Question 1

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?

Accepted Answer

A)  Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
B)  Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
C)  Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
D)  Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.

Question 2

Financial statements can be prepared from the information provided by an adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 3

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 4

At March 1, 2022, Minutemen Corp.had supplies on hand of $500.During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500.The March 31 adjusting journal entry should include a

Accepted Answer

A)  debit to the Supplies account for $1,500.
B)  credit to the Supplies account for $500.
C)  debit to the Supplies account for $1,200.
D)  credit to the Supplies account for $1,500.

Question 5

Mary Chain Investments purchased an 18-month insurance policy on May 31, 2022 for $3,600.The December 31, 2022 balance sheet would report Prepaid Insurance of

Accepted Answer

A)  $0 because Prepaid Insurance is reported on the Income Statement.
B)  $1,400.
C)  $2,200.
D)  $3,600.

Question 6

In a service-type business, revenue is considered recognized

Accepted Answer

A)  at the end of the month.
B)  at the end of the year.
C)  when the service is performed.
D)  when cash is received.

Question 7

On January 1, 2021, Mudhoney Inc.purchased equipment for $45,000.The company is depreciating the equipment at the rate of $750 per month.At January 31, 2022, the adjusted balance in Accumulated Depreciation is

Accepted Answer

A)  $750.
B)  $9,000.
C)  $9,750.
D)  $35,250.

Question 8

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

Accepted Answer

A)  net income to be overstated.
B)  an understatement of assets and an understatement of revenues.
C)  an understatement of revenues and an understatement of liabilities.
D)  an understatement of revenues and an overstatement of liabilities.

Question 9

Accepted Answer

Pavement Company purchased a truck from Bee Thousand Corp.by issuing a six-month, 8% note payable for $90,000 on November 1.On December 31, the accrued expense adjusting entry is

Question 10

Accrued revenues are amounts recorded and received but not yet recognized.

Accepted Answer

A) True 
 B)False

Question 11

The expense recognition principle states that expenses should be matched with revenues.Another way of stating the principle is to say that

Accepted Answer

A)  assets should be matched with liabilities.
B)  efforts should be matched with accomplishments.
C)  owner withdrawals should be matched with owner contributions.
D)  cash payments should be matched with cash receipts.

Question 12

Book value is also referred to as

Accepted Answer

A)  accumulated depreciation.
B)  carrying value.
C)  fair value.
D)  original cost.

Question 13

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

Accepted Answer

A)  expenses will be overstated.
B)  liabilities will be understated.
C)  net income will be understated.
D)  stockholders' equity will be understated.

Question 14

Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2022.Interest expense for the year ended December 31, 2022 was

Accepted Answer

A)  $6,000.
B)  $2,500.
C)  $2,000.
D)  $1,500.

Question 15

Valuing assets at their fair value rather than at their cost is inconsistent with the

Accepted Answer

A)  economic entity assumption.
B)  historical cost principle.
C)  periodicity assumption.
D)  full disclosure principles.

Question 16

If an adjustment is needed for unearned revenues, the

Accepted Answer

A)  liability and related revenue are overstated before adjustment.
B)  liability and related revenue are understated before adjustment.
C)  liability is overstated and the related revenue is understated before adjustment.
D)  liability is understated and the related revenue is overstated before adjustment.

Question 17

Which of the following reflects the balances of prepayment accounts prior to adjustment?

Accepted Answer

A)  Balance sheet accounts are understated and income statement accounts are understated.
B)  Balance sheet accounts are overstated and income statement accounts are overstated.
C)  Balance sheet accounts are overstated and income statement accounts are understated.
D)  Balance sheet accounts are understated and income statement accounts are overstated.

Question 18

Which one of the following is not a justification for adjusting entries?

Accepted Answer

A)  Adjusting entries are necessary to ensure that the revenue recognition principle is followed.
B)  Adjusting entries are necessary to ensure that the expense recognition principle is followed.
C)  Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.
D)  Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Question 19

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.

