Question 1

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

Accepted Answer

A) True 
 B)False

Question 2

The quality of consistency pertains to the use of the same accounting principles by firms in the same industry.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would not result in unearned revenue?

Accepted Answer

A)  Rent collected in advance from tenants
B)  Services performed on account
C)  Sale of season tickets to football games
D)  Sale of two-year magazine subscriptions

Question 4

Depreciation is the process of

Accepted Answer

A)  valuing an asset at its fair value.
B)  increasing the value of an asset over its useful life in a rational and systematic manner.
C)  allocating the cost of an asset to expense over its useful life in a rational and systematic manner.
D)  writing down an asset to its real value each accounting period.

Question 5

For prepaid expense adjusting entries

Accepted Answer

A)  an expense-liability account relationship exists.
B)  prior to adjustment, expenses are overstated and assets are understated.
C)  the adjusting entry results in a debit to an expense account and a credit to an asset account.
D)  none of these answer choices are correct.

Question 6

Expenses incurred but not yet paid or recorded are called

Accepted Answer

A)  prepaid expenses.
B)  accrued expenses.
C)  interim expenses.
D)  unearned expenses.

Question 7

If an adjusting entry is not made for an accrued revenue,

Accepted Answer

A)  assets will be overstated.
B)  expenses will be understated.
C)  stockholders' equity will be understated.
D)  revenues will be overstated.

Question 8

Characteristics associated with relevant accounting information are

Accepted Answer

A)  comparability and timeliness.
B)  predictive value and confirmatory value.
C)  neutral and verifiable.
D)  consistency and understandability.

Question 9

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 10

Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2015. Interest expense for the year ended December 31, 2015 was

Accepted Answer

A)  $21,000.
B)  $24,000.
C)  $27,000.
D)  $36,000.

Question 11

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Accepted Answer

A)  debit Unearned Service Revenue and credit Cash.
B)  debit Unearned Service Revenue and credit Service Revenue.
C)  debit Unearned Service Revenue and credit Prepaid Expense.
D)  debit Unearned Service Revenue and credit Accounts Receivable.

Question 12

Depreciation based on revaluation of land and buildings is permitted under

Accepted Answer

A)  GAAP but not IFRS.
B)  IFRS but not GAAP.
C)  both IFRS and GAAP.
D)  neither IFRS nor GAAP.

Question 13

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Accepted Answer

A) True 
 B)False  False

Question 14

Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for $49,500. The insurance policy is in effect from March 2015 through February 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Accepted Answer

A)  net income and assets will be understated by $41,250.
B)  net income and assets will be overstated by $41,250.
C)  net income and assets will be understated by $8,250.
D)  net income and assets will be overstated by $8,250. B

Question 15

A liability-revenue relationship exists with

Accepted Answer

A)  prepaid expense adjusting entries.
B)  accrued expense adjusting entries.
C)  unearned revenue adjusting entries.
D)  accrued revenue adjusting entries.

Question 16

Which one of the following is not an enhancing quality of useful information?

Accepted Answer

A)  Timeliness
B)  Understandability
C)  Materiality
D)  Comparability

Question 17

At December 31, 2015, before any year-end adjustments, Murmur Company's Insurance Expense account had a balance of $2,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $2,800 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

Accepted Answer

A)  $2,450.
B)  $3,450.
C)  $2,800.
D)  $5,250.

Question 18

Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 19

If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, the failure to make an adjusting entry will cause

Accepted Answer

A)  liabilities to be overstated.
B)  revenues to be understated.
C)  revenues to be overstated.
D)  accounts receivable to be overstated.

Question 20

An expense is recorded under the cash basis only when

Accepted Answer

A)  services are performed.
B)  it is earned.
C)  cash is paid.
D)  it is incurred. C

Exam 3: Adjusting the Accounts

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

Correct Answer
verified

The quality of consistency pertains to the use of the same accounting principles by firms in the same industry.

Correct Answer
verified

Which of the following would not result in unearned revenue?

Correct Answer
verified

Depreciation is the process of

Correct Answer
verified

For prepaid expense adjusting entries

Correct Answer
verified

Expenses incurred but not yet paid or recorded are called

Correct Answer
verified

If an adjusting entry is not made for an accrued revenue,

Correct Answer
verified

Characteristics associated with relevant accounting information are

Correct Answer
verified

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Correct Answer
verified

Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2015. Interest expense for the year ended December 31, 2015 was

Correct Answer
verified

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Correct Answer
verified

Depreciation based on revaluation of land and buildings is permitted under

Correct Answer
verified

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Correct Answer
verified
False

Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for $49,500. The insurance policy is in effect from March 2015 through February 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Correct Answer
verified
B

A liability-revenue relationship exists with

Correct Answer
verified

Which one of the following is not an enhancing quality of useful information?

Correct Answer
verified

Correct Answer
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Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

Correct Answer
verified

If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, the failure to make an adjusting entry will cause

Correct Answer
verified

An expense is recorded under the cash basis only when

Correct Answer
verified
C

Exam 3: Adjusting the Accounts

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

Correct AnswerverifiedShow Answer

The quality of consistency pertains to the use of the same accounting principles by firms in the same industry.

Correct AnswerverifiedShow Answer

Which of the following would not result in unearned revenue?

Correct AnswerverifiedShow Answer

Depreciation is the process of

Correct AnswerverifiedShow Answer

For prepaid expense adjusting entries

Correct AnswerverifiedShow Answer

Expenses incurred but not yet paid or recorded are called

Correct AnswerverifiedShow Answer

If an adjusting entry is not made for an accrued revenue,

Correct AnswerverifiedShow Answer

Characteristics associated with relevant accounting information are

Correct AnswerverifiedShow Answer

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Correct AnswerverifiedShow Answer

Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2015. Interest expense for the year ended December 31, 2015 was

Correct AnswerverifiedShow Answer

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Correct AnswerverifiedShow Answer

Depreciation based on revaluation of land and buildings is permitted under

Correct AnswerverifiedShow Answer

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

Correct AnswerverifiedFalse

Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for $49,500. The insurance policy is in effect from March 2015 through February 2016. If the company neglects to make the proper year-end adjustment for the expired insurance

Correct AnswerverifiedB

A liability-revenue relationship exists with

Correct AnswerverifiedShow Answer

Which one of the following is not an enhancing quality of useful information?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Revenue received before services are performed and expenses paid before being used or consumed are both initially recorded as liabilities.

Correct AnswerverifiedShow Answer

If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, the failure to make an adjusting entry will cause

Correct AnswerverifiedShow Answer

An expense is recorded under the cash basis only when

Correct AnswerverifiedC

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False

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B

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C