

T

Expense recognition is tied to revenue recognition

T

Financial statements can be prepared from the information provided by an adjusted trial balance.

T

Financial statements must be prepared before the closing entries are made

T

Recognizing when an expense contributes to the production of revenue is critical

T

Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as liabilities.

T

The cash basis of accounting is not in accordance with generally accepted accounting principles.

T

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

T

The expense recognition principle is frequently referred to as the matching principle

T

The expense recognition principle requires that efforts be related to accomplishments.

T

The only accounts that are closed are temporary accounts

T

The periodicity assumption states that the economic life of a business entity can be divided in-to artificial time periods.

T

An accounting time period that is one year in length is called: a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period.

A

An adjusting entry can include a: a. debit to an asset and a credit to a revenue. b. debit to a revenue and a credit to an asset. c. credit to an expense and a debit to a revenue. d. debit to an expense and a credit to a revenue.

A

At December 31, 2014, before any year-end adjustments, Dallis Company's Prepaid Insurance account had a balance of $2,900. It was determined that $1,300 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be: a. $1,300. b. $1,600. c. $2,900. d. $1,400.

A

At March 1, I. Repo Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $950 and consumed supplies of $700. If no adjusting entry is made for supplies: a. stockholders' equity will be overstated by $700. b. expenses will be understated by $950. c. assets will be understated by $450. d. net income will be understated by $700.

A

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omit-ted. Which of the following statements is true? a. Net income will be overstated for the current year. b. Total assets will be understated at the end of the current year. c. The balance sheet and income statement will be misstated but the Retained Earnings statement will be correct for the current year. d. Total expenses will be overstated at the end of the current year.

A

The Accounts Receivable account has a beginning balance of $52,000 and an ending balance of $69,000. If $42,000 was sold on account during the year, what were the total collections on account? a. $25,000 b. $59,000 c. $69,000 d. $79,000

A

Which type of accounts will not appear in the post-closing trial balance? a. Asset accounts b. Permanent accounts c. Liability accounts d. Temporary accounts

D

When closing entries are prepared, each income statement account is closed directly to retained earnings.

F

The revenue recognition principle and the expense recognition principle are helpful guides used in determining net income or net loss for a period.

T

The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.

T

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

T

The difference between the balance of a plant asset account and the related accumulated de-preciation account is termed: a. market value. b. contra asset. c. book value. d. liability.

C

The difference between the cost of a depreciable asset and its related accumulated deprecia-tion is referred to as the: a. market value of the asset. b. blue book value of the asset. c. book value of the asset. d. depreciated difference of the asset.

C

An adjusting entry can include a: a. debit to an asset and a credit to a liability. b. debit to a revenue and a credit to an asset. c. debit to a liability and a credit to a revenue. d. debit to an expense and a credit to a revenue.

C

An adjusting entry: a. affects two balance sheet accounts. b. affects two income statement accounts. c. affects a balance sheet account and an income statement account. d. is always a compound entry.

C

Mary Richardo has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make? a. Debit Cash and credit Unearned Service Revenue b. Debit Accounts Receivable and credit Unearned Service Revenue c. Debit Accounts Receivable and credit Service Revenue d. Debit Unearned Service Revenue and credit Service Revenue

C

Oakville Inc. purchased a 12-month insurance policy on March 1, 2014 for $1,800. At March 31, 2014, the adjusting journal entry to record expiration of this asset will include: a. a debit to Prepaid Insurance and a credit to Cash for $1,800. b. a debit to Prepaid Insurance and a credit to Insurance Expense for $180. c. a debit to Insurance Expense and a credit to Prepaid Insurance for $150. d. a debit to Insurance Expense and a credit to Cash for $150.

C

On January 1, 2013, Leardon Inc. purchased equipment for $60,000. The company is depreci-ating the equipment at the rate of $800 per month. At January 31, 2014, the balance in Accu-mulated Depreciation is: a. $800 debit. b. $9,600 credit. c. $10,400 credit. d. $53,200 debit.

C

On January 1, 2013, M. Johanson Company purchased equipment for $36,000. The company is depreciating the equipment at the rate of $500 per month. The book value of the equipment at December 31, 2013 is: a. $0. b. $6,000. c. $30,000. d. $36,000.

C

The final step in the accounting cycle is to prepare:

C

The first required step in the accounting cycle is: a. adjusting entries. b. journalizing transactions. c. analyzing transactions. d. posting transactions.

C

The worksheet starts with two columns for the: a. adjustments. b. financial statements. c. trial balance. d. adjusted trial balance.

C

Adjusting entries affect at least: a. one revenue and one expense account. b. one asset and one liability account. c. one revenue and one balance sheet account. d. one income statement account and one balance sheet account

D

Adjusting entries are made to ensure that: a. expense are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an ac-counting period. d. All of these answer choices are correct.

D

An accumulated depreciation account: a. is a contra liability account. b. increases on the debit side. c. is offset against total assets on the balance sheet. d. has a normal credit balance.

