Accounting ch3-4
A depreciable asset's cost minus accumulated depreciation is called ________. A) book value B) residual value C) accrued revenue D) accrued expense
A
All assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called ________. A) long-term assets B) fully depreciated assets C) current assets D) current liabilities
A
An adjusting entry that credits Salaries Payable is an example of a(n) ________. A) accrued expense B) deferred revenue C) accrued revenue D) deferred expense
A
Kostner Financial Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received the client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed? A) Service Revenue B) Unearned Revenue C) Accounts Payable D) Prepaid Expense
A
The financial statements are prepared from the ________. A) adjusted trial balance B) chart of accounts C) statement of retained earnings D) unadjusted trial balance
A
The time period concept states that ________. A) financial statements can be prepared for specific periods B) all expenses should be recorded when they are incurred during the period C) companies should record revenue when it has been earned D) expenses incurred during a period should be matched against the revenues of the period
A
Under which of the following categories would Accounts Receivable appear? A) Current assets B) Current liabilities C) Long-term assets D) Long-term liabilities
A
Unearned Revenue is classified as a(n) ________ account. A) liability B) asset C) revenue D) equity
A
Which of the following accounts will be closed by crediting the Income Summary account? A) Service Revenue B) Depreciation Expense C) Accounts Payable D) Accumulated Depreciation
A
Which of the following accounts will be closed by debiting the Income Summary account? A) Depreciation Expense B) Accounts Payable C) Service Revenue D) Accumulated Depreciation
A
An adjusting entry is completed ________. A) at the beginning of the accounting period B) at the end of the accounting period C) when the balance sheet is prepared D) when accounts need to be balanced in the ledger
B
At the time the transaction occurred, which of the following would result in an increase in net income under the accrual basis of accounting, but would not result in an increase in net income under cash basis accounting? A) purchase of supplies for cash B) performance of services on account C) use of supplies purchased earlier D) receipt of cash for services that were performed earlier on account
B
Bryson Accounting Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received a check by mail on January 5. Which of the following accounts should appear on the balance sheet as of December 31 as related to the services performed? A) Prepaid Expense B) Accounts Receivable C) Unearned Revenue D) None, there is no entry in December.
B
If a company is using accrual basis accounting, when should it record revenue? A) when cash is received, even though services may be performed at a later date B) when services are performed, even though cash may be received at a later date C) when services are performed and cash is received D) when cash is received, 30 days after the completion of the services
B
The expected value of a depreciable asset at the end of its useful life is called ________. A) book value B) residual value C) accrued revenue D) accrued expense
B
The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash, is called the ________. A) production time B) operating cycle C) accounting cycle D) sales time
B
Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting? A) Cash B) Unearned Revenue C) Service Revenue D) Salaries Expense
B
What amount of total long-term assets would be shown on the balance sheet? A) $100,000 B) $131,500 C) $132,000 D) $139,000
B- Building $100,000 Accumulated Depreciation—Building (4,500) Furniture 7,000 Accumulated Depreciation—Furniture (3,000) Land 32,000 Total long-term assets $131,500
The net income of Harriet Company for the year is $25,000. The owner made withdrawals during the year of $30,000. Which of the following statements is true? A) Owner, Capital account decreases by $25,000. B) Owner, Capital account decreases by $5,000. C) Owner, Capital account increases by $30,000. D) Owner, Capital will remain the same.
B- Net Income $25,000 Owner, Withdrawals (30,000) Decrease in Owner, Capital. $5,000
Accrued revenue is revenue that ________. A) has been collected and earned B) the business has collected in cash, but not yet earned C) the business has earned, but not yet collected in cash D) will be collected and earned in the future
C
An account that is not closed at the end of the period is called a(n) ________. A) expense account B) temporary account C) permanent account D) revenue account
C
Assets are listed in the order of their ________ on the balance sheet. A) magnitude B) dates of purchase C) liquidity D) durability
C
Dalton Delivery Service is hired on October 31, 2016 to perform services, beginning on November 1, 2016. The delivery services will be performed for six months at a rate of $3,200 per month. Dalton's fiscal year ends on December 31. What amount of service revenue should be recorded as an adjusting entry on December 31, 2016? A) $3,200 B) 0 C) $6,400 D) $9,600
C
Notes Payable due within two years are classified as ________. A) current liabilities B) current assets C) long-term liabilities D) long-term assets
C
Salaries Payable, Interest Payable, and Unearned Revenue are examples of ________. A) short-term investments B) fixed assets C) current liabilities D) long-term liabilities
C
The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle. A) comparison B) accrual C) matching D) revenue recognition
C
The asset account, Office Supplies had a beginning balance of $5,400. During the accounting period, office supplies were purchased, on account, for $5,400. A physical count, on the last day of the accounting period, shows $2,300 of office supplies on hand. What is the amount of Supplies Expense for the accounting period? A) $5,400 B) $2,300 C) $8,500 D) $3,100
