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Accounting Principles: True-False and Multiple Choice Questions, Exercises of Accounting

Huston-Tillotson University (HTU)Accounting

chapter 4 accounting principles

Typology: Exercises

2020/2021

Uploaded on 11/12/2021

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Homework - Part 4
TRUE-FALSE STATEMENTS
1. The periodicity assumption states that the economic life of a business entity can be divided
into artificial time periods.
2. The periodicity assumption is often referred to as the expense recognition principle.
3. The revenue recognition principle dictates that revenue be recognized in the accounting
period in which it is earned.
4. Expense recognition is tied to revenue recognition.
5. The revenue recognition principle and the expense recognition principle are helpful guides
used in determining net income or net loss for a period.
6. The expense recognition principle requires that efforts be related to accomplishments.
7. Recognizing when an expense contributes to the production of revenue is critical.
8. The expense recognition principle is frequently referred to as the matching principle.
9. Income will always be greater under the cash basis of accounting than under the accrual
basis of accounting.
10. The cash basis of accounting is not in accordance with generally accepted accounting
principles.
11. Adjusting entries are often made because some business events are not recorded as they
occur.
12. Adjusting entries are recorded in the general journal but are not posted to the accounts in
the general ledger.
13. Adjusting entries are not necessary if the trial balance debit and credit columns balances
are equal. F
14. An adjusting entry would be made to the revenue account only when cash is received.
15. An adjusting entry to a prepaid expense is required to recognize expired expenses.
16. An adjusting entry always involves two balance sheet accounts.
17. An adjusting entry always involves a balance sheet account and an income statement
account.
18. Revenue received before it is earned and expenses paid before being used or consumed
are both initially recorded as liabilities.
19. Revenue received before it is earned and expenses used or consumed before being paid
are both initially recorded as liabilities.
20. Accrued revenues are revenues that have been received but not yet earned.
21. Accrued revenues are revenues that have been earned but not yet recorded.
22. The difference between unearned revenue and accrued revenue is that accrued revenue
has been recorded and needs adjusting and unearned revenue has never been recorded.
23. If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the
future.
24. The cost of a depreciable asset less accumulated depreciation reflects the book value of
the asset.
25. The book value of a depreciable asset is always equal to its market value because
depreciation is a valuation technique.
26. Accumulated Depreciation is a liability account and has a credit normal account balance.
27. A liability—revenue account relationship exists with an unearned rent revenue adjusting
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Download Accounting Principles: True-False and Multiple Choice Questions and more Exercises Accounting in PDF only on Docsity!

Homework - Part 4

TRUE-FALSE STATEMENTS

  1. The periodicity assumption states that the economic life of a business entity can be divided into artificial time periods.
  2. The periodicity assumption is often referred to as the expense recognition principle.
  3. The revenue recognition principle dictates that revenue be recognized in the accounting period in which it is earned.
  4. Expense recognition is tied to revenue recognition.
  5. The revenue recognition principle and the expense recognition principle are helpful guides used in determining net income or net loss for a period.
  6. The expense recognition principle requires that efforts be related to accomplishments.
  7. Recognizing when an expense contributes to the production of revenue is critical.
  8. The expense recognition principle is frequently referred to as the matching principle.
  9. Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.
  10. The cash basis of accounting is not in accordance with generally accepted accounting principles.
  11. Adjusting entries are often made because some business events are not recorded as they occur.
  12. Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.
  13. Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal. F
  14. An adjusting entry would be made to the revenue account only when cash is received.
  15. An adjusting entry to a prepaid expense is required to recognize expired expenses.
  16. An adjusting entry always involves two balance sheet accounts.
  17. An adjusting entry always involves a balance sheet account and an income statement account.
  18. Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities.
  19. Revenue received before it is earned and expenses used or consumed before being paid are both initially recorded as liabilities.
  20. Accrued revenues are revenues that have been received but not yet earned.
  21. Accrued revenues are revenues that have been earned but not yet recorded.
  22. The difference between unearned revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and unearned revenue has never been recorded.
  23. If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.
  24. The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.
  25. The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.
  26. Accumulated Depreciation is a liability account and has a credit normal account balance.
  27. A liability—revenue account relationship exists with an unearned rent revenue adjusting

entry.

