Accounting 26th Edition Carl Warren James M Reeve Jonathan Duchac – Test Bank
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Sample Test
Chapter 03 The Adjusting Progress
1. The
system of accounting where revenues are recorded when they are earned and
expenses are recorded when they are incurred is called the cash basis of
accounting.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
2. Generally
accepted accounting principles require accrual-basis accounting.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
3. The
revenue recognition concept states that revenue should be recorded in the same
period as the cash is received.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
4. The
matching concept requires expenses be recorded in the same period that the
related revenue is recorded.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
5. For
most large businesses, the cash basis of accounting will provide accurate
financial statements for user needs.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
6. An
example of deferred revenue is Unearned Rent.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
7. Accruals
are needed when an unrecorded expense has been incurred or an unrecorded
revenue has been earned.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
8. If
the debit portion of an adjusting entry is to an asset account, then the credit
portion must be to a liability account.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06
– Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
9. Proper
reporting of revenues and expenses in a period is due to the accounting period
concept.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
10.
The revenue recognition concept requires that the reporting of
revenue be included in the period when cash for the service is received.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
11.
Revenues and expenses should be recorded in the same period to
which they relate.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
12.
The matching concept supports matching expenses with the related
revenues.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
13.
Even though GAAP requires the accrual basis of accounting, some
businesses prefer using the cash basis of
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.3-01
– 3-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
14.
The updating of accounts is called the adjusting process.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06
– Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
15.
Adjusting entries affect balance sheet accounts at the exclusion
of income statement accounts.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
16.
Adjusting entries affect only expense and asset accounts.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
17.
An adjusting entry would adjust revenue so it is reported when
earned and not when cash is received.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
18.
An adjusting entry would adjust an expense account so the
expense is reported when incurred.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
19.
An adjusting entry to accrue an incurred expense will affect
total liabilities.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
20.
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.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
21.
Deferrals are recorded transactions that delay the recognition
of an expense or revenue.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
22.
Adjustments for accruals are needed to record a revenue that has
been earned or an expense that has been incurred but not recorded.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
23.
Unearned revenue is a liability.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
24.
The systematic allocation of land’s cost to expense is called
depreciation.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.ACBSP.APC.13 – Long-term Assets Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
25.
The difference between the balance of a fixed asset account and
the balance of its related accumulated depreciation account is termed the book
value of the asset.
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13
– Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
26.
The balance in the accumulated depreciation account is the sum
of the depreciation expense recorded in past
1. True
2. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13
– Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
27.
Accumulated depreciation accounts are liability accounts.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13
– Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
28.
Accumulated depreciation is reported on the income statement.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
29.
A contra asset account for Land will normally appear on the
balance sheet.
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.ACBSP.APC.13 – Long-term Assets Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
30.
Depreciation Expense is reported on the balance sheet as an
addition to the related asset.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
31.
A company pays $36,000 for twelve month’s rent on October 1,
recording the prepayment as an asset. The adjusting entry on December 31 is a
debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
32.
A company receives $360 for a 12-month trade magazine
subscription on August 1. The adjusting entry on December 31 is a debit to
Unearned Subscription Revenue, $150, and credit to Subscription Revenue, $150.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
33.
A company depreciates its equipment $500 a year. The adjusting
entry on December 31 is a debit to Depreciation Expense, $500, and a credit to
Equipment, $500.
1. True
2. False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
34.
A company pays an employee $3,000 for a fiveday work week,
Monday–Friday. The adjusting entry on December 31, which is a Wednesday, is a
debit to Wages Expense, $1,800, and a credit to Wages Payable, $1,800.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
35.
A company receives $6,500 for two season tickets sold on
September 1. If $2,500 is earned by December 31, the adjusting entry made at
that time is a debit to Cash, $2,500, and a credit to Ticket Revenue, $2,500.
1. True
2. False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
36.
A company realizes that the last two day’s revenue for the month
was billed but not recorded. The adjusting entry on December 31 is a debit to
Accounts Receivable and a credit to Fees Earned.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
37.
