Question 1

The beginning balance of retained earnings appears on the balance sheet and the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 2

Accrual accounting records the impact of both cash and noncash business transactions as they occur.

Accepted Answer

A) True 
 B)False

Question 3

The dividends account is a permanent account.

Accepted Answer

A) True 
 B)False

Question 4

Operating income reflects the earnings from the company's core business.

Accepted Answer

A) True 
 B)False

Question 5

The journal entry to record a cash sale will be the same under the accrual and cash-basis of accounting.

Accepted Answer

A) True 
 B)False

Question 6

Cash-basis accounting does NOT record:

Accepted Answer

A)  purchase of supplies with cash.
B)  sale of common stock.
C)  payment of note payable.
D)  depreciation expense.

Question 7

On August 1 of the current year, Trevor Beck received $5400 for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include a:

Accepted Answer

A)  credit to Unearned Service Revenue of $4500.
B)  debit to Unearned Service Revenue of $900.
C)  debit to Service Revenue of $900.
D)  credit to Service Revenue of $4500.

Question 8

The revenue principle requires that a business record revenue when the business:

Accepted Answer

A)  receives an order from a customer.
B)  prepares the invoice for the customer.
C)  delivers goods to or performs services for a customer.
D)  receives payment from a customer.

Question 9

On a multistep income statement, a common subtotal is:

Accepted Answer

A)  Income from Nonoperating Activities.
B)  Gross Profit.
C)  Interest Expense minus Interest Income.
D)  none of the above.

Question 10

Jackson Company holds a $50,000 note receivable dated July 1, 2016, with 10% interest. What adjusting entry is needed on December 31, 2016?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> $50,000 ×...

Question 11

At the end of the accounting period, a company has accrued interest revenue that will not be received until the next accounting period. The adjusting entry would include a:

Accepted Answer

A)  debit to Interest Expense.
B)  debit to Interest Payable.
C)  debit to Interest Revenue.
D)  debit to Interest Receivable.

Question 12

When cash-basis accounting is used, and services are provided on account:

Accepted Answer

A)  only the income statement will be incorrect.
B)  only the balance sheet will be incorrect.
C)  both the income statement and the balance sheet will be incorrect.
D)  either the income statement or the balance sheet will be incorrect.

Question 13

The entry to close expense account(s) includes a:

Accepted Answer

A)  debit to the expense accounts.
B)  credit to the expense accounts.
C)  credit to Retained Earnings.
D)  debit to the revenue accounts.

Question 14

Income tax expense and the related income tax payable are typically accrued as the final adjusting entry of the period.

Accepted Answer

A) True 
 B)False

Question 15

Generally to be considered sufficiently liquid, entities should have a sufficient excess of current liabilities over current assets.

Accepted Answer

A) True 
 B)False

Question 16

Under cash-basis accounting, no journal entry is recorded when a sale is made on account.

Accepted Answer

A) True 
 B)False

Question 17

The requirement to report accounting information at regular intervals is known as the:

Accepted Answer

A)  interim reporting concept.
B)  revenue principle.
C)  time-period concept.
D)  expense recognition principle.

Question 18

Operating income reflects:

Accepted Answer

A)  income from a company's main and secondary business activities.
B)  earnings from a company's core business activities.
C)  earnings from a company 's core business activities which includes interest income.
D)  an important measure that investors to use to evaluate the liquidity of the business.

Question 19

The following accounts and balances are taken from Brown Company's adjusted trial balance:
  Prepare the closing entries.

Accepted Answer

The answer of The following accounts and balances are taken...

Question 20

Under accrual accounting, revenue is recorded:

Accepted Answer

A)  when the cash is received, regardless of when the services are performed.
B)  when the services are performed, regardless of when the cash is received.
C)  at the end of every month.
D)  only if the cash is received at the same time the services are performed.

Exam 3: Accrual Accounting Income

On August 1 of the current year, Trevor Beck received $5400 for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include a:

Correct AnswerverifiedShow Answer

At the end of the accounting period, a company has accrued interest revenue that will not be received until the next accounting period. The adjusting entry would include a:

Correct AnswerverifiedShow Answer

The dividends account is a permanent account.

Correct AnswerverifiedShow Answer

Operating income reflects:

Correct AnswerverifiedShow Answer

Under cash-basis accounting, no journal entry is recorded when a sale is made on account.

Correct AnswerverifiedShow Answer

The beginning balance of retained earnings appears on the balance sheet and the statement of retained earnings.

Correct AnswerverifiedShow Answer

Operating income reflects the earnings from the company's core business.

Correct AnswerverifiedShow Answer

Under accrual accounting, revenue is recorded:

Correct AnswerverifiedShow Answer

Cash-basis accounting does NOT record:

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Jackson Company holds a $50,000 note receivable dated July 1, 2016, with 10% interest. What adjusting entry is needed on December 31, 2016?

Correct Answerverified $50,000 ×...View AnswerShow Answer

The revenue principle requires that a business record revenue when the business:

Correct AnswerverifiedShow Answer

When cash-basis accounting is used, and services are provided on account:

Correct AnswerverifiedShow Answer

The following accounts and balances are taken from Brown Company's adjusted trial balance: Prepare the closing entries.

Correct AnswerverifiedShow Answer

Accrual accounting records the impact of both cash and noncash business transactions as they occur.

Correct AnswerverifiedShow Answer

The requirement to report accounting information at regular intervals is known as the:

Correct AnswerverifiedShow Answer

The entry to close expense account(s) includes a:

Correct AnswerverifiedShow Answer

Income tax expense and the related income tax payable are typically accrued as the final adjusting entry of the period.

Correct AnswerverifiedShow Answer

Generally to be considered sufficiently liquid, entities should have a sufficient excess of current liabilities over current assets.

Correct AnswerverifiedShow Answer

The journal entry to record a cash sale will be the same under the accrual and cash-basis of accounting.

Correct AnswerverifiedShow Answer

On a multistep income statement, a common subtotal is:

Correct AnswerverifiedShow Answer

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$50,000 ×...
View Answer

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