Question 1

Explain when revenues and expenses are recognized and how this forms the basis for accrual accounting.

Accepted Answer

Revenue is recognized (recorded) when go...

Question 2

Accrued revenues are

Accepted Answer

A)  received and recorded as liabilities before they are earned.
B)  earned and recorded as liabilities before they are received.
C)  revenues that have not yet been received but have been earned and have been recorded for the first time by an adjusting entry.
D)  earned and already received and recorded.E) None of the above
F) C) and D)

Question 3

Accumulated Depreciation is a(n)

Accepted Answer

A)  expense account.
B)  shareholders' equity account.
C)  liability account.
D)  contra asset account.E) B) and D)
F) All of the above

Question 4

A company usually determines the amount of supplies used during a period by

Accepted Answer

A)  adding the supplies on hand to the balance of the Supplies account.
B)  totalling 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.E) A) and B)
F) A) and C)

Question 5

Fang's Tune-Up Shop uses the accrual basis of accounting.Fang services a car on May 31.The customer picks up the vehicle on June 1 and mails payment to Fang on June 5.Fang receives the cheque in the mail on June 6.When would Fang recognize the revenue as being earned?

Accepted Answer

A)  June 6
B)  June 5
C)  June 1
D)  May 31E) A) and D)
F) A) and C)

Question 6

If a three-month, 6% bank loan for $5,000 is signed on October 1, the interest expense for the month of October is $75.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

On February 15, a local business receives an invoice for electricity used in the month of January and pays it on March 1.In which month should the business recognize the expense?

Accepted Answer

A)  February
B)  January
C)  March
D)  No expense should be recorded.E) All of the above
F) C) and D)

Question 9

For a private company reporting under ASPE, adjusting entries must be prepared at least quarterly.

Accepted Answer

A) True 
 B)False

Question 10

Expense recognition is tied to changes in assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 11

Adjusting entries never affect cash.

Accepted Answer

A) True 
 B)False

Question 12

An adjusting entry would not include which of the following accounts?

Accepted Answer

A)  Cash
B)  Interest Receivable
C)  Property Tax Payable
D)  Unearned RevenueE) B) and C)
F) All of the above

Question 13

Accumulated Depreciation is a liability account and its normal account balance is a credit.

Accepted Answer

A) True 
 B)False

Question 14

Depreciation is a valuation concept; that is, we allocate costs to reflect the actual change in the value of the asset.

Accepted Answer

A) True 
 B)False

Question 15

At December 31, 2015, before any year-end adjustments, Ubanigi Corp.'s Insurance Expense account had a balance of $725 and its Prepaid Insurance account had a balance of $2,900.It was determined that $1,500 of the Prepaid Insurance had expired.The adjusted balance for Insurance Expense for the year would be

Accepted Answer

A)  $2,225.
B)  $1,500.
C)  $1,125.
D)  $ 725.E) A) and B)
F) B) and C)

Question 16

A post-closing trial balance will show

Accepted Answer

A)  zero balances for all accounts.
B)  zero balances for statement of financial position accounts.
C)  only statement of financial position accounts.
D)  only income statement accounts.E) A) and B)
F) A) and C)

Question 17

Using accrual accounting, expenses are recorded and reported only

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 18

Best Value Trucks Inc.began the year with $1,200 of supplies on hand.During the year the company purchased $4,000 worth of supplies, debited to the Supplies account.At the end of the year, there was $1,000 worth of supplies left on hand.The adjusting entry for Supplies at the end of the year would be:

Accepted Answer

The answer of Best Value Trucks Inc.began the year with...

Question 19

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Accepted Answer

A) True 
 B)False

Question 20

The preparation of adjusting entries

Accepted Answer

A)  is straight-forward because the accounts that need adjustment will be out of balance.
B)  requires an understanding of the company's operations and the inter-relationship of accounts.
C)  is only required for accounts that do not have a normal balance.
D)  is optional when financial statements are prepared.E) B) and C)
F) None of the above

Exam 4: Accrual Accounting Concepts

Adjusting entries never affect cash.

Correct Answer
verified

Depreciation is a valuation concept; that is, we allocate costs to reflect the actual change in the value of the asset.

Correct Answer
verified

Accumulated Depreciation is a(n)

Correct Answer
verified

Expense recognition is tied to changes in assets and liabilities.

Correct Answer
verified

The preparation of adjusting entries

Correct Answer
verified

For a private company reporting under ASPE, adjusting entries must be prepared at least quarterly.

Correct Answer
verified

A company usually determines the amount of supplies used during a period by

Correct Answer
verified

Correct Answer
verified

If a three-month, 6% bank loan for $5,000 is signed on October 1, the interest expense for the month of October is $75.

Correct Answer
verified

On February 15, a local business receives an invoice for electricity used in the month of January and pays it on March 1.In which month should the business recognize the expense?

Correct Answer
verified

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Correct Answer
verified

Correct Answer
verified

Accrued revenues are

Correct Answer
verified

Fang's Tune-Up Shop uses the accrual basis of accounting.Fang services a car on May 31.The customer picks up the vehicle on June 1 and mails payment to Fang on June 5.Fang receives the cheque in the mail on June 6.When would Fang recognize the revenue as being earned?

Correct Answer
verified

A post-closing trial balance will show

Correct Answer
verified

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

Correct Answer
verified

Using accrual accounting, expenses are recorded and reported only

Correct Answer
verified

Accumulated Depreciation is a liability account and its normal account balance is a credit.

Correct Answer
verified

Explain when revenues and expenses are recognized and how this forms the basis for accrual accounting.

Correct Answer
verified
Revenue is recognized (recorded) when go...
View Answer

An adjusting entry would not include which of the following accounts?

Correct Answer
verified

Exam 4: Accrual Accounting Concepts

Adjusting entries never affect cash.

Correct AnswerverifiedShow Answer

Depreciation is a valuation concept; that is, we allocate costs to reflect the actual change in the value of the asset.

Correct AnswerverifiedShow Answer

Accumulated Depreciation is a(n)

Correct AnswerverifiedShow Answer

Expense recognition is tied to changes in assets and liabilities.

Correct AnswerverifiedShow Answer

The preparation of adjusting entries

Correct AnswerverifiedShow Answer

For a private company reporting under ASPE, adjusting entries must be prepared at least quarterly.

Correct AnswerverifiedShow Answer

A company usually determines the amount of supplies used during a period by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a three-month, 6% bank loan for $5,000 is signed on October 1, the interest expense for the month of October is $75.

Correct AnswerverifiedShow Answer

On February 15, a local business receives an invoice for electricity used in the month of January and pays it on March 1.In which month should the business recognize the expense?

Correct AnswerverifiedShow Answer

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accrued revenues are

Correct AnswerverifiedShow Answer

Fang's Tune-Up Shop uses the accrual basis of accounting.Fang services a car on May 31.The customer picks up the vehicle on June 1 and mails payment to Fang on June 5.Fang receives the cheque in the mail on June 6.When would Fang recognize the revenue as being earned?

Correct AnswerverifiedShow Answer

A post-closing trial balance will show

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using accrual accounting, expenses are recorded and reported only

Correct AnswerverifiedShow Answer

Accumulated Depreciation is a liability account and its normal account balance is a credit.

Correct AnswerverifiedShow Answer

Explain when revenues and expenses are recognized and how this forms the basis for accrual accounting.

Correct AnswerverifiedRevenue is recognized (recorded) when go...View AnswerShow Answer

An adjusting entry would not include which of the following accounts?

Correct AnswerverifiedShow Answer

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Revenue is recognized (recorded) when go...
View Answer

Correct Answer
verified