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.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s :Knowledge
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 –
Measurement
BUSPROG: Analytic
38.
A fixed asset’s market value is reflected on the balance sheet.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.ACBSP.APC.13 – Long-term Assets Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
39.
If the adjustment for accrued salaries at the end of the period
is inadvertently omitted, both liabilities and owner’s equity will be
understated for the period.
1. True
2. False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
40.
If the adjustment to recognize expired insurance at the end of
the period is inadvertently omitted, the assets at the end of the period will
be understated.
1. True
2. False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
41.
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.
1. True
2. False
ANSWER: True
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
42.
If the adjustment for depreciation for the year is inadvertently
omitted, the assets on the balance sheet at the end of the period will be
understated.
1. True
2. False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
43.
Adjusting journal entries are dated on the last day of the
period.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
44.
By ignoring and not posting the adjusting journal entries to the
appropriate accounts, net income will always be
1. True
2. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-03
– 03-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
45.
The financial statements are prepared from the unadjusted trial
balance.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-04
– 03-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
46.
The adjustment for accrued fees was debited to Accounts Payable
instead of Accounts Receivable. This error will be detected when the adjusted
trial balance is prepared.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-04
– 03-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
47.
The adjusted trial balance verifies that total debits equals
total credits before the adjusting entries are prepared.
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-04
– 03-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
48.
Vertical analysis compares each item in a financial statement
with a total amount from the same statement.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-05
– 03-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
49.
When preparing an income statement vertical analysis, each
revenue and expense is expressed as a percent of net
1. True
2. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-05
– 03-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
50.
Vertical analysis is useful for analyzing financial statement
changes over time.
1. True
2. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-05
– 03-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09
– Financial Statements
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
51.
The revenue recognition concept
1. is
not in conflict with the cash method of accounting.
2. determines
when revenue is credited to a revenue account.
3. states
that revenue is not recorded until the cash is received.
4. controls
all revenue reporting for the cash basis of accounting.
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
52.
The matching concept
1. addresses
the relationship between the journal and the balance sheet.
2. determines
whether the normal balance of an account is a debit or credit.
3. requires
that the dollar amount of debits equal the dollar amount of credits on a trial
balance.
4. states
that the revenues and related expenses should be reported in the same period.
ANSWER: d
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
53.
Using accrual accounting, revenue is recorded and reported only
1. when
cash is received without regard to when the services are rendered.
2. when
the services are rendered without regard to when cash is received.
3. when
cash is received at the time services are rendered.
4. if
cash is received after the services are rendered.
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
54.
Using accrual accounting, expenses are recorded and reported
only
1. when
they are incurred, whether or not cash is paid
2. when
they are incurred and paid at the same time
3. if
they are paid before they are incurred
4. if
they are paid after they are incurred
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
55.
The accounting concepts upon which deferrals and accruals are
based is
1. matching
2. cost
3. price-level
adjustment
4. conservatism
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
56.
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?
1. decreases
the balance of an owner’s equity account
2. increases
the balance of a liability account
3. increases
the balance of an asset account
4. decreases
the balance of an expense account
ANSWER: b
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
57.
If the effect of the credit portion of an adjusting entry is to
increase the balance of a liability account, which of the following describes
the effect of the debit portion of the entry?
1. increases
the balance of a contra asset account
2. increases
the balance of an asset account
3. decreases
the balance of an owner’s equity account
4. increases
the balance of an expense account
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
58.
Prior to the adjusting process, accrued expenses have
1. not
yet been incurred, paid, or recorded
2. been
incurred, not paid, but have been recorded
3. been
incurred, not paid, and not recorded
4. been
paid but have not yet been incurred
ANSWER: c
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
59.
Prior to the adjusting process, accrued revenue has
1. been
earned and cash received
2. been
earned and not recorded as revenue
3. not
been earned but recorded as revenue
4. not
been recorded as revenue but cash has been received
ANSWER: b
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
60.
Deferred expenses have
1. not
yet been recorded as expenses but have been paid
2. been
recorded as expenses and paid
3. been
incurred and paid
4. not
yet been recorded as expenses
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
61.
