Question 1

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

Accepted Answer

A) True 
 B)False

Question 2

What effect will this adjustment have on the accounting records?

Accepted Answer

A)   increase net income
B)   increase revenues reported for the period
C)   decrease liabilities
D)   all of theseE) B) and C)
F) All of the above

Question 3

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

Accepted Answer

A) True 
 B)False

Question 4

The financial statements measure precisely the financial condition and results of operations of a business.

Accepted Answer

A) True 
 B)False

Question 5

Vertical analysis is useful for analyzing financial statement changes over time.

Accepted Answer

A) True 
 B)False

Question 6

How will the following adjusting journal entry affect the accounting equation?

Accepted Answer

A)   increase assets, increase revenues
B)   increase liabilities, increase revenues
C)   decrease liabilities, increase revenues
D)   decrease liabilities, decrease revenuesE) A) and B)
F) All of the above

Question 7

At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Accepted Answer

A) True 
 B)False

Question 8

DogMart Company records depreciation to Office Equipment and Production Equipment. Depreciation for the period ending December 31 is $1,400 for Office Equipment and $2,650 for Production Equipment. Prepare two entries to record the Office Equipment and Production Equipment depreciation.

Accepted Answer

The answer of DogMart Company records depreciation to Office Equipment...

Question 9

For each of the following, journalize the necessary adjusting entry:

Accepted Answer

The answer of For each of the following, journalize the...

Question 10

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

Accepted Answer

A)   Salary expense for the year was understated.
B)   The total of the liabilities at the end of the year was overstated.
C)   Net income for the year was understated.
D)   Stockholders' equity at the end of the year was understated.E) A) and C)
F) C) and D)

Question 11

The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.

Accepted Answer

A) True 
 B)False

Question 12

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?

Accepted Answer

A)   decreases the balance of a stockholders'equity account
B)   increases the balance of a liability account
C)   increases the balance of an asset account
D)   decreases the balance of an expense accountE) A) and C)
F) B) and D)

Question 13

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Accepted Answer

A)   equipment allocation
B)   depreciation
C)   accumulation
D)   matchingE) A) and C)
F) C) and D)

Question 14

The Accumulated Depreciation's account balance is the sum of the depreciation expense recorded in past periods.

Accepted Answer

A) True 
 B)False

Question 15

Income statements for Debra's Design Services are shown below.
  (a) Prepare a vertical analysis of Debra's Design Services income statements.
(b) Does the analysis indicate favorable or unfavorable trend(s)?
(c) What other information would enhance the analysis?

Accepted Answer

(a)

(b) The vertical analysis shows bo...

Question 16

Requirement: Make the journal entries for both of the following:

Accepted Answer

(a) On December 1, $12,500 was received ...

Question 17

Generally accepted accounting principles requires that companies use the ____ of accounting.

Accepted Answer

A)   cash basis
B)   deferral basis
C)   accrual basis
D)   account basisE) A) and B)
F) None of the above

Question 18

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not true regarding depreciation?

Accepted Answer

A)   Depreciation allocates the cost of a fixed asset over its estimated life.
B)   Depreciation expense reflects the decrease in market value each year.
C)   Depreciation is an allocation not a valuation method.
D)   Depreciation expense does not measure changes in market value.E) All of the above
F) A) and C)

Question 20

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

Accepted Answer

A)   Adjust supplies inventory to actual.
B)   Record purchase of supplies.
C)   Reduce supplies expense.
D)   Record sale of supplies.E) None of the above
F) All of the above

Exam 3: The Adjusting Process

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

Correct AnswerverifiedShow Answer

For each of the following, journalize the necessary adjusting entry:

Correct AnswerverifiedShow Answer

The financial statements measure precisely the financial condition and results of operations of a business.

Correct AnswerverifiedShow Answer

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

Correct AnswerverifiedShow Answer

Income statements for Debra's Design Services are shown below. (a) Prepare a vertical analysis of Debra's Design Services income statements. (b) Does the analysis indicate favorable or unfavorable trend(s)? (c) What other information would enhance the analysis?

Correct Answerverified(a) (b) The vertical analysis shows bo...View AnswerShow Answer

What effect will this adjustment have on the accounting records?

Correct AnswerverifiedShow Answer

Vertical analysis is useful for analyzing financial statement changes over time.

Correct AnswerverifiedShow Answer

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Correct AnswerverifiedShow Answer

At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Correct AnswerverifiedShow Answer

Generally accepted accounting principles requires that companies use the ____ of accounting.

Correct AnswerverifiedShow Answer

The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.

Correct AnswerverifiedShow Answer

Requirement: Make the journal entries for both of the following:

Correct Answerverified(a) On December 1, $12,500 was received ...View AnswerShow Answer

How will the following adjusting journal entry affect the accounting equation?

Correct AnswerverifiedShow Answer

The Accumulated Depreciation's account balance is the sum of the depreciation expense recorded in past periods.

Correct AnswerverifiedShow Answer

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding depreciation?

Correct AnswerverifiedShow Answer

DogMart Company records depreciation to Office Equipment and Production Equipment. Depreciation for the period ending December 31 is $1,400 for Office Equipment and $2,650 for Production Equipment. Prepare two entries to record the Office Equipment and Production Equipment depreciation.

Correct AnswerverifiedShow Answer

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?

Correct AnswerverifiedShow Answer

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

Correct AnswerverifiedShow Answer

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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(a) On December 1, $12,500 was received ...
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