  1. The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

  2. Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

  3. The adjusting entry for unearned revenue results in an increase (a debit) to an asset account and an increase (a credit) to a revenue account.

  4. Asset prepayments become expenses when they expire.

  5. A contra asset account is subtracted from a related account in the balance sheet.

  6. Accrued revenues are revenues that have been earned but cash has not been received before financial statements have been prepared.

  7. The adjusting entry for accrued salaries requires a debit to Salaries Payable.

  8. The accrued interest for a three month note payable of $10,000 dated December 1, 2011 at an interest rate of 6% is $150 on December 31, 2011.

  9. Without an adjusting entry for accrued interest expense, liabilities and interest expense are understated, and net income and stockholders’ equity are overstated.

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

  11. An adjusted trial balance must be prepared before the adjusting entries can be recorded.

  12. Closing entries deal primarily with the balances of permanent accounts.

  13. The only accounts that are closed are temporary accounts.

  14. When closing entries are prepared, each income statement account is closed directly to retained earnings.

  15. Cash is a temporary account.

  16. The post-closing trial balance will contain only permanent—balance sheet—accounts.

  17. Accounts receivable is a permanent account.

  18. The Dividends account is closed to the Income Summary account at the end of each year.

  19. A revenue account is closed with a credit to the revenue account and a debit to Income Summary.

  20. An expense account is closed with a credit to the expense account and a debit to the Income Summary account.

  21. Financial statements must be prepared before the closing entries are made.

  22. In the accounting cycle, closing entries are prepared before adjusting entries.

  23. Closing entries result in the transfer of net income or net loss into the Retained Earnings account.

  24. The post closing trial balance will have fewer accounts than the adjusted trial balance.

  25. The accounting cycle begins with the journalizing of the transactions. *53. A 10-column work sheet is a permanent accounting record.

d. in the period that income taxes are paid.

  1. In a service-type business, revenue is considered earned: 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.
  2. The expense recognition principle matches: a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses.
  3. Otto’s Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was earned? a. August 31 b. August 1 c. September 5 d. September 6
  4. A company spends $20 million dollars for an office building. Over what period should the cost be written off? a. When the $20 million is expended in cash. b. All in the first year. c. After $20 million in revenue is earned. d. None of the above.
  5. The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. dividends should be matched with stockholder investments. d. cash payments should be matched with cash receipts.
  6. Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)? a. Cost principle. b. Periodicity principle. c. Revenue recognition principle. d. Expense recognition principle.
  7. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? a. December 5 b. December 10 c. November 30 d. December 1
  8. A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in:

a. January. b. February. c. the period when the workers receive their checks. d. either January or February depending on when the pay period ends.

  1. Which is not an application of revenue recognition? a. Recording revenue as an adjusting entry on the last day of the accounting period. b. Accepting cash from an established customer for services to be performed over the next three months. c. Billing customers on June 30 for services completed during June. d. Receiving cash for services performed.
  2. Why do generally accepted accounting principles require the application of the revenue recognition principle? a. Failure to apply the revenue recognition principle could lead to a misstatement of revenue. b. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. c. Recording revenue when cash is received is an objective application of the revenue recognition principle. d. Accounting software has made the revenue recognition easy to apply.
  3. On April 1, 2011, nPropel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. nPropel records depreciation expense of $48,000 for the calendar year ending December 31, 2011. Which accounting principle has been violated? a. Depreciation principle. b. No principle has been violated. c. Cash principle. d. Expense recognition principle.
  4. Under the cash basis of accounting: a. Revenue is recognized when services are performed. b. Expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue.
  5. Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.
  6. Using accrual accounting, expenses are recorded and reported only: a. when they are incurred whether or not cash is paid. b. when they are incurred and paid at the same time. c. if they are paid before they are incurred. d. if they are paid after they are incurred.
  7. A small company may be able to justify using a cash basis of accounting if they have: a. sales under $1,000,000. b. no accountants on staff. c. few receivables and payables.