D

An architecture firm earned $2,000 for architecture services provided with the fee to be paid in the future. No entry was made at the time the service was provided. If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause: a. revenues to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.

D

If as of December 31, 2014, rent of $120 for December had not been recorded or paid, the ad-justing entry would include a: a. credit to Accumulated Rent for $120. b. credit to Cash for $120. c. debit to Rent Payable for $120 d. debit to Rent Expense for $120

D

If, on December 31, 2014, supplies on hand were $20, the adjusting entry would contain a: a. debit to Supplies for $20. b. credit to Supplies for $20. c. debit to Supplies Expense for $120. d. credit to Supplies Expense for $120.

D

The closing entry process consists of closing: a. all asset and liability accounts. b. out the Retained Earnings account. c. all permanent accounts. d. all temporary accounts.

D

An adjusting entry always involves two balance sheet accounts

F

An adjusting entry would be made to the revenue account only when cash is received.

F

In the accounting cycle, closing entries are prepared before adjusting entries

F

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

F

Revenue received before it is recognized and expenses paid before being used or consumed are both initially recorded as liabilities

F

The Dividends account is closed to the Income Summary account at the end of each year.

F

The accrued interest for a three month note payable of $10,000 dated December 1, 2013 at an interest rate of 6% is $150 on December 31, 2013.

F

The adjusting entry for unearned revenue results in an increase (a debit) to an asset account and an increase (a credit) to a revenue account.

F

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

F

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

F

The difference between unearned revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and unearned revenue has never been recorded.

F

The periodicity assumption is often referred to as the expense recognition principle

F

The post closing trial balance will have fewer accounts than the adjusted trial balance

T

A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $30,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest? a. Interest Expense 300 Interest Payable 300 b. Interest Expense 450 Interest Payable 450 c. Interest Expense 300 Cash 300 d. Interest Expense 450 Note Payable 450

A

Accrued expenses are: a. incurred but not yet paid or recorded. b. paid and recorded in an asset account after they are used or consumed. c. paid and recorded in an asset account before they are used or consumed. d. incurred and already paid or recorded.

A

Adjusting entries are required: a. because some costs expire with the passage of time and have not yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are earned. d. None of these answer choices are correct.

A

Adjustments for accrued revenues: a. increase assets and increase revenues. b. increase assets and increase liabilities. c. decrease assets and increase revenues. d. decrease liabilities and increase revenues.

A

Adjustments for unearned revenue: a. decrease liabilities and increase revenues. b. increase liabilities and increase revenues. c. increase assets and increase revenues. d. decrease revenues and decrease assets.

A

Boyce Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the peri-od would be: a. debit Supplies Expense, $3,200; credit Supplies, $3,200. b. debit Supplies, $1,800; credit Supplies Expense, $1,800. c. debit Supplies Expense, $1,800; credit Supplies, $1,800. d. debit Supplies, $3,200; credit Supplies Expense, $3,200

A

Each of the following is a major type (or category) of adjusting entry except: a. earned expenses. b. prepaid expenses. c. accrued expenses. d. accrued revenues.

A

Expenses are recognized when: a. they contribute to the production of revenue. b. they are paid. c. they are billed by the supplier. d. the invoice is received.

A

Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance? a. $3,585 b. $3,559 c. $3,698 d. $3,672

A

Given the following adjusted trial balance: net income for the year is: a. $98. b. $270. c. $324. d. $496.

A

Goods purchased for future use in the business, such as supplies, are called: a. prepaid expenses. b. revenues. c. stockholders' equity. d. liabilities.

A

Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credit-ed for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31: a. debit Unearned Rent Revenue, $5,000; credit Rent Revenue, $5,000. b. debit Rent Revenue, $5,000; credit Unearned Rent Revenue, $5,000. c. debit Unearned Rent Revenue, $30,000; credit Rent Revenue, $30,000. d. debit Cash, $30,000; credit Rent Revenue, $30,000.

A

If the estimated depreciation for equipment were $800, the adjusting entry would contain a: a. credit to Accumulated Depreciation, Equipment for $800. b. credit to Depreciation Expense, Equipment for $800. c. debit to Accumulated Depreciation, Equipment for $800. d. credit to Equipment for $800.

A

Leyland Realty Company received a check for $15,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credit-ed for the full $15,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 31: a. debit Unearned Rent Revenue, $2,500; credit Rent Revenue, $2,500. b. debit Rent Revenue, $2,500; credit Unearned Rent Revenue, $2,500. c. debit Unearned Rent Revenue, $15,000; credit Rent Revenue, $15,000. d. debit Cash, $15,000; credit Rent Revenue, $15,000.

A

Nacron Company borrowed $10,000 from the bank signing a 6%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be: a. debit Interest Expense, $50; credit Interest Payable, $50. b. debit Interest Expense, $600; credit Interest Payable, $600. c. debit Note Payable, $600; credit Cash, $600. d. debit Cash, $50; credit Interest Payable, $50.

A

Net income for the year is: a. $49. b. $135. c. $162. d. $248.

A

Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on Sep-tember 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized? a. August 31 b. August 1 c. September 5 d. September 6

A

Prepaid expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

A

The following accounts show balances on the adjusted trial balance. Which of these account balances will not appear the same on the balance sheet? a. Retained earnings b. Accounts receivable c. Common stock d. Notes payable

A

The following information is from the Income Statement of the Dirt Poor Laundry Service The entry to close the Service Revenue account includes a:

A

The policy at Adler Corporation is to expense all office supplies at the time of purchase. On the last day of the accounting period, there are $1,100 of unused office supplies on hand and the balance of supplies expense is $3,500. What should the accountant do? a. Debit Supplies and credit Supplies Expense for $1,100. b. Nothing, company policy says to expense supplies when purchased. c. Convince management to change its policy to avoid problems in the future. d. Debit Supplies Expense for $2,400 and credit Supplies for $2,400.

A

Unearned revenues are: a. received and recorded as liabilities before they are recognized. b. recognized and recorded as liabilities before they are received. c. recognized but not yet received or recorded. d. recognized and already received and recorded.

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

Wang Company had the following transactions during 2013: • Sales of $10,800 on account • Collected $4,800 for services to be performed in 2014 • Paid $3,100 cash in salaries • Purchased airline tickets for $600 in December for a trip to take place in 2014 What is Wang's 2013 net income using cash basis accounting? a. $1,100 b. $2,300 c. $12,500 d. $1,700

A

Which account will have a zero balance after closing entries have been journalized and post-ed? a. Service revenue. b. Supplies. c. Prepaid Insurance. d. Accumulated Depreciation.

A

Which of the following is not generally an accounting time period? a. A week. b. A month. c. A quarter. d. A year.

A

Which types of accounts will appear in the post-closing trial balance? a. Permanent accounts. b. Temporary accounts. c. Accounts shown in the income statement columns of a work sheet. d. None of these answer choices are correct.

A

Why do generally accepted accounting principles require the application of the revenue recog-nition principle? a. Failure to apply the revenue recognition principle could lead to a misstatement of revenue. b. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. c. Recording revenue when cash is received is an objective application of the revenue recognition principle. d. Accounting software has made the revenue recognition easy to apply.

A

Adjusting entries are: a. not necessary if the accounting system is operating properly. b. usually required before financial statements are prepared. c. made whenever management desires to change an account balance. d. made to balance sheet accounts only.

B

Adjusting entries are: a. the same as correcting entries. b. needed to ensure that the expense recognition principle is followed. c. optional. d. rarely needed.

B

Adjusting entries can be classified as: a. postponements and advances. b. accruals and deferrals. c. deferrals and postponements. d. accruals and advances.

B

Amos Real Estate signed a four-month note payable in the amount of $16,000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is: a. $480. b. $120. c. $1,440. d. $160.

B

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

B

An adjusting entry made to record accrued interest on a note receivable due next year con-sists of a: a. debit to Interest Expense and a credit to Interest Payable. b. debit to Interest Receivable and a credit to Interest Revenue. c. debit to Interest Expense and a credit to Notes Payable. d. debit to Interest Expense and a credit to Cash.

B

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a: a. debit to an asset account and a credit to an expense account. b. debit to an expense account and a credit to an asset account. c. debit to an asset account and a credit to an asset account. d. debit to an expense account and a credit to an expense account.

B

At December 31, 2014, before any year-end adjustments, Janus Company's Prepaid Insur-ance account had a balance of $2,800. It was determined that $1,200 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be: a. $1,200. b. $1,600. c. $3,800. d. $2,800.

B

At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month, Candy pur-chased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account? a. $1,500 b. $1,600 c. $2,800 d. $2,900

B

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? a. Salaries and Wages Expense for the year is overstated. b. Liabilities at the end of the year are understated. c. Assets at the end of the year are understated. d. Stockholders' equity at the end of the year is understated.

B

Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance? Service revenue $4,300 Equipment $7,400 Cash 1,525 Prepaid insurance 1,225 Unearned service rev. 5,320 Depreciation expense 640 Salaries and wages expense 1,050 Accum. depreciation 1,280 Common stock 390 Retained earnings 550

B

Can financial statements be prepared directly from the adjusted trial balance? a. They cannot. The general ledger must be used. b. Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts. c. No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose. d. They can because that is the only reason that an adjusted trial balance is prepared

B

Darting Company purchased a computer system for $7,200 on January 1, 2014. The company expects to use the computer system for 3 years. It has no salvage value. Monthly depreciation expense on the asset is: a. $0. b. $200. c. $2,400. d. $7,200.

B

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause: a. net income to be overstated. b. an understatement of assets and an understatement of revenues. c. an understatement of revenues and an understatement of liabilities. d. an understatement of revenues and an overstatement of liabilities.