Deferred revenue is revenue that is
1. earned
and the cash has been received
2. earned
but the cash has not been received
3. not
earned and the cash has not been received
4. not
earned but the cash has been received
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 –
Measurement
BUSPROG: Analytic
62.
Adjusting entries are
1. the
same as correcting entries
2. needed
to bring accounts up to date and match revenue and expense
3. optional
under generally accepted accounting principles
4. rarely
needed in large companies
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
63.
Adjusting entries affect at least one
1. income
statement account and one balance sheet account
2. revenue
and the drawing account
3. asset
and one owner’s equity account
4. revenue
and one capital account
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
64.
The term used to describe an expense that has not been paid and
has not yet been recognized in the accounts by a routine entry is
1. prepaid
2. deferred
3. accrued
4. matched
ANSWER: c
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
65.
Which of the following is not a
characteristic of accrual basis of accounting?
1. Revenues
and expenses are reported in the period in which cash is received or paid.
2. Revenues
are reported on the income statement in the period in which they are earned.
3. Accrual
basis of accounting supports the matching concept.
4. Expenses
are reported in the same period as the revenues to which they relate.
ANSWER: a
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
66.
Generally accepted accounting principles require that companies
use the of accounting.
1. cash
basis
2. deferral
basis
3. accrual
basis
4. account
basis
ANSWER: c
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02
– GAAP
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
67.
The cash basis of accounting records revenues and expenses when
the cash is exchanged while the accrual basis of accounting
1. records
revenues when they are earned and expenses when they are paid
2. records
revenues and expenses when they are incurred
3. records
revenues when cash is received and expenses when they are incurred
4. records
revenues and expenses when the company needs to apply for a loan
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
68.
By matching revenues and expenses in the same period in which
they incur
1. net
income or loss will always be underestimated
2. net
income or loss will always be overestimated
3. net
income or loss will be properly reported on the income statement
4. net
income or loss will not be determined
ANSWER: c
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
69.
Adjusting entries always include
1. only
income statement accounts
2. only
balance sheet accounts
3. the
cash account
4. at least
one income statement account and one balance sheet account
ANSWER: d
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
70.
Prepaid expenses are eventually expected to
1. become
expenses when their future economic value expires
2. become
revenues when services are performed
3. become
expenses in the period when they are paid
4. become
revenues when the liability is no longer owed
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.13 – Long-term Assets Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
71.
Which of the following is considered to be unearned revenue?
1. theater
tickets sold last month for yesterday’s performance
2. theater
tickets sold yesterday on credit for yesterday’s performance
3. theater
tickets that were not sold for the current performance
4. theater
tickets sold for next month’s performance
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.ACBSP.APC.16 – Current Liabilities Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
72.
Which of the following is an example of accrued revenue?
1. snow
removal services that have been paid for three months in advance
2. snow
removal services that have been provided but have not been billed or paid
3. an
agreement that has been signed for snow removal services for the next three
months
4. snow
removal services that has been provided and paid on the same day
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 –
Measurement
BUSPROG: Analytic
73.
Which of the following is considered to be an accrued expense?
1. A
computer technician has installed the latest software updates and was paid on
the same day.
2. A
computer technician has been paid in advance to install software updates as
they become available.
3. A
computer technician has just signed an agreement with you regarding pricing for
future work.
4. A
computer technician has installed the latest software updates, but you have not
received an invoice or made payment.
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.04
– Cash vs. Accrual
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
74.
Which account would normally not require
an adjusting entry?
1. Wages
Expense
2. Accounts
Receivable
3. Accumulated
Depreciation
4. Cash
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
75.
Which one of the accounts below would likely be included in an
accrual adjusting entry?
1. Insurance
Expense
2. Prepaid
Rent
3. Interest
Expense
4. Unearned
Rent
ANSWER: c
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCT.WARD.16.03-02 – 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
76.
Which of the following accounts would likely be included in a
deferral adjusting entry?
1. Interest
Revenue
2. Unearned
Revenue
3. Salaries
Payable
4. Accounts
Receivable
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-01
– 03-01
ACCT.WARD.16.03-02 – 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
77.