 Sales of $4,500 on account  Collected $2,000 for services to be performed in 2012  Paid $1,375 cash in salaries for 2011  Purchased airline tickets for $250 in December for a trip to take place in 2012  4500- What is La More’s 2011 net income using accrual accounting? a. $3, b. $5, c. $5, d. $3,

  1. La More Company had the following transactions during 2011.  Sales of $4,500 on account  Collected $2,000 for services to be performed in 2012  Paid $1,125 cash in salaries  Purchased airline tickets for $250 in December for a trip to take place in 2012  2000-1125- What is La More’s 2011 net income using cash basis accounting? a. $5, b. $ c. $5, d. $
  2. Wang Company had the following transactions during 2011:  Sales of $5,400 on account  Collected $2,400 for services to be performed in 2012  Paid $1,550 cash in salaries for 2011  Purchased airline tickets for $300 in December for a trip to take place in 2012 What is Wang’s 2011 net income using accrual accounting? a. $4, b. $6, c. $6, d. $3,
  3. Wang Company had the following transactions during 2011:  Sales of $5,400 on account  Collected $2,400 for services to be performed in 2012  Paid $1,550 cash in salaries  Purchased airline tickets for $300 in December for a trip to take place in 2012 What is Wang’s 2011 net income using cash basis accounting? a. $ b. $1, c. $6, d. $
  4. Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Revenue earned $14,

Accounts receivable 3, Expenses incurred 7, Accounts payable (related to expenses) 750 Supplies purchased with cash 1, => Rev earned do basic acting=> Rev= 14000-AR(chua nhan dc cash)= 11000 => Exp incurred nma AP related to exp=> Expense da tra bang cash=> 7250-750= a. $4, b. $9, c. $2, d. $4,

  1. Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue earned $14, Accounts receivable 3, Expenses incurred 7, Accounts payable (related to expenses) 750 a. $6, b. $9, c. $4, d. $7,
  2. Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Cash received from customers $44, Accounts receivable 12, Cash paid for expenses 26, Accounts payable (related to expenses) 3, Prepaid rent for next period 7, a. $18, b. $27, c. $20, d. $11,
  3. Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Cash received from customers $44, Accounts receivable 12, Cash paid for expenses 26, Accounts payable (related to expenses) 3, Prepaid rent for next period 7, a. $18, b. $27, c. $20, d. $11,
  4. Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): a. revenue b. liability c. expense d. prepaid expense

d. made to balance sheet accounts only.

  1. Each of the following is a major type (or category) of adjusting entry except: a. earned expenses. b. prepaid expenses. c. accrued expenses. d. accrued revenues.

  2. Adjusting entries are required: a. because some costs expire with the passage of time and have not yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are earned. d. None of the above.

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

  4. An adjusting entry: a. affects two balance sheet accounts. b. affects two income statement accounts. c. affects a balance sheet account and an income statement account. d. is always a compound entry.

  5. Adjusting entries are: a. the same as correcting entries. b. needed to ensure that the expense recognition principle is followed. c. optional. d. rarely needed.

  6. The preparation of adjusting entries is: a. straightforward because the accounts that need adjustment will be out of balance. b. needed to ensure that the expense recognition principle is followed. c. only required for accounts that do not have a normal balance. d. optional when financial statements are prepared.

  7. If a resource has been consumed but a bill has not been received at the end of the accounting period, then: a. an expense should be recorded when the bill is received. b. an expense should be recorded when the cash is paid out. c. an adjusting entry should be made recognizing the expense. d. it is optional whether to record the expense before the bill is received.

  8. An asset–expense relationship exists with: a. liability accounts. b. revenue accounts. c. prepaid expense adjusting entries. d. accrued expense adjusting entries.

  9. A liability–revenue relationship exists with: a. asset accounts.

b. revenue accounts. c. unearned revenue adjusting entries. d. accrued expense adjusting entries.

  1. Adjusting entries can be classified as: a. postponements and advances. b. accruals and deferrals. c. deferrals and postponements. d. accruals and advances.
  2. Adjusting entries can be classified as: a. postponements and advances. b. accruals and advances. c. deferrals and postponements. d. accruals and deferrals.
  3. Accrued expenses are: a. incurred but not yet paid or recorded. b. paid and recorded in an asset account after they are used or consumed. c. paid and recorded in an asset account before they are used or consumed. d. incurred and already paid or recorded.
  4. Accrued revenues are: a. received and recorded as liabilities before they are earned. b. earned and recorded as liabilities before they are received. c. earned but not yet received or recorded. d. earned and already received and recorded.
  5. Prepaid expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.
  6. Goods purchased for future use in the business, such as supplies, are called: a. prepaid expenses. b. revenues. c. stockholders’ equity. d. liabilities.
  7. Accrued expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.
  8. Unearned revenues are: a. received and recorded as liabilities before they are earned. b. earned and recorded as liabilities before they are received. c. earned but not yet received or recorded. d. earned and already received and recorded.
  9. Adjusting entries affect at least: a. one revenue and one expense account. b. one asset and one liability account. c. one revenue and one balance sheet account. d. one income statement account and one balance sheet account.

a. debit Office Supplies Expense, $3,600; credit Office Supplies, $3,600. b. debit Office Supplies, $600; credit Office Supplies Expense, $600. c. debit Office Supplies Expense, $2,400; credit Office Supplies, $2,400. d. debit Office Supplies, $2,400; credit Office Supplies Expense, $2,400.

  1. Unearned revenue is classified as a(n): a. asset account. b. revenue account. c. contra revenue account. d. liability.
  2. Boyce Company purchased office supplies costing $5,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Office Supplies Expense, $3,600; credit Office Supplies, $3,600. b. debit Office Supplies, $1,400; credit Office Supplies Expense, $1,400. c. debit Office Supplies Expense, $1,400; credit Office Supplies, $1,400. d. debit Office Supplies, $3,600; credit Office Supplies Expense, $3,600.
  3. On July 1 the Fisher Shoe Store paid $15,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: a. debit Rent Expense, $15,000; credit Prepaid Rent, $2,500. b. debit Prepaid Rent, $2,500; credit Rent Expense, $2,500. c. debit Rent Expense, $2,500; credit Prepaid Rent, $2,500. d. debit Rent Expense, $15,000; credit Prepaid Rent, $12,500.
  4. The balance in the prepaid rent account before adjustment at the end of the year is $12, and represents three months rent paid on December 1. The adjusting entry required on December 31 is: a. debit Prepaid Rent, $4,000; credit Rent Expense $4,000. b. debit Prepaid Rent, $8,000; credit Rent Expense, $8,000. c. debit Rent Expense, $12,000; credit Prepaid Rent, $12,000. d. debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.
  5. 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: a. debit Unearned Revenue and credit Cash. b. debit Unearned Revenue and credit Revenue Earned. c. debit Unearned Revenue and credit Prepaid Expense. d. debit Unearned Revenue and credit Accounts Receivable.
  6. Accumulated Depreciation is a(n): a. expense account. b. stockholders’ equity account. c. liability account. d. contra asset account.
  7. The Harris Company purchased a computer for $3,000 on December 1. It is estimated that annual depreciation on the computer will be $600. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: a. debit Depreciation Expense, $600; credit Accumulated Depreciation, $600. b. debit Depreciation Expense, $50; credit Accumulated Depreciation, $50. c. debit Depreciation Expense, $2,400; credit Accumulated Depreciation, $2,400.

d. debit Office Equipment, $3,000; credit Accumulated Depreciation, $3,000.