B

Fleet Services Company purchased equipment for $9,000 on January 1, 2014. The company expects to use the equipment for 5 years. It has no salvage value. What balance would be re-ported on the December 31, 2014 balance sheet for Accumulated Depreciation? a. $0 because Accumulated Depreciation is reported on the Income Statement. b. $1,800 c. $7,200 d. $9,000

B

Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Cash received from customers $48,000 Accounts receivable 12,000 Cash paid for expenses 26,000 Accounts payable (related to expenses) 3,000 Prepaid rent for next period 7,000 a. $22,000 b. $31,000 c. $24,000 d. $15,000

B

How many required steps are there in the accounting cycle? a. 11 b. 9 c. 7 d. 5

B

If a business has received cash in advance of services performed and credits a liability ac-count, the adjusting entry needed after the services are performed will be: a. debit Unearned Service Revenue and credit Cash. b. debit Unearned Service Revenue and credit Service Revenue. c. debit Unearned Service Revenue and credit Prepaid Expense. d. debit Unearned Service Revenue and credit Accounts Receivable.

B

If a company fails to adjust for accrued expenses, what effect will this have on that month's fi-nancial statements? a. Failure to make an adjustment does not affect the financial statements. b. Expenses will be understated and net income and stockholders' equity will be over- stated. c. Assets will be overstated and net income and stockholders' equity will be under-stated. d. Assets will be overstated and net income and stockholders' equity will be overstated.

B

If a company fails to make an adjusting entry to record supplies expense, then: a. stockholders' equity will be understated. b. expense will be understated. c. assets will be understated. d. net income will be understated.

B

James & Younger Corporation purchased a one-year insurance policy in January 2013 for $48,000. The insurance policy is in effect from March 2013 through February 2014. If the com-pany neglects to make the proper year-end adjustment for the expired insurance: a. net income and assets will be understated by $40,000. b. net income and assets will be overstated by $40,000. c. net income and assets will be understated by $8,000. d. net income and assets will be overstated by $8,000.

B

Jill Clown earned a salary of $500 for the last week of October. She will be paid on November 1. The adjusting entry for Jill's employer October 31 is: a. No entry is required. b. Salaries and Wages Expense 500 Salaries and Wages payable 500 c. Salaries and Wages Expense 500 Cash 500 d. Salaries and Wages Payable 500 Cash 500

B

Management usually wants ________ financial statements and the IRS requires all business-es to file _________ tax returns. a. annual, annual b. monthly, annual c. quarterly, monthly d. monthly, monthly

B

Mary Richardo, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will she make upon receipt of the payments? a. Debit Unearned Service Revenue and credit Service Revenue b. Debit Cash and credit Accounts Receivable c. Debit Accounts Receivable and credit Service Revenue d. Debit Cash and credit Service Revenue

B

Masterfalls Corporation purchased a one-year insurance policy in January 2013 for $30,000. The insurance policy is in effect from March 2013 through February 2014. If the company ne-glects to make the proper year-end adjustment for the expired insurance: a. net income and assets will be understated by $25,000. b. net income and assets will be overstated by $25,000. c. net income and assets will be understated by $5,000. d. net income and assets will be overstated by $5,000.

B

Net income is recorded on the worksheet under the: a. debit column of the adjusted trial balance and the credit column of retained earnings. b. debit column of the income statement and the credit column of the balance sheet. c. credit column of the adjusted trial balance and the debit column of retained earnings. d. credit column of the income statement and the debit column of the balance sheet.

B

Raxon Company borrowed $40,000 from the bank signing a 6%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be: a. debit Interest Expense, $2,400; credit Interest Payable, $2,400. b. debit Interest Expense, $200; credit Interest Payable, $200. c. debit Note Payable, $2,400; credit Cash, $2,400. d. debit Cash, $600; credit Interest Payable, $600.

B

Skypress Company collected $8,400 in May of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transac-tion during 2013 would be: a. $0. b. $6,300. c. $8,400. d. $2,100.

B

The expense recognition principle matches: a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses.

B

The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. dividends should be matched with stockholder investments. d. cash payments should be matched with cash receipts.

B

The following information is from the Income Statement of the Dirt Poor Laundry Service: The entry to close the Income Summary includes a: a. credit to Income Summary for $2,450. b. debit to Income Summary for $2,450. c. debit to Retained Earnings for $2,450. d. credit to Common Stock for $2,450.

B

The following information is from the Income Statement of the Dirt Poor Laundry Service: The entry to close the expense accounts includes a: a. credit to Income Summary for $3,050. b. debit to Income Summary for $3,050. c. debit to Salaries and Wages Expense for $1,950. d. credit to Retained Earnings for $3,050.

B

The following is selected information from L Corporation for the fiscal year ending October 31, 2014. Cash received from customers $300,000 Revenue earned 390,000 Cash paid for expenses 170,000 Cash paid for computers on November 1, 2013 that will be used for 3 years 48,000 Expenses incurred including any depreciation 216,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000 Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2014? a. $204,000 b. $174,000 c. $158,000 d. $220,000

B

The preparation of adjusting entries is: a. straightforward because the accounts that need adjustment will be out of balance. b. needed to ensure that the expense recognition principle is followed. c. only required for accounts that do not have a normal balance. d. optional when financial statements are prepared.