The balance in the prepaid rent account before adjustment at the
end of the year is $32,000, which represents four months’ rent paid on December
1. The adjusting entry required on December 31 is
1. debit
Rent Expense, $8,000; credit Prepaid Rent, $8,000
2. debit
Prepaid Rent, $24,000; credit Rent Expense, $8,000
3. debit
Rent Expense, $24,000; credit Prepaid Rent, $8,000
4. debit
Prepaid Rent, $8,000; credit Rent Expense, $8,000
ANSWER: a
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
78.
The balance in the office supplies account on January 1 was
$7,000, supplies purchased during January were $3,000, and the supplies on hand
at January 30 were $2,000. The amount to be used for the appropriate adjusting
entry is
79.
$4,300
80.
$12,000
81.
$5,000
82.
$8,000
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
79.
Which of the following is the proper adjusting entry, based on a
prepaid insurance account balance before adjustment of $14,000 and unexpired
insurance of $3,000, for the fiscal year ending on April 30?
1. debit
Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
2. debit
Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
3. debit
Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
4. debit
Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
80.
The entry to adjust for the cost of supplies used during the
accounting period is
1. debit
Supplies Expense; credit Supplies
2. debit
Owner Capital; credit Supplies
3. debit
Accounts Payable; credit Supplies
4. debit
Supplies; credit Owner Capital
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
81.
Buster Industries pays weekly salaries of $30,000 on Friday for
a five-day week ending on that day. The adjusting entry necessary at the end of
the fiscal period ending on Tuesday is
1. debit
Salaries Payable, $12,000; credit Cash, $12,000
2. debit
Salary Expense, $12,000; credit Drawing, $12,000
3. debit
Salary Expense, $12,000; credit Salaries Payable, $12,000
4. debit
Drawing, $12,000; credit Cash, $12,000
ANSWER: c
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
82.
The difference between the balance of a fixed asset account and
the related accumulated depreciation account is termed
1. historical
cost
2. contra
asset
3. book
value
4. market
value
ANSWER: c
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13
– Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
83.
The adjusting entry to record the depreciation of a building for
the fiscal period is
1. debit
Depreciation Expense; credit Building.
2. debit
Depreciation Expense; credit Accumulated Depreciation.
3. debit
Accumulated Depreciation; credit Depreciation Expense.
4. debit
Building; credit Depreciation Expense.
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
84.
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
1. equipment
allocation
2. depreciation
3. accumulation
4. matching
ANSWER: b
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.13 – Long-term Assets Reporting ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
85.
The entry to adjust the accounts for salaries accrued at the end
of the accounting period is
1. debit
Salaries Payable; credit Salaries Income
2. debit
Salaries Income; credit Salaries Payable
3. debit
Salaries Payable; credit Salaries Expense
4. debit
Salaries Expense; credit Salaries Payable
ANSWER: d
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
86.
The supplies account has a balance of $4,400 at the beginning of
the year and was debited during the year for $2,400, representing the total of
supplies purchased during the year. If $400 of supplies are on hand at the end
of the year, the supplies expense to be reported on the income statement for
the year is
87.
$400
88.
$2,000
89.
$6,800
90.
$6,400
ANSWER: d
DIFFICULTY: Moderate
Bloom’s: Applying
LEARNING OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 –
Measurement BUSPROG: Analytic
87.
Smokey Company purchases a one-year insurance policy on July 1
for $3,600. The adjusting entry on December 31 is
1. debit
Insurance Expense, $1,800; credit Prepaid Insurance, $1,800
2. debit
Insurance Expense, $1,500; credit Prepaid Insurance, $1,500
3. debit
Insurance Expense, $2,100; credit Prepaid Insurance, $2,100
4. debit
Prepaid Insurance, $1,800; credit Cash, $1,800
ANSWER: a
DIFFICULTY: Challenging
Bloom’s: Applying
LEARNING
OBJECTIVES: ACCT.WARD.16.03-02
– 03-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.07
– Adjusting Entries
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
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