  1. Adjustments for unearned revenue: a. decrease liabilities and increase revenues. b. increase liabilities and increase revenues. c. increase assets and increase revenues. d. decrease revenues and decrease assets.
  2. Leyland Realty Company received a check for $12,000 on July 1, which represents a 6- month advance payment of rent on a building it rents to a client. Unearned Rental Revenue was credited for the full $12,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 31: a. debit Unearned Rental Revenue, $2,000; credit Rental Revenue, $2,000. b. debit Rental Revenue, $2,000; credit Unearned Rental Revenue, $2,000. c. debit Unearned Rental Revenue, $12,000; credit Rental Revenue, $12,000. d. debit Cash, $12,000; credit Rental Revenue, $12,000.
  3. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a: a. debit to an asset account and a credit to an expense account. b. debit to an expense account and a credit to an asset account. c. debit to an asset account and a credit to an asset account. d. debit to an expense account and a credit to an expense account.
  4. Adjustments for unearned revenue: a. decrease liabilities and increase revenues. b. increase liabilities and increase revenues. c. increase assets and increase revenues. d. decrease revenues and decrease assets.
  5. Payments of expenses that will benefit more than one accounting period are identified as a. expenses. b. revenues. c. prepaid expenses. d. liabilities.
  6. A company usually determines the amount of supplies used during a period by: a. adding the supplies on hand to the balance of the Supplies account. b. summing the amount of supplies purchased during the period. c. taking the difference between the supplies purchased and the supplies paid for during the period. d. taking the difference between the balance of the Supplies account and the cost of supplies on hand.
  7. If a company fails to make an adjusting entry to record supplies expense, then: a. stockholders’ equity will be understated. b. expense will be understated. c. assets will be understated. d. net income will be understated.
  8. Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies: a. remaining. b. purchased. c. used. d. either used or remaining.

omitted. Which of the following statements is true? a. Net income will be overstated for the current year. b. Total assets will be understated at the end of the current year. c. The balance sheet and income statement will be misstated but the Retained Earnings statement will be correct for the current year. d. Total expenses will be overstated at the end of the current year.

  1. The trial balance for Greenway Corporation appears as follows: Greenway Corporation Trial Balance December 31, 2011 Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Office Equipment 4, Accumulated Depreciation, Office Equipment $ 800 Accounts Payable 300 Common Stock 1, Retained Earnings 1, Service Revenue 3, Salaries Expense 1, Rent Expense 500 0 $6,500 $6, If, on December 31, 2011, supplies on hand were $30, the adjusting entry would contain a: a. debit to Supplies for $30. b. credit to Supplies for $30. c. debit to Supplies Expense for $110. d. credit to Supplies Expense for $110.
  2. The trial balance for Greenway Corporation appears as follows: Greenway Corporation Trial Balance December 31, 2011 Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Office Equipment 4, Accumulated Depreciation, Office Equipment $ 800 Accounts Payable 300 Common Stock 1, Retained Earnings 1, Service Revenue 3, Salaries Expense 1,

Rent Expense 500 0 $6,500 $6, If, on December 31, 2011, the insurance still unexpired amounted to $15, the adjusting entry would contain a: a. debit to Prepaid Insurance for $45. b. credit to Prepaid Insurance for $15. c. debit to Insurance Expense for $45. d. debit to Prepaid Insurance for $15.

  1. The trial balance for Greenway Corporation appears as follows: Greenway Corporation Trial Balance December 31, 2011 Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Office Equipment 4, Accumulated Depreciation, Office Equipment $ 800 Accounts Payable 300 Common Stock 1, Retained Earnings 1, Service Revenue 3, Salaries Expense 1, Rent Expense 500 0 $6,500 $6, If the estimated depreciation for office equipment were $800, the adjusting entry would contain a: a. credit to Accumulated Depreciation, Office Equipment for $800. b. credit to Depreciation Expense, Office Equipment for $800. c. debit to Accumulated Depreciation, Office Equipment for $800. d. credit to Office Equipment for $800.
  2. The trial balance for Greenway Corporation appears as follows: Greenway Corporation Trial Balance December 31, 2011 Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Office Equipment 4, Accumulated Depreciation, Office Equipment $ 800 Accounts Payable 300

b. contra asset. c. book value. d. liability.