B

The purpose of the post-closing trial balance is to: a. prove that no mistakes were made. b. prove the equality of the permanent account balances that are carried forward into the next accounting period. c. prove the equality of the temporary account balances that are carried forward into the next accounting period. d. list all the balance sheet accounts in alphabetical order for easy reference.

B

The revenue recognition principle dictates that revenue should be recognized in the account-ing records: a. when cash is received. b. when the performance obligation is satisfied. c. at the end of the month. d. in the period that income taxes are paid.

B

The worksheet does not contain columns for the: a. income statement. b. statement of retained earnings. c. balance sheet. d. adjusted trial balance.

B

There are usually how many closing journal entries? a. 5 b. 4 c. 3 d. 2

B

Walton Company collected $9,600 in May of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transac-tion during 2013 would be: a. $0. b. $7,200. c. $9,600. d. $2,400.

B

Which is not an application of revenue recognition? a. Recording revenue as an adjusting entry on the last day of the accounting period. b. Accepting cash from an established customer for services to be performed over the next three months. c. Billing customers on June 30 for services completed during June. d. Receiving cash for services performed.

B

Which of the following accounts will reflect the account's beginning balance on the adjusted trial balance? a. Prepaid rent b. Retained earnings c. Prepaid insurance d. Unearned revenue

B

Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants. b. Services performed on account. c. Sale of season tickets to football games. d. Sale of two-year magazine subscriptions.

B

Which statement is correct concerning the adjusted trial balance? a. An adjusted trail balance eliminates the need for the preparation of financial statements. b. The purpose of an adjusted trial balance is to prove the equality of the total debit balances and the total credit balances in the ledger. c. An adjusted trial balance will contain only permanent—balance sheet—accounts. d. The adjusted trial balance is prepared after the adjusting entries have been journalized but before they have been posted.

B

Which statement is correct? a. As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use. b. The use of the cash basis of accounting violates both the revenue recognition and ex-pense recognition principles. c. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. d. As long as management is ethical, there are no problems with using the cash basis of ac-counting.

B

Why was Apple required to spread their iPhone revenues over a two year period? a. Because of its newness, their returns might exceed the normal level of returns. b. Because they were required to provide software updates over that two year period. c. Because that was the estimated life of the iPhone. d. Because they needed to defer revenue recognition since they had a swap program availa-ble for future models.

B

A company purchased office supplies costing $3,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Supplies Expense, $3,900; credit Supplies, $3,900. b. debit Supplies, $900; credit Supplies Expense, $900. c. debit Supplies Expense, $2,100; credit Supplies, $2,100. d. debit Supplies, $2,100; credit Supplies Expense, $2,100.

C

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a state-ment on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? a. December 5 b. December 10 c. November 30 d. December 1

C

A liability-revenue relationship exists with: a. asset accounts. b. revenue accounts. c. unearned revenue adjusting entries. d. accrued expense adjusting entries.

C

A new accountant working for Metcalf Company records $800 Depreciation Expense on store equipment as follows: Dr. Cr. Depreciation Expense .......................... 800 Cash 800 The effect of this entry is to: a. adjust the accounts to their proper amounts on December 31. b. understate total assets on the balance sheet as of December 31. c. overstate the book value of the depreciable assets at December 31. d. understate the book value of the depreciable assets as of December 31.

C

A post-closing trial balance will show: a. zero balances for all accounts. b. zero balances for balance sheet accounts. c. only balance sheet accounts. d. only income statement accounts.

C

A small company may be able to justify using a cash basis of accounting if they have: a. sales under $1,000,000. b. no accountants on staff. c. few receivables and payables. d. all sales and purchases on account.

C

Accumulated Depreciation is a(n): a. expense account. b. stockholders' equity account. c. liability account. d. contra asset account.

D

According to some U.S. companies what gives foreign firms a competitive advantage in the capital market? a. The foreign companies don't have standards similar to GAAP. b. The foreign companies don't have strict ethical codes. c. The Sarbanes-Oxley Act which requires more stringent internal controls on U.S. firms. d. The foreign companies don't have to be audited.

C

Accrued expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

C

Accrued revenues are: a. received and recorded as liabilities before they are recognized. b. recognized and recorded as liabilities before they are received. c. recognized but not yet received or recorded. d. recognized and already received and recorded.

C

An asset-expense relationship exists with: a. liability accounts. b. revenue accounts. c. prepaid expense adjusting entries. d. accrued expense adjusting entries.

C

Bluing Corporation issued a one-year 9% $300,000 note on April 30, 2014. Interest expense for the year ended December 31, 2014 was: a. $27,000. b. $20,250. c. $18,000. d. $15,750.

C

Closing entries: a. are prepared before the financial statements. b. reduce the number of permanent accounts. c. cause the revenue and expense accounts to have zero balances. d. summarize the activity in every account.

C

De Meaning Corporation issued a one-year 6% $300,000 note on April 30, 2014. Interest ex-pense for the year ended December 31, 2014 was: a. $18,000. b. $13,500. c. $12,000. d. $10,500.

