Chapter 4 Quiz/Homework on Canvas PDF

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Chapter 4 Canvas questions answered for Cornett...

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TEST BANK > CONTROL PANE L > POOL MANAGE R > POOL CANVA S

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Chapter 4--Accrual Accounting and Adjusting Entries

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Question 1

Matching

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Question Match the following types of adjusting entries to the listed situation. (Choices may be used more than once.) Answer Match Question Items Answer Items A. - A. Two years insurance premium was paid in advance A. A deferred (prepaid) expense B. - B. Cash was collected from customers for services to be performed next year B. A deferred (unearned) revenue A. - C. An office building was acquired for cash C. An accrued expense C. - D. Utility expense was incurred, but not yet paid at the end of the year D. An accrued revenue D. - E. Interest is earned but not yet collected Add Question Here

Question 2

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Question For each transaction select the type of adjustment it relates to. (Choices may be used more than once.) Answer Match Question Items Answer Items A. - A. Depreciation on a building is recorded B. - B. Revenue is earned for previously received advance cash collections D. - C. Interest is earned on notes receivable, but not yet received A. - D. The cost of supplies used during the year is recorded C. - E. The cost of salaries earned by employees, but not paid at the end of the accounting period, is recorded

A. Deferred (prepaid) expense B. Deferred (unearned) revenue C. Accrued expense D. Accrued revenue

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Question 3

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Question From the list of accounts, determine whether the account is a temporary or a permanent account. (Choices may be used more than once.) Answer Match Question Items Answer Items B. A. B. A. -

A. B. C. D.

Cash A. Temporary account Rent Revenue B. Permanent account Land Depreciation Expense

B. B. A. B. -

E. F. G. H.

Prepaid Insurance Unearned Revenue Supplies Expense Salaries Payable Add Question Here

Question 4

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Question Under accrual accounting, revenue is recognized: Answer when cash is received, and expenses, when cash is paid. when cash is received, and expenses, when they are incurred. when it is earned, and expenses, when the costs are incurred. When it is earned, and expenses when cash is paid. Add Question Here

Question 5

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Question Glass Corporation sold merchandise to a customer for $30,000 on credit on July 15. The customer paid Glass the amount due on July 31. Under the accrual basis of accounting, how should Glass record the transaction? Answer

Glass should recognize the revenue on July 31. The July 15th transaction increases revenue, but has no effect on assets because cash has not been received. Revenue is recognized after the cost of the merchandise sold has been paid by Glass Corporation Revenue is recognized on July 15. The July 31st transaction has no effect on total assets under the accrual basis. Add Question Here

Question 6

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Question GMC sells cars and pays each salesperson a commission of $800 for each car sold. During the month of December, a salesperson, Tom, sold 3 new cars. GMC pays commissions on the 5th day of the month following the sale. Tom operates on the cash basis; the car dealer operates on the accrual basis. Which of the following statements is true? Answer Tom will recognize commission revenue earned in the amount of $2,400 in December. GMC will recognize commission expense in the amount of $2,400 in December. Tom will recognize commission expense in the amount of $2,400 in January. Tom will recognize revenue in the same month that the car dealer recognizes expense.

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Question 7

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Question Under which accounting method are revenues and expenses recognized in the same accounting period that cash receipts and payments occur? Answer Under the cash basis of accounting Under the accrual basis of accounting Under the percentage of sales method of accounting Under the direct write-off method of accounting Add Question Here

Question 8

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Question Which of the following concepts is important to accrual accounting? Answer Time period, because accrual accounting divides earnings into time periods. Market basis, because inflation is a big factor in the environment. Cash basis, because if cash is not received, revenue is not accrued. Entity concept, because personal transactions must be separated from business transactions. Add Question Here

Question 9

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Question Which of the following statements present financial information based on the cash basis of accounting? Answer Balance Sheet Income Statement Statement of Retained Earnings Statement of Cash Flows Add Question Here

Question 1 0

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Question FedZ is a local package delivery service. If FedZ uses accrual basis of accounting, when should it recognize revenue from its package delivery service? Answer

