ACCT 2010 Chapter 3 Questions

The entry to close Management Fee Revenue would be which of the following? a. Retained Earnings Management Fee Revenue b. Management Fee Revenue Retained Earnings c. Management Fee Revenue Service Revenue d. Management Fee Revenue does not need to be closed

b. Management Fee Revenue Retained Earnings

Balance Sheet Classifications Match Account Titles given below with the appropriate Balance Sheet Classification Classifications: A) Currents Assets B) Long-Term Investments C) Property, Plant, and Equipment D) Intangible Assets E) Current Liabilities F) Long-Term Liabilities G) Stockholders Equity H) Not presented on the Balance Sheet Account Titles: __ Common Stock __ Unearned Rent Revenue __ Supplies Inventory __ Accounts Payable __ Rent Expense __ Salaries Payable __ Equipment __ Service Revenue __ Retained Earnings __ Prepaid Insurance __ Bonds Payable __ Taxes Payable __ Accumulated Depreciation - Equipment __ Accounts Receivable __ Mortgage Payable __ Dividends

_G_ Common Stock _E_ Unearned Rent Revenue _A_ Supplies Inventory _E_ Accounts Payable _H_ Rent Expense _E_ Salaries Payable _C_ Equipment _H_ Service Revenue _G_ Retained Earnings _A_ Prepaid Insurance _F_ Bonds Payable _E_ Taxes Payable _C_ Accumulated Depreciation - Equipment _A_ Accounts Receivable _F_ Mortgage Payable _H_ Dividends

Which of the following accounts would not be included in the closing entries? a. Accumulated Depreciation b. Depreciation Expense c. Service Revenue d. Retained Earnings

a. Accumulated Depreciation

Beryl Strauss began a music business in July 2014. Strauss prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are Strauss's Company's only activities during July through October: July 14: Bought music on account for $25, with payment to the supplies due in 90 days August 3: Performed a job on account for Jimmy Jones for $40, collectible from Jones in 30 days. Used up all the music purchased on July 14 September 16: Collected the $40 receivable from Jones October 22: Paid the $25 owed for the supplier from the July 14 transaction In which month should Strauss record the cost of the music as an expense? a. August b. July c. September d. October

a. August

Interest earned on a note receivable at December 31 equals $375. What adjusting entry is required to accrue this interest? a. Interest Receivable 375 Interest Revenue 375 b. Interest Expense 375 Cash 375 c. Interest Expense 375 Interest Payable 375 d. Interest Payable 375 Interest Expense 375

a. Interest Receivable 375 Interest Revenue 375

What is the effect on the financial statements of recording depression on equipment? a. Net income, assets, and stockholders equity are all decreased b. Net income and assets are decreased, but stockholders equity is not affected c. Assets are decreased, but net income and stockholders equity are not affected d. Net income is not affected, but assets and stockholders equity are decreased

a. Net income, assets, and stockholders equity are all decreased

All of the following statements are true except one. Which statement is false? a. adjusting entries are required for a business that uses the cash basis b. accrual accounting produces better information than cash-basis accounting c. a fiscal year may end on some date other than December 31 d. the expense recognition principle directs accountants to identify and measure all expenses incurred and deduct them from revenues earned during the same period

a. adjusting entries are required for a business that uses the cash basis

Refer to above two questions. If the Strauss Company uses the cash basis of accounting instead of the accrual basis, in what month with Strauss report revenue and in what month will it report expense? Revenue Expense a. August August b. September October c. September July d. August October

b. September; October

An adjusting entry recorded June salary expense that will be paid in July. Which statement best describes the effect of this adjusting entry on the company's accounting equation? a. assets are decreased, liabilities are increased, and stockholders equity is decreased b. assets are not affected, liabilities are increased, and stockholders equity is decreased c. assets are decreased, liabilities are not affected, and stockholders equity is decreased d. assets are not affected, liabilities are increased, and stockholders equity is increased

b. assets are not affected, liabilities are increased, and stockholders equity is decreased

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

b. expenses with revenues

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. usually required before financial statements are prepared

The revenue recognition principle dictates that revenue should be recognized: a. when cash is received b. when it is earned c. at the end of the month d. in the period that income taxes are paid

b. when it is earned

On a trial balance, which of the following would indicate that an error has been made? a. Unearned Revenue has a credit balance b. Salary Expense has a debit balance c. Service Revenue has a debit balance d. All of the above indicate errors

c. Service Revenue has a debit balance

An adjusting entry that debits an expense and credits a liability in which type: a. depreciation expense b. prepaid expense c. accrued expense d. cash expense

c. accrued expense

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

c. affects a balance sheet and income statement account

If a real estate company fails to accrue commission revenue, a. revenues are understated, and net income is overstated b. liabilities are overstated, and owners equity is understated c. assets are understated, and net income is understated d. net income is understated, and stockholders equity is overstated

c. assets are understated, and net income is understated

In which month should revenue be recorded? a. in the month that the invoice is mailed to the customer b. in the month that goods are ordered by the customer c. in the month that goods are shipped to the customer d. in the month that cash is collected from the customer

c. in the month that goods are shipped to the customer

A major purpose of preparing closing entries is to: a. zero out the liability accounts b. close out the Supplies account c. update the Retained Earnings account d. adjust the asset accounts to their correct current balances

c. update the Retained Earnings account

Which of the following accounts is not closed? a. Depreciation Expense b. Dividends c. Interest Revenue d. Accumulated Depreciation

d. Accumulated Depreciation

The accountant for Trumbull Corp. failed to make the adjusting entry to record depreciation for the current year. The effect of this error is which of the following? a. Assets are overstated; stockholders equity and net income are understated b. Net income is overstated and liabilities are understated c. Assets and expenses are understated; net income is understated d. Assets, net income and stockholders equity are all overstated

d. Assets, net income and stockholders equity are all overstated

Refer to question above. In which month should Strauss report the $40 revenue on its income statement? a. July b. September c. October d. August

d. August

Adjusting entries: a. are needed to measure the period's net income or net loss b. do not debit or credit cash c. update the accounts d. all of the above

d. all of the above

The Village 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 $3,000 on hand. The adjusting entry that should be made by the company on June 30 is: a. debit Laundry Supplies Expense, $3,000; credit Laundry Supplies, $3,000 b. debit Laundry Supplies Expense, $3,500; credit Laundry Supplies, $3,000 c. debit Laundry Supplies, $3,500; credit Laundry Supplies Expense, $3,500 d. debit Laundry Supplies Expense, $3,500; credit Laundry Supplies, $3,500

d. debit Laundry Supplies Expense, $3,500; credit Laundry Supplies, $3,500

The account Unearned Revenue is a(n): a. asset b. revenue c. expense d. liability

d. liability

For 2014, Wyndham Company had revenues in excess of expense. Which statement describes Wyndham's closing entries at the end of 2014 (assume there is only one closing entry for both revenue and expenses)? a. revenues will be debited, expenses will be credited, and retained earnings will be debited b. revenues will be credited, expenses will be debited, and retained earnings will be debited c. revenues will be credited, expenses will be debited, and retained earnings will be credited d. revenues will be debited, expenses will be credited, and retained earnings will be credited

d. revenues will be debited, expenses will be credited, and retained earnings will be credited