C

DeNova Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 6%. The amount of interest to be accrued at the end of September is: a. $480. b. $120. c. $40. d. $90.

C

Depreciation is the process of: a. valuing an asset at its fair value. b. increasing the value of an asset over its useful life in a rational and systematic manner. c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner. d. writing down an asset to its real value each accounting period.

C

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: a. net income to be understated. b. an overstatement of assets and an overstatement of liabilities. c. an understatement of expenses and an understatement of liabilities. d. an overstatement of expenses and an overstatement of liabilities.

C

Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Revenue earned $16,000 Accounts receivable 3,000 Expenses incurred 7,250 Accounts payable (related to expenses) 750 Supplies purchased with cash 1,800 a. $6,500 b. $11,000 c. $4,700 d. $6,950

C

Greese Company purchased office supplies costing $4,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,500 still on hand. The appropriate adjusting journal entry to be made at the end of the peri-od would be: a. debit Supplies Expense, $1,500; credit Supplies, $1,500. b. debit Supplies, $2,500; credit Supplies Expense, $2,500. c. debit Supplies Expense, $2,500; credit Supplies, $2,500. d. debit Supplies, $1,500; credit Supplies Expense, $1,500.

C

Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2014 for $7,200. The December 31, 2014 balance sheet would report Prepaid Insurance of: a. $0 because Prepaid Insurance is reported on the Income Statement. b. $2,800. c. $4,400. d. $7,200.

C

If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit: a. cash. b. prepaid rent. c. unearned rent revenue. d. accrued rent revenue.

C

If a company fails to adjust an Unearned Rent Revenue account for rent that has been earned, what effect will this have on that month's financial statements? a. Assets will be understated and revenues will be understated. b. Liabilities will be understated and revenues will be understated. c. Liabilities will be overstated and revenues will be understated. d. Assets will be overstated and revenues will be understated.

C

If a resource has been consumed but a bill has not been received at the end of the accounting period, then: a. an expense should be recorded when the bill is received. b. an expense should be recorded when the cash is paid out. c. an adjusting entry should be made recognizing the expense. d. it is optional whether to record the expense before the bill is received.

C

If service for $125 had been performed but not billed, the adjusting entry to record this would include a: a. debit to Service Revenue for $125. b. credit to Unearned Service Revenue for $125. c. credit for Service Revenue for $125. d. debit to Unearned Revenue for $125.

C

If, on December 31, 2014, the insurance still unexpired amounted to $10, the adjusting entry would contain a: a. debit to Prepaid Insurance for $50. b. credit to Prepaid Insurance for $10. c. debit to Insurance Expense for $50. d. debit to Prepaid Insurance for $10.

C

In a service-type business, revenue is recognized: a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received.

C

On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for 6 months rent beginning Ju-ly 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: a. debit Rent Expense, $18,000; credit Prepaid Rent, $3,000. b. debit Prepaid Rent, $3,000; credit Rent Expense, $3,000. c. debit Rent Expense, $3,000; credit Prepaid Rent, $3,000. d. debit Rent Expense, $18,000; credit Prepaid Rent, $15,000.

C

Payments of expenses that will benefit more than one accounting period are identified as: a. expenses. b. revenues. c. prepaid expenses. d. liabilities.

C

Snelling Tables paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $900 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January? a. Salaries and Wages Expense 900 Salaries and Wages Payable 900 b. Salaries and Wages Expense 4,500 Salaries and Wages Payable 4,500 c. Salaries and Wages Expense 2,700 Salaries and Wages Payable 2,700 d. No adjusting entry is required.

C

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the ad-justing entry is for the amount of supplies: a. remaining. b. purchased. c. used. d. either used or remaining.

C

The following is selected information from C Corporation for the fiscal year ending October 31, 2014. Cash received from customers $150,000 Revenue earned 195,000 Cash paid for expenses 85,000 Cash paid for computers on November 1, 2013 that will be used for 3 years 24,000 Expenses incurred including any depreciation 119,000 Proceeds from a bank loan, part of which was used to pay for the computers 50,000 Based on the accrual basis of accounting, what is C Corporation's net income for the year ending October 31, 2014? a. $102,000 b. $86,000 c. $76,000 d. $110,000

C

The primary difference between prepaid and accrued expenses is that prepaid expenses have: a. been incurred and accrued expenses have not. b. not been paid and accrued expenses have. c. been recorded and accrued expenses have not. d. not been recorded and accrued expenses have.

C

Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they oc-cur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

C

Under the cash basis of accounting: a. revenue is recognized when services are performed. b. expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue.

C

Which of the following is a true statement about closing the books of a corporation? a. Expenses are closed to the Expense Summary account. b. Only revenues are closed to the Income Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the Dividends account are closed to the Income Summary ac-count.

C

Which of the following would be unethical? a. Recording accrued salaries and wages expense. b. Recording accrued interest revenue. c. Recording backdated revenue. d. Recording prepaid expense adjustments.