At the date the customer places the order At the date the packages are delivered At the date the invoice is mailed to the customer At the date the customer's payment is received Add Question Here

Question 11

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Question Using the accrual basis of accounting, when is revenue from the sale of merchandise normally recognized? Answer

On the date the sale is made. On the date the customer pays for the merchandise. Either on the date on which the sale occurs, or the date on which the customer pays. When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit. Add Question Here

Question 12

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Question Brooks Company sells merchandise to customers. Under the accrual basis of accounting, Brooks should normally recognize: Answer revenue and the related expenses in the same accounting period as earned, whether payment is received or not. revenue when cash is collected and expenses when Brooks pays its creditor for the merchandise. revenue and expenses after all payments are made. expenses in the period the merchandise is sold and defer revenue recognition until the customer pays for the merchandise. Add Question Here

Question 13

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Question Under accrual basis of accounting, expenses are be matched against revenue: Answer

if the earnings process is not complete. when cash is collected from the sale of products. in the same period as the revenue that it helped to generate. when payment is made for costs related to revenue. Add Question Here

Question 14

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Question Joe's Auto Company uses the accrual basis of accounting. Which situation violates the matching principle during 2012? Answer Sales commissions are charged to expense in 2012 on all sales revenue recognized in 2012 even though some of the commissions have not been paid. Insurance expense is recognized for the total cost of a 1-year policy purchased in May, 2012. Rent expenses are recognized as expenses in 2012 even though the last bill received in 2012 will not be paid until 2013. Sales commissions paid in 2012 for 2013 commissions are recorded as prepaid expenses for 2012. Add Question Here

Question 15

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Question What does the phrase, "Revenue is recognized when earned" mean? Answer Revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer. Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.

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Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer. Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer. Add Question Here

Question 16

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Question Accrued expenses originate from: Answer previously unrecorded expenses that have been incurred but not yet paid in cash. items paid in advance, but not incurred. collecting cash from customers. paying off liabilities. Add Question Here

Question 17

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Question Assets become expenses when: Answer purchased for cash or on credit. asset is delivered. they are paid for in cash. their economic benefits expire. Add Question Here

Question 1 8

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Question Which one of the following is an example of a deferred revenue? Answer Sales are made to customers on credit. Revenue has been earned but not yet recorded. Payments are received prior to providing the services to customers. Cash sales are made to customers. Add Question Here

Question 19

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Question What effect does "recognizing accrued interest revenue at the end of the accounting period" have on the accounting equation? Answer Assets increase and stockholders' equity decreases. Assets increase and stockholders' equity increases. Assets decrease and liabilities decrease. Liabilities increase and stockholders' equity decreases. Add Question Here

Question 20

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Question What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company? Answer Assets increase and liabilities decrease. Assets increase and stockholders' equity increases. Assets decrease and liabilities decrease. Liabilities decrease and stockholders' equity increases. Add Question Here

Question 21

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Question Which one of the following is an example of an accrued liability? Answer Rent that has been incurred, but have not been paid at the end of the period. Equipment that will benefit several periods has been purchased. An insurance policy that expires in a future period has been acquired. Supplies are purchased and used over several months. Add Question Here

Question 22

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Question Adjusting journal entries are made at the end of the period when: Answer the cash basis of accounting is used for all accounting periods. cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting. management reports its adjustments on the statement of cash flows. the company reports revenue in the same period cash is collected. Add Question Here

Question 23

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Question What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded? Answer Assets and stockholders' equity decrease Assets and stockholders' equity increase Assets and liabilities decrease Liabilities increase and stockholders' equity decreases Add Question Here

Question 24

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Question What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue? Answer Assets and liabilities increase Liabilities decrease and stockholders' equity increases Assets and liabilities decrease Stockholders' equity increases and decreases by the same amount Add Question Here

Question 25

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Question Adjustments for which of the following involves the cash account? Answer Deferred revenues Accrued expenses Deferred liabilities None of these Add Question Here