  1. A new accountant working for Metcalf Company records $800 Depreciation Expense on store equipment as follows: Dr. Cr. Depreciation Expense ……………………................ 800 Cash ............................................................... 800 The effect of this entry is to: a. adjust the accounts to their proper amounts on December 31. b. understate total assets on the balance sheet as of December 31. c. overstate the book value of the depreciable assets at December 31. d. understate the book value of the depreciable assets as of December 31.
  2. From an accounting standpoint, the acquisition of long-lived assets is essentially a(n): a. accrual of expense. b. accrual of revenue. c. accrual of unearned revenue. d. prepaid expense.
  3. If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit: a. cash. b. prepaid rent. c. unearned rent revenue. d. accrued rent revenue.
  4. An accumulated depreciation account: a. is a contra liability account. b. increases on the debit side. c. is offset against total assets on the balance sheet. d. has a normal credit balance.
  5. The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the: a. market value of the asset. b. blue book value of the asset. c. book value of the asset. d. depreciated difference of the asset.
  6. Which of the following would not result in unearned revenue? 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.
  7. The policy at Adler Corporation is to expense all office supplies at the time of purchase. On the last day of the accounting period, there are $1,400 of unused office supplies on hand and the balance of supplies expense is $3,500. What should the accountant do? a. Debit Supplies and credit Supplies Expense for $1,400. b. Nothing, company policy says to expense supplies when purchased. c. Convince management to change its policy to avoid problems in the future. d. Debit Supplies Expense for $2,100 and credit Supplies for $2,100.
  8. Which statement is correct?

a. Accumulated Depreciation should always have a debit balance in the Adjusted Trial Balance. b. Accumulated Depreciation is added to the long-term liabilities on the Balance Sheet. c. Accumulated Depreciation, Office Equipment represents the total cost of office equipment that has expired up to the date of the Balance Sheet. d. Accumulated Depreciation is used to reveal the value of the related asset on the date of the Balance Sheet.

  1. Walton Company collected $7,200 in May of 2010 for 4 months of service which would take place from October of 2010 through January of 2011. The revenue reported from this transaction during 2010 would be: a. $ b. $5, c. $7, d. $1,
  2. Skypress Company collected $5,600 in May of 2010 for 4 months of service which would take place from October of 2010 through January of 2011. The revenue reported from this transaction during 2010 would be: a. $ b. $4, c. $5, d. $1,
  3. Masterfalls Corporation purchased a one-year insurance policy in January 2010 for $60,000. The insurance policy is in effect from March 2010 through February 2011. If the company neglects to make the proper year-end adjustment for the expired insurance: a. net income and assets will be understated by $50, b. net income and assets will be overstated by $50, c. net income and assets will be understated by $10, d. net income and assets will be overstated by $10,
  4. James & Younger Corporation purchased a one-year insurance policy in January 2010 for $36,000. The insurance policy is in effect from March 2010 through February 2010. If the company neglects to make the proper year-end adjustment for the expired insurance: a. net income and assets will be understated by $30,000. b. net income and assets will be overstated by $30,000. c. net income and assets will be understated by $6,000. d. net income and assets will be overstated by $6,000.
  5. At March 1, 2011, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $1,800. The March 31 balance sheet should report what balance in the supplies account? a. $1, b. $2, c. $1, d. $2,
  6. Darting Company purchased a computer system for $5,400 on January 1, 2011. The company expects to use the computer system for 3 years. It has no salvage value. Monthly depreciation expense on the asset is: a. $ b. $ c. $1,