C

Which statement is correct? a. Accumulated Depreciation should always have a debit balance in the adjusted trial balance. b. Accumulated Depreciation is added to the long-term liabilities on the balance sheet. c. Accumulated Depreciation, Equipment represents the total cost of equipment that has ex-pired up to the date of the balance sheet. d. Accumulated Depreciation is used to reveal the value of the related asset on the date of the balance sheet.

C

Which statement is incorrect concerning the adjusted trial balance? a. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. b. The adjusted trial balance provides the primary basis for the preparation of financial state-ments. c. The adjusted trial balance lists the account balances in order of their magnitude. d. The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.

C

Which trial balance will consist of the greatest number of accounts? a. Post-closing trial balance b. Trial balance c. Adjusted trial balance d. All of the above will contain the same number of accounts.

C

Ye Olde Christmas shop signs a three-month note payable to help finance increases in inven-tory for the Christmas shopping season. The note is signed on October 1 in the amount of $20,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest? a. Interest Expense 100 Interest Payable 100 b. Interest Expense 200 Interest Payable 200 c. Interest Expense 300 Interest Payable 300 d. Interest Expense 1,200 Note Payable 1,200

C

Accrued revenues are revenues that have been recognized but cash has not been received before financial statements have been prepared.

F

Accumulated Depreciation is a liability account and has a credit normal account balance

F

A company shows a balance in Salaries and Wages Payable of $40,000 at the end of the month. The next payroll amounting to $60,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries? a. Salaries and Wages Expense 60,000 Salaries and Wages Payable 60,000 b. Salaries and Wages Expense 60,000 Cash 60,000 c. Salaries and Wages Expense 20,000 Cash 20,000 d. Salaries and Wages Payable 40,000 Salaries and Wages Expense 20,000 Cash 60,000

D

A company spends $20 million dollars for an office building. Over what period should the cost be written off? a. When the $20 million is expended in cash. b. All in the first year. c. After $20 million in revenue is earned. d. None of these answer choices are correct.

D

A company usually determines the amount of supplies used during a period by: a. adding the supplies on hand to the balance of the Supplies account. b. summing the amount of supplies purchased during the period. c. taking the difference between the supplies purchased and the supplies paid for during the period. d. taking the difference between the balance of the Supplies account and the cost of supplies on hand.

D

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause: a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.

D

A revenue-asset relationship exists with: a. prepaid expense adjusting entries. b. accrued expense adjusting entries. c. unearned revenue adjusting entries. d. accrued revenue adjusting entries

D

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

F

Adjusting entries can be classified as: a. postponements and advances. b. accruals and advances. c. deferrals and postponements. d. accruals and deferrals.

D

Adjustments would not be necessary if financial statements were prepared to reflect net in-come from: a. monthly operations. b. fiscal year operations. c. interim operations. d. lifetime operations.

D

After closing entries have been posted, the balance in retained earnings will be: a. $3,256. b. $3,170. c. $3,440. d. $3,354.

D

All of the following are required steps in the accounting cycle except: a. journalizing and posting closing entries. b. preparing an adjusted trial balance. c. preparing a post-closing trial balance. d. preparing a work sheet.

D

Employees at Biquell Corporation are paid $9,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2? a. $9,000 b. $5,400 c. None, expense recognition requires the weekly salary to be accrued on December 31. d. $3,600

D

From an accounting standpoint, the acquisition of long-lived assets is essentially a(n): a. accrual of expense. b. accrual of revenue. c. accrual of unearned revenue. d. prepaid expense.

D

Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Cash received from customers $48,000 Accounts receivable 12,000 Cash paid for expenses 26,000 Accounts payable (related to expenses) 3,000 Prepaid rent for next period 7,000 a. $22,000 b. $31,000 c. $24,000 d. $15,000

D

Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance? a. $7,396 b. $7,118 c. $7,344 d. $7,170

D

Given the following the trial balance: After closing entries have been posted, the balance in retained earnings will be: a. $6,340. b. $6,512. c. $6,880. d. $6,708.

D

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements? a. Failure to make an adjustment does not affect the financial statements. b. Expenses will be overstated and net income and stockholders' equity will be under- stated. c. Assets will be overstated and net income and stockholders' equity will be understated. d. Assets will be overstated and net income and stockholders' equity will be overstated.

D

If a company fails to adjust for accrued revenues: a. liabilities will be understated and revenues will be understated. b. liabilities will be overstated and revenues will be understated. c. assets will be overstated and revenues will be understated. d. assets will be understated and revenues will be understated.

D

La More Company had the following transactions during 2013. • Sales of $4,500 on account • Collected $2,000 for services to be performed in 2014 • Paid $1,325 cash in salaries • Purchased airline tickets for $250 in December for a trip to take place in 2014 What is La More's 2013 net income using cash basis accounting? a. $5,175 b. $675 c. $4,925 d. $425

D

La More Company had the following transactions during 2013: • Sales of $4,500 on account • Collected $2,000 for services to be performed in 2014 • Paid $1,875 cash in salaries for 2013 • Purchased airline tickets for $250 in December for a trip to take place in 2014 What is La More's 2013 net income using accrual accounting? a. $2,875 b. $4,875 c. $4,625 d. $2,625

D

On April 1, 2013, nPropel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. nPropel records depreciation expense of $48,000 for the calendar year ending December 31, 2013. Which accounting prin-ciple has been violated? a. Depreciation principle. b. No principle has been violated. c. Cash principle. d. Expense recognition principle.