Question 26

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Question Which one of the following adjustments will increase assets? Answer Interest incurred on money borrowed during the period but not yet paid to the bank. Rent revenue is recorded for amounts owed by a tenant but not yet paid. The use of supplies is recorded. Depreciation for the period is recorded. Add Question Here

Question 27

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Question Accumulated Depreciation: Answer

increases with a debit. decreases with a credit. increases with a credit. is an adjunct account. Add Question Here

Question 28

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Question Suppose that a business sells 6-month subscriptions to its monthly magazine. On January 1, the company receives a total of $600 for 10 subscriptions. To record this transaction, the company debits “Cash” for $600 and credits “Unearned Subscription Revenue” for $600. As of January 31, the company has provided one month of magazines and has earned one month of revenue. What adjusting entry is necessary at January 31? Answer

Unearned Subscription Revenue Subscription Revenue Subscription Revenue Unearned Subscription Revenue Unearned Subscription Revenue Subscription Revenue Subscription Revenue Unearned Subscription Revenue

600 600 100 100 100 100 600 600 Add Question Here

Question 29

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Question Suppose a company received a $2,500 utility bill for the month of March but has not yet recorded the transaction or paid the bill. What adjusting entry is necessary at March 31? Answer Utilities Expense 2,500 Utilities Payable 2,500 Utilities Expense 2,500 Cash 2,500 Utilities Payable 2,500 Utilities Expense 2,500 No Entry Add Question Here

Question 30

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Question Pine Corporation makes adjusting entries monthly. Property, Plant, and Equipment depreciates at a rate of $9,000 per month. No entry for depreciation has been recorded in the month of March. What adjusting entry is necessary at March 31? Answer Accumulated Depreciation 750 Property, Plant, & Equipment 750 Depreciation Expense 9,000 Accumulated Depreciation 9,000 Property, Plant & Equipment 750 Depreciation Expense 750 Depreciation Expense 9,000 Property, Plant & Equipment 9,000 Add Question Here

Question 31

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Question Pine Corporation makes adjusting entries monthly. As of March 31, the general ledger shows Prepaid Rent to have a debit balance of $6,000. Rent expires at a rate of $1,200 per month. No entry for rent has been recorded in the month of March. What adjusting entry is necessary at March 31? Answer

Prepaid Rent Cash Rent Expense Cash

500 500 1,200 1,200

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Rent Expense Prepaid Rent Prepaid Rent Rent Expense

1,200

1,200

6,000 6,000 Add Question Here

Question 32

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Question Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits “Prepaid Insurance” for $24,000 and credits “Cash” for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31? Answer Insurance Expense 24,000 Prepaid Insurance 24,000 Insurance Expense 4,000 Cash 4,000 Prepaid Insurance 24,000 Insurance Expense 24,000 Insurance Expense 4,000 Prepaid Insurance 4,000 Add Question Here

Question 33

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Question Income statement accounts are also known as which of the following? Answer Temporary accounts Real accounts Permanent accounts Asset accounts Add Question Here

Question 34

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Question The Dividend account is a(n): Answer temporary account asset account real account liability account Add Question Here

Question 35

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Question Which of the following does not occur during the closing process? Answer

Journal entries are made to return the balance in all temporary accounts to zero. Journal entries are made to transfer the net income or loss to retained earnings. Journal entries are made to return the balance in all permanent accounts to zero. Journal entries are made to transfer the dividends to retained earnings. Add Question Here

Question 36

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Question Which of the following entries properly closes a temporary account? Answer Retained Earnings 20,000 Service Revenue 20,000 Dividends 200 Retained Earnings 200 Accumulated Depreciation 1,600 Retained Earnings 1,600 Retained Earnings 400 Salaries Expense 400 Add Question Here

Question 37

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Question Which of the following entries properly Answer Service Revenues Retained Earnings Unearned Revenue Retained Earnings Accumulated Depreciation Retained Earnings Dividends Retained Earnings

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closes a temporary account? 20,000 20,000 10,200 10,200 1,600 1,600 400 400 Add Question Here

Question 38

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