Practice Problems-Ch 4.

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?

Debit Accounts Receivable and credit Service Revenue

The closing entry process consists of closing:

all temporary accounts.

In a service-type business, revenue is recognized:

when the service is performed.

Expenses are recognized when:

they contribute to the production of revenue.

The revenue recognition principle dictates that revenue should be recognized in the accounting records:

when the performance obligation is satisfied.

An adjusting entry:

affects a balance sheet account and an income statement account.

Goods purchased for future use in the business, such as supplies, are called:

prepaid expenses.

Payments of expenses that will benefit more than one accounting period are identified as:

prepaid expenses.

Brokaw Industries signs a $40,000, 9%, 6-month note payable on September 1, 2021. How much interest expense will Brokaw report in its 2022 financial statements?

$600

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

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 September 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

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

A

Which of the following accounts would appear in an adjusted trial balance but not a post-closing trial balance? a. Depreciation Expense b. Accumulated Depreciation c. Unearned Revenue d. Supplies

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

Which trial balance will consist of the greatest number of accounts?

Adjusted trial balance

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:

Book Value

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

B

Which of the following accounts is adjusted but is not closed? a. Supplies Expense b. Supplies c. Depreciation Expense d. Service Revenue

B

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 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

Adjusting entries are made to ensure that: a. expenses 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 accounting period. d. All of these answer choices are correct.

D

On April 1, 2022, Propel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. Propel records depreciation expense of $48,000 for the calendar year ending December 31, 2022. Which accounting principle has been violated? a. Depreciation principle. b. No principle has been violated. c. Cash principle. d. Expense recognition principle.

D

Which of the following accounts is neither adjusted nor closed? a. Supplies Expense b. Unearned Revenue c. Accumulated Depreciation d. Cash

D

14

Go to Sheet

25

Go to Sheet

28

Go to Sheet

29

Go to Sheet

35

Go to Sheet

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement 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?

November 30

The following accounts show balances on the adjusted trial balance. Which of these account balances will not appear the same on the balance sheet?

Retained earnings

Which of the following would not result in unearned revenue?

Services performed on account.

Which statement is incorrect concerning the adjusted trial balance?

The adjusted trial balance lists the account balances in order of their magnitude.

An accounting time period that is one year in length is called:

a fiscal year.

15. The primary difference between prepaid and accrued expenses is that prepaid expenses have:

been recorded and accrued expenses have not.

Under the cash basis of accounting:

cash must be received before revenue is recognized.

Closing entries:

cause the revenue and expense accounts to have zero balances.

Under the accrual basis of accounting:

events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

If a company fails to make an adjusting entry to record supplies expense, then:

expense will be understated.

The expense recognition principle matches:

expenses with revenues.

An accounting period starting on February 1 that is one year long is called a (an):

fiscal year.

The primary difference between accrued revenues and unearned revenues is that accrued revenues have:

not been recorded and unearned revenues have.

Adjusting entries affect at least:

one income statement account and one balance sheet account.

A post-closing trial balance will show:

only balance sheet accounts.

Adjusting entries are:

usually required before financial statements are prepared.