D

Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting en-tries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the follow-ing are true? a. Failure to make the adjustment does not affect the February financial statements. b. Expenses will be overstated by $4,000 and net income and stockholders' equity will be understated by $4,000. c. Assets will be overstated by $8,000 and net income and stockholders' equity will be un-derstated by $8,000. d. Assets will be overstated by $4,000 and net income and stockholders' equity will be over-stated by $4,000.

D

The Harris Company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: a. debit Depreciation Expense, $1,800; credit Accumulated Depreciation, $1,800. b. debit Depreciation Expense, $150; credit Accumulated Depreciation, $150. c. debit Depreciation Expense, $7,200; credit Accumulated Depreciation, $7,200. d. debit Equipment, $9,000; credit Accumulated Depreciation, $9,000.

D

The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is: a. debit Supplies Expense, $1,000; credit Supplies, $1,000. b. debit Supplies, $5,500; credit Supplies Expense, $5,500. c. debit Supplies, $1,000; credit Supplies Expense, $1,000. d. debit Supplies Expense, $5,500; credit Supplies, $5,500.

D

The accounts of a business before an adjusting entry is made to record accrued revenue re-flect an: a. understated liability and an overstated revenue. b. overstated asset and an understated revenue. c. understated expense and an overstated revenue. d. understated asset and an understated revenue.

D

The balance in the prepaid rent account before adjustment at the end of the year is $15,000 and represents three months rent paid on December 1. The adjusting entry required on De-cember 31 is: a. debit Prepaid Rent, $5,000; credit Rent Expense $5,000. b. debit Prepaid Rent, $10,000; credit Rent Expense, $10,000. c. debit Rent Expense, $15,000; credit Prepaid Rent, $15,000. d. debit Rent Expense, $5,000; credit Prepaid Rent, $5,000.

D

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: a. contra asset. b. prepayment. c. asset. d. accrued.

D

The periodicity assumption states that: a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time periods.

D

The primary difference between accrued revenues and unearned revenues is that accrued revenues have: a. not been recognized and accrued revenues have been. b. been paid and unearned revenues have not. c. been recorded and unearned revenues have not. d. not been recorded and unearned revenues have.

D

The primary source used in the preparation of the financial statements is the: a. trial balance. b. post-closing trial balance. c. general trial balance. d. adjusted trial balance.

D

The worksheet contains columns for the: a. statement of retained earnings. b. statement of cash flows. c. post-closing trial balance. d. balance sheet.

D

The worksheet is: a. part of the journal. b. a financial statement. c. part of the ledger. d. none of these answer choices are correct.

D

Unearned revenue is classified as a(n): a. asset account. b. revenue account. c. contra revenue account. d. liability.

D

Wang Company had the following transactions during 2013: • Sales of $10,800 on account • Collected $4,800 for services to be performed in 2014 • Paid $3,100 cash in salaries for 2013 • Purchased airline tickets for $600 in December for a trip to take place in 2014 What is Wang's 2013 net income using accrual accounting? a. $8,300 b. $13,100 c. $12,500 d. $7,700

D

Which of the following account's balance will change between the adjusted trial balance and the post-closing trial balance? a. Common stock b. Prepaid rent c. Unearned service revenue d. Retained earnings

D

Which principle dictates that efforts (expenses) be recorded with accomplishments (reve-nues)? a. Cost principle. b. Periodicity principle. c. Revenue recognition principle. d. Expense recognition principle.

D

Which of the following steps in the accounting cycle usually occurs only at the end of a com-pany's annual accounting period? a. Step 3: Post to the ledger accounts. b. Step 7: Prepare financial statements. c. Step 6: Prepare adjusting trial balance. d. Step 9: Prepare a post-closing trial balance.

D

Which of the statements below is not true? a. An adjusted trial balance should show ledger account balances. b. An adjusted trial balance can be used to prepare financial statements. c. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. d. An adjusted trial balance is prepared before all transactions have been journalized.

D

Which one of the following is not a justification for adjusting entries? a. Adjusting entries are necessary to ensure that the revenue recognition principle is fol-lowed. b. Adjusting entries are necessary to ensure that the expense recognition principle is fol-lowed. c. Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. d. Adjusting entries are necessary to bring the general ledger accounts in line with the budget

D

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

F

An adjusted trial balance must be prepared before the adjusting entries can be recorded.

F

A revenue account is closed with a credit to the revenue account and a debit to Income Summary.

F

Accrued revenues are revenues that have been received but not yet recognized

F

A 10-column worksheet is a permanent accounting record

F