Accounting Chapter 3: Connect Multiple Choice

Which of the following accounts is considered a prepaid expense? Multiple choice question. Supplies Accounts payable Wages expense Utility expense

a

Define the Salaries payable account by selecting the appropriate statement below. Multiple choice question. It reports amounts owed to employees and is reported on the income statement. It reports amounts owed to employees and is a liability. It reports amounts owed to employees and is an asset. It is increased with a debit and is considered an asset account.

b

Which of the accounts below are considered accrued expenses? Multiple choice question. Unearned revenue, Utility expense Wages expense, Interest expense Common Stock, Dividends Cash, Building, Equipment

b

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below. Multiple choice question. Debit Interest expense for $30. Credit Interest expense for $30. Debit Interest payable for $30. Credit Unearned revenues for $30.

a

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Multiple select question. Supplies would be credited for $300. Supplies expense would be credited for $300. Supplies expense would be debited for $300. Supplies expense would be debited for $700. Supplies would be debited for $300.

a and c

Describe the final step in the adjusting process. Multiple choice question. The final step is to create an adjusting journal entry to get from step 1 to step 2. The final step is to determine the correct balance of an account. The final step is to determine the current balance of an account. The final step is to post to a trial balance so financial statements can be prepared.

a

What is a plant asset? Multiple choice question. A plant asset is the portion of a current asset which will be used up in the next accounting period. A plant asset refers to a long-term tangible asset used to produce and sell products or services. A plant asset is considered temporary and will be used up within one accounting period. A plant asset refers to the stock purchased by a business held for future investment.

b

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.) Multiple select question. debit to Prepaid insurance for $400. credit to Prepaid insurance for $400. debit to Insurance expense for $4,800. credit to Insurance expense for $400. debit to Insurance expense for $400.

b and e

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below. Multiple choice question. Insurance expense would be debited for $300. Cash would be credited for $3,600. Insurance expense would be debited for $3,600. Prepaid insurance would be credited for $3,600.

c

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.) Multiple select question. Revenues are recorded when they are earned or services are performed. Expenses are recorded when they are paid and revenues are recorded when payment is received. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process.

c and d

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry? Multiple choice question. Supplies expense would be debited for $200. Supplies would be credited for $200. Supplies would be debited for $200. Supplies expense would be debited for $600.

d

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include by choosing the correct statement below. Multiple choice question. Debit Service revenue for $400. Debit Unearned revenues for $600. Credit Unearned revenues for $400. Debit Unearned revenues for $400.

d

Explain what unearned revenues are by choosing the correct statement below. Multiple choice question. Unearned revenues refer to cash received in advance of providing a service or product. Unearned revenues refer to income reported on the income statement. Unearned revenues refer to amounts owed to the company that have not yet been billed. Unearned revenues refer to customer payments which have not yet been received.

a

Multiple Select Question Select all that apply Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? (Check all that apply.) Multiple select question. one-year one-month six-month five-year

a, b, and c

Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.) Multiple select question. Examples of accrued expenses are wages expense and interest expense. They refer to costs that are incurred in a period, but are both unpaid and unrecorded. They are reported on an income statement. They are also called accounts receivable. They refer to earnings which have been earned, but not yet billed. Adjustments involve increasing both an expense and a liability account.

a, b, c, and f

Accrual basis accounting is defined as: (Check all that apply.) Multiple select question. an accounting system that uses the matching principle to determine when to recognize revenues and expenses. an accounting system that recognizes revenues when cash is received and records expenses when cash is paid. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred. an accounting system which is consistent with generally accepted accounting principles.

a, c, and d

Which of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.) Multiple select question. Useful information must reach decision makers frequently and promptly. Decision makers require financial statements that are audited to ensure reliability. The value of information is often linked to its timeliness. Businesses report financial information at regular intervals to ensure timeliness of data.

a, c, and d

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.) Multiple select question. Wages expense will be debited for $4,000. Salaries expense would be debited for $3,500. Salaries payable will be credited for $500. Cash would be credited for $4,000. Salaries payable will be debited for $500.

b, d, and e

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Multiple select question. Accounts receivable would be debited for $700. Reason: Accounts receivable is not involved. Service revenue would be credited for $300. Reason: It would be credited for $700. Unearned revenue would be debited for $700. Unearned revenue would be debited for $300. Reason: Since $300 has not been earned, it means that $700 has been earned. Service revenue would be credited for $700. Correct Answer

c and e

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.) Multiple select question. They are also called accounts receivable. They refer to earnings which have been earned, but not yet billed. They are also called deferred revenues. They refer to cash received in advance of performing a service or product. They are a liability. They are reported on a balance sheet.

c, d, e, and f

The expense recognition (matching) principle aims to record (expenses/assets/liabilities) in the same accounting period as the (expenses/revenues/assets) that are earned as a result of those costs. This principle is a major part of the (timing/adjusting/estimating) process.

expenses; revenues; adjusting

Accrual basis accounting recognizes (equity/revenues/expenses) when earned and records (revenues/expenses/liabilities) when (incurred/paid) in order to adhere to the matching principle.

revenues; expenses, incurred

Place the steps in the adjusting process in the correct order in which they would be performed. Instructions Determine what the current account balance is Determine what the correct account balance should be. Record an adjusting entry.

this is the correct order