C
The entry to record depreciation includes a credit to the ________. A) Depreciation Payable account B) Cash account C) Accumulated Depreciation account D) Depreciation Expense account
C
The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the ________. A) income statement B) statement of owner's equity C) balance sheet D) unadjusted trial balance
C
To which of the following accounts should the balance in the Income Summary account be closed? A) Owner, Withdrawals B) Net Income C) Owner, Capital D) Service Revenue
C
Which of the following accounting elements does the matching principle help to match? A) revenues and liabilities B) expenses and assets C) expenses and revenues D) expenses and liabilities
C
Which of the following is considered a fiscal year? A) six months B) three months C) twelve months D) four months
C
Dogwood Company earned revenues of $19,000 and incurred expenses of $7,000. The owner made withdrawals of $3,500. What is the balance in the Income Summary account prior to closing net income or loss to the Owner, Capital account? A) debit balance of $12,000 B) debit balance of $8,500 C) credit balance of $12,000 D) credit balance of $19,000
C- Revenue $19,000 Expenses (7,000) Net Income. $12,000
A business purchased equipment for $120,000 on January 1, 2017. The equipment will be depreciated over the five years of its estimated useful life using the straight-line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on equipment for the year 2017? (Assume the residual value of the acquired equipment to be zero.) A) Debit $120,000 to Equipment, and credit $120,000 to Cash. B) Debit $24,000 to Depreciation Expense—Equipment, and credit $120,000 to Accumulated Depreciation—Equipment. C) Debit $24,000 to Depreciation Expense—Equipment, and credit $24,000 to Accumulated Depreciation—Equipment. D) Debit $24,000 to Depreciation Expense, and credit $24,000 to Equipment.
C-Depreciation Expense = $120,000 / 5 years = $24,000
An income statement includes ________. A) Land and Salaries Payable B) Owner's Capital and Owner's Withdrawals C) Furniture and Cash D) Service Revenue and Utilities Expense
D
Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ________ assets. A) intangible B) plant C) long-term D) current
D
Financial statements are prepared from the balances in a(n) ________. A) general journalB) chart of accountsC) unadjusted trial balance D) adjusted trial balance
D
Patents, copyrights, and trademarks are examples of ________. A) short-term investments B) fixed assets C) long-term investments D) intangible assets
D
The allocation of a plant asset's cost to expense over its useful life is called ________. A) residual value B) book value C) accrued revenue D) depreciation
D
The entry to record depreciation includes a debit to the ________. A) Equipment account B) Cash account C) Accumulated Depreciation account D) Depreciation Expense account
D
The sum of all the depreciation expense recorded to date for a depreciable asset is called ________. A) book value B) residual value C) depreciation expense D) accumulated depreciation
D
Which of the following accounting terms assumes that a business's activities can be divided into small segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year? A) adjusting entry concept B) economic entity concept C) matching principle D) time period concept
D
Which of the following entries will be necessary to close the Insurance Expense account at the end of the year? A) debit Insurance Expense and credit Income Summary B) debit Insurance Expense and credit Owner, Capital C) debit Owner, Capital and credit Insurance Expense D) debit Income Summary and credit Insurance Expense
D
Which of the following is an example of an intangible asset? A) Equipment B) Plant C) Property D) Copyright
D
As a part of the closing process, revenues and expenses may be closed to a temporary account called the Net Income (Loss) account.
False
Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting, no entry is made until the amount is paid.
False
The Cash account is a temporary account.
False
Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received.
False
The Family Dental Company prepays the rent on its dental office. On July 1, the corporation paid $18,000 for 6 months of rent. How much Rent Expense should Family Dental Company record the three months ended September 30 under the cash basis? Why?
Family Dental should report Rent Expense of $18,000 because expenses are recorded when cash is paid.
A business hired a repair service to overhaul its plumbing system. The repair service began work on September 15 and intends to complete it on October 15. The business will pay the repair service $4,000 when the work is completed. As of September 30, the work was 50% complete. Provide the adjusting entry to accrue repair expense by the end of September.
Repair Expense $2,000 Accounts Payable $2,000
Adjusting entries either credit a revenue account or debit an expense account.
True
Generally Accepted Accounting Principles (GAAP) require the use of accrual basis of accounting.
True
In a balance sheet, assets are classified as either current or long term, depending on their liquidity.
True
In the closing process, the Owner,Withdrawals account is closed to the Owner, Capital account.
True
Permanent accounts are not closed at the end of the accounting period.
True
Revenue and expense accounts are closed to the Income Summary account.
True
The Supplies Expense account is a temporary account.
True
The revenue recognition principle is the basis for recording revenues-both when to record revenue and the amount of revenue to record.
True
Under cash basis accounting, an expense is recorded only when cash is paid.
True
