Question 1

A deferral is the recognition of an expense that has arisen but has not yet been recorded.

Accepted Answer

A) True 
 B)False

Question 2

If an adjusting entry were not made at the end of an accounting period to remove the earned revenue from the Unearned Revenue account,

Accepted Answer

A)   assets would be understated.
B)   owner's equity would be overstated.
C)   liabilities would be understated.
D)   liabilities would be overstated.

Question 3

Which of the following accounts would appear on an adjusted trial balance but probably would not appear on a trial balance?

Accepted Answer

A)   Supplies Expense
B)   Accounts Payable
C)   Service Revenue
D)   Cash

Question 4

If a company is expected to survive, it is considered a going concern.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following accounts most likely would be found on both a trial balance and an adjusted trial balance?

Accepted Answer

A)   Utilities Expense
B)   Insurance Expense
C)   Supplies Expense
D)   Depreciation Expense-Equipment

Question 6

Failure to adjust for accrued wages at year end will result in an

Accepted Answer

A)   overstatement of liabilities.
B)   understatement of assets.
C)   understatement of owner's equity.
D)   overstatement of net income.

Question 7

Accrual accounting recognizes revenues and expenses at the point that cash changes hands.

Accepted Answer

A) True 
 B)False

Question 8

When preparing financial statements, the accountant assumes that the business will continue to operate indefinitely unless there is evidence to the contrary.

Accepted Answer

A) True 
 B)False

Question 9

The entry to record depreciation on a building is

Accepted Answer

A)   Accumulated Depreciation-Building - Debit; Building - Credit
B)   Depreciation Expense-Building - Debit; Building - Credit
C)   Depreciation Expense-Building - Debit; Cash - Credit
D)   Depreciation Expense-Building - Debit; Accumulated Depreciation-Building - Credit

Question 10

The adjustment for estimated property taxes would include a

Accepted Answer

A)   credit to Property Taxes Payable.
B)   debit to Unearned Property Taxes.
C)   credit to Property Taxes Expense.
D)   credit to Cash.

Question 11

Which of the following is not an application of accrual accounting?

Accepted Answer

A)   Recording advertising fees earned at the time the work is done
B)   Adjusting unearned advertising fees to the proper balance at the end of the month
C)   Recording advertising fees earned at the time the cash payment is received
D)   Recording telephone expense in the accounting period covered by the monthly bill

Question 12

Retailers often end their fiscal years .

Accepted Answer

A)   during the slack season
B)   during the peak of the busy season.
C)   at different times each year, depending on the tax consequences.
D)   on June 30.

Question 13

One application of accrual accounting is adjusting the accounts.

Accepted Answer

A) True 
 B)False

Question 14

Recording incurred but unpaid expenses is an example of an accrual.

Accepted Answer

A) True 
 B)False

Question 15

Use this information to answer the following question. The trial balance for Sanchez Company appears as follows:
 If on December 31, 2010, the insurance still unexpired amounted to $20, the adjusting entry would contain a

Accepted Answer

A)   debit to Prepaid Insurance for $30.
B)   credit to Prepaid Insurance for $30
C)   debit to Insurance Expense for $20.
D)   credit to Prepaid Insurance for $20.

Question 16

Which of the following is an application of accrual accounting?

Accepted Answer

A)   Depreciating a building as quickly as allowed by income tax regulations
B)   Recording utilities expense in the accounting period covered by the monthly bill
C)   Expensing a machine in its entirety when purchased
D)   Recording revenue at the time payment is received

Question 17

Which of the following is an example of a deferral?

Accepted Answer

A)   Debit Interest Expense, credit Interest Payable
B)   Debit Accounts Receivable, credit Legal Fees Earned
C)   Debit Property Taxes Expense, credit Property Taxes Payable
D)   Debit Depreciation Expense-Truck, credit Accumulated Depreciation-Truck

Question 18

Which of the following is an example of a deferral?

Accepted Answer

A)   Wages recorded but not yet paid
B)   The purchase of a company vehicle
C)   Legal fees earned but not yet collected
D)   The accumulation of interest in a bank account

Question 19

As the usefulness of a plant asset expires,

Accepted Answer

A)   an amount is transferred from one asset account to another.
B)   a related expense account is reduced.
C)   a liability is created.
D)   the cost of the asset is allocated to an expense account.

Question 20

The cash basis of accounting is prohibited for income tax purposes.

Accepted Answer

A) True 
 B)False

Exam 3: Measuring Business Income

Use this information to answer the following question. The trial balance for Sanchez Company appears as follows: If on December 31, 2010, the insurance still unexpired amounted to $20, the adjusting entry would contain a

Correct AnswerverifiedShow Answer

One application of accrual accounting is adjusting the accounts.

Correct AnswerverifiedShow Answer

If an adjusting entry were not made at the end of an accounting period to remove the earned revenue from the Unearned Revenue account,

Correct AnswerverifiedShow Answer

Which of the following is an example of a deferral?

Correct AnswerverifiedShow Answer

Which of the following is an application of accrual accounting?

Correct AnswerverifiedShow Answer

When preparing financial statements, the accountant assumes that the business will continue to operate indefinitely unless there is evidence to the contrary.

Correct AnswerverifiedShow Answer

As the usefulness of a plant asset expires,

Correct AnswerverifiedShow Answer

The cash basis of accounting is prohibited for income tax purposes.

Correct AnswerverifiedShow Answer

The adjustment for estimated property taxes would include a

Correct AnswerverifiedShow Answer

Accrual accounting recognizes revenues and expenses at the point that cash changes hands.

Correct AnswerverifiedShow Answer

Which of the following accounts most likely would be found on both a trial balance and an adjusted trial balance?

Correct AnswerverifiedShow Answer

The entry to record depreciation on a building is

Correct AnswerverifiedShow Answer

Recording incurred but unpaid expenses is an example of an accrual.

Correct AnswerverifiedShow Answer

A deferral is the recognition of an expense that has arisen but has not yet been recorded.

Correct AnswerverifiedShow Answer

Failure to adjust for accrued wages at year end will result in an

Correct AnswerverifiedShow Answer

If a company is expected to survive, it is considered a going concern.

Correct AnswerverifiedShow Answer

Which of the following is not an application of accrual accounting?

Correct AnswerverifiedShow Answer

Which of the following accounts would appear on an adjusted trial balance but probably would not appear on a trial balance?

Correct AnswerverifiedShow Answer

Retailers often end their fiscal years .

Correct AnswerverifiedShow Answer

Which of the following is an example of a deferral?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified