ACCT315 Chapter Notes - Chapter 3-3: Deferral, Accrual, Financial Statement
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Question 23
If a resource has been consumed but a bill hasnot been received at the end of the accountingperiod, then
an expense should be recorded when the bill is received. | ||
an expense should be recorded when the cash is paid out. | ||
an adjusting entry should be made recognizing the expense. | ||
it is optional whether to record the expense before the bill isreceived. |
3 points
Question 24
Prepaid expenses are
paid and recorded in an asset account before they are used orconsumed. | ||
paid and recorded in an asset account after they are used orconsumed. | ||
incurred but not yet paid or recorded. | ||
incurred and already paid or recorded. |
3 points
Question 25
If a business has received cash in advance of services performedand credits a liability account, the adjusting entry needed afterthe services are performed will be
debit Unearned Service Revenue and credit Cash. | ||
debit Unearned Service Revenue and credit Service Revenue. | ||
debit Unearned Service Revenue and credit Prepaid Expense. | ||
debit Unearned Service Revenue and credit AccountsReceivable. |
3 points
Question 26
The preparation of adjusting entries is
straight forward because the accounts that need adjustment willbe out of balance. | ||
often an involved process requiring the skills of aprofessional. | ||
only required for accounts that do not have a normalbalance. | ||
optional when financial statements are prepared. |
3 points
Question 27
On January 1 of the current year, Doolittle Company purchasedfurniture for $7,560. The company expects to use the furniture for3 years. The asset has no salvage value. The book value of thefurniture at December 31of this year is
$0. | ||
$2,520. | ||
$5,040. | ||
$7,560. |
3 points
Question 28
Husker Du Supplies Inc. purchased a 12-month insurance policy onMarch 1 of the current year for $1,800. At March 31, the adjustingjournal entry to record expiration of this asset will include a
debit to Prepaid Insurance and a credit to Cash for $1,800. | ||
debit to Prepaid Insurance and a credit to Insurance Expense for$200. | ||
debit to Insurance Expense and a credit to Prepaid Insurance for$150. | ||
debit to Insurance Expense and a credit to Cash for $150. |
QUESTION 6
Which of the following statements is not true regarding prepaidexpenses?
Prepaid expenses represent assets. | ||
Prepaid expenses are shown in a special section of the incomestatement. | ||
Prepaid expenses become expenses only as goods or services areused up. | ||
Prepaid expenses appear in the balance sheet. |
4 points
QUESTION 7
The balance of an unearned revenue account:
Appears in the balance sheet as a component of stockholders'equity. | ||
Appears in the income statement along with other revenueaccounts. | ||
Appears in a separate section of the income statement forrevenue not yet earned. | ||
Appears in the liability section of the balance sheet. |
4 points
QUESTION 8
As of January 31, Hudson Corporation owes $600 to U-Rent-It forequipment used during January. If no adjustment is made for thisitem at January 31, how will Hudson's financial statements beaffected?
Cash will be overstated at January 31. | ||
Net income for January will be overstated. | ||
Stockholders' equity will be understated. | ||
The financial statements will be accurate since the $600 doesnot have to be paid yet. |
4 points
QUESTION 9
The accountant for the Linville Company forgot to make anadjusting entry to record revenue earned but not yet billed tocustomers. The effect of this error is:
An overstatement of assets. | ||
An overstatement of stockholders' equity. | ||
Understatement of both assets and stockholders' equity | ||
Overstatement of both assets and stockholders' equity. |
4 points
QUESTION 10
An adjusting entry involving recognition of unrecorded revenueis necessary at the end of March in which of the followingsituations?
Financial Consultants received payment in February forconsulting services rendered in March. | ||
Financial Consultants began working for a client on March 15;bills will be sent monthly beginning April 15. | ||
Financial Consultants made payment in January for office rentfor the first three months of the year. | ||
On March 31, a major customer paid his bill for a consulting jobcompleted in February. |
4 points
QUESTION 11
Which of the following entries causes an immediate decrease inassets and in stockholders' equity?
The entry to record depreciation expense. | ||
The entry to record revenue earned but not yet received. | ||
The entry to record the earned portion of rent received inadvance. | ||
The entry to record accrued wages payable. |
4 points
QUESTION 12
The CPA firm auditing Greer Company found that net income hadbeen overstated. Which of the following errors could be thecause?
Failure to record depreciation expense for the period. | ||
No entry made to record purchase of land for cash on the lastday of the year. | ||
Failure to record payment of an account payable on the last dayof the year. | ||
Failure to make an adjusting entry to record revenue which hadbeen earned but not yet billed to customers. |