Question 20

Which of the following is not an accounting assumption?

Accepted Answer

A)  Integrity
B)  Going concern
C)  Periodicity
D)  Economic entity

Exam 3: Adjusting the Accounts

An expense is recorded under the cash basis only when

Correct Answer
verified

Mary Chain Investments purchased an 18-month insurance policy on May 31, 2022 for $3,600.The December 31, 2022 balance sheet would report Prepaid Insurance of

Correct Answer
verified

Which one of the following is not a justification for adjusting entries?

Correct Answer
verified

Correct Answer
verified

In a service-type business, revenue is considered recognized

Correct Answer
verified

Accrued revenues are amounts recorded and received but not yet recognized.

Correct Answer
verified

At March 1, 2022, Minutemen Corp.had supplies on hand of $500.During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500.The March 31 adjusting journal entry should include a

Correct Answer
verified

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

Correct Answer
verified

Book value is also referred to as

Correct Answer
verified

On January 1, 2021, Mudhoney Inc.purchased equipment for $45,000.The company is depreciating the equipment at the rate of $750 per month.At January 31, 2022, the adjusted balance in Accumulated Depreciation is

Correct Answer
verified

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Correct Answer
verified

Valuing assets at their fair value rather than at their cost is inconsistent with the

Correct Answer
verified

Which of the following is not an accounting assumption?

Correct Answer
verified

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?

Correct Answer
verified

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

Correct Answer
verified

Financial statements can be prepared from the information provided by an adjusted trial balance.

Correct Answer
verified

If an adjustment is needed for unearned revenues, the

Correct Answer
verified

Which of the following reflects the balances of prepayment accounts prior to adjustment?

Correct Answer
verified

Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2022.Interest expense for the year ended December 31, 2022 was

Correct Answer
verified

The expense recognition principle states that expenses should be matched with revenues.Another way of stating the principle is to say that

Correct Answer
verified

Exam 3: Adjusting the Accounts

An expense is recorded under the cash basis only when

Correct AnswerverifiedShow Answer

Mary Chain Investments purchased an 18-month insurance policy on May 31, 2022 for $3,600.The December 31, 2022 balance sheet would report Prepaid Insurance of

Correct AnswerverifiedShow Answer

Which one of the following is not a justification for adjusting entries?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a service-type business, revenue is considered recognized

Correct AnswerverifiedShow Answer

Accrued revenues are amounts recorded and received but not yet recognized.

Correct AnswerverifiedShow Answer

At March 1, 2022, Minutemen Corp.had supplies on hand of $500.During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500.The March 31 adjusting journal entry should include a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Book value is also referred to as

Correct AnswerverifiedShow Answer

On January 1, 2021, Mudhoney Inc.purchased equipment for $45,000.The company is depreciating the equipment at the rate of $750 per month.At January 31, 2022, the adjusted balance in Accumulated Depreciation is

Correct AnswerverifiedShow Answer

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period.

Correct AnswerverifiedShow Answer

Valuing assets at their fair value rather than at their cost is inconsistent with the

Correct AnswerverifiedShow Answer

Which of the following is not an accounting assumption?

Correct AnswerverifiedShow Answer

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?

Correct AnswerverifiedShow Answer

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause

Correct AnswerverifiedShow Answer

Financial statements can be prepared from the information provided by an adjusted trial balance.

Correct AnswerverifiedShow Answer

If an adjustment is needed for unearned revenues, the

Correct AnswerverifiedShow Answer

Which of the following reflects the balances of prepayment accounts prior to adjustment?

Correct AnswerverifiedShow Answer

Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2022.Interest expense for the year ended December 31, 2022 was

Correct AnswerverifiedShow Answer

The expense recognition principle states that expenses should be matched with revenues.Another way of stating the principle is to say that

Correct AnswerverifiedShow Answer

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