Question 1

ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2011 at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year-end on December 31, 2011 would include:

Accepted Answer

A)   A debit to Rent Earned for $2,400
B)   A credit to Unearned Rent for $2,400
C)   A debit to Cash for $6,400
D)   A credit to Rent Earned for $2,400
E)   A debit to Unearned Rent for $4,000F) D) and E)
G) A) and E)

Question 2

Which of the following assets is not depreciated?

Accepted Answer

A)   Store fixtures
B)   Computers
C)   Land
D)   Buildings
E)   VehiclesF) A) and C)
G) B) and C)

Question 3

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet?

Accepted Answer

A)   Under IFRS it is mandatory to present current assets first while under GAAP it is customary (but not required)  to present noncurrent assets first.
B)   Both IFRS and GAAP require that current assets are listed first
C)   Under GAAP it is mandatory to present current assets first while under IFRS it is customary (but not required)  to present noncurrent assets first.
D)   It is customary (but not required)  under both IFRS and GAAP to present noncurrent assets first
E)   GAAP requires that current assets be presented first while IFRS requires that current assets be presented lastF) A) and E)
G) A) and C)

Question 4

Which of the following statements regarding financial statement preparation is false?

Accepted Answer

A)   Financial statements can be prepared from information in the adjusted trial balance
B)   The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company
C)   It makes sense to prepare the balance sheet first because it contains information needed on the income statement
D)   When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger
E)   The income statement is prepared first.F) A) and E)
G) A) and B)

Question 5

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a twelve-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?

Accepted Answer

A)   $72
B)   $648
C)   $7,776
D)   $864
E)   $1,512F) A) and E)
G) B) and C)

Question 6

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

Accepted Answer

A) True 
 B)False

Question 7

How is the current ratio calculated? How is it used to evaluate a company?

Accepted Answer

The current ratio is current assets divi...

Question 8

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

Accepted Answer

A) True 
 B)False

Question 9

On December 31, 2009, a company forgot to record $7,000 of depreciation on office equipment. What would be the effect on the assets, net income and equity when it comes to the 2009 financial statements?

Accepted Answer

1 Assets are overstated by $7,...

Question 10

Describe the two alternate methods used to account for prepaid expenses.

Accepted Answer

The first method places all prepaid expe...

Question 11

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following accounts would not be impacted by adjusting journal entries?

Accepted Answer

A)   Accounts Receivable
B)   Consulting Fee Earned
C)   Unearned Consulting Fees
D)   Cash
E)   Wages PayableF) A) and B)
G) B) and D)

Question 13

Unearned revenue is reported on the financial statements as:

Accepted Answer

A)   A revenue on the balance sheet
B)   A liability on the balance sheet
C)   An unearned revenue on the income statement
D)   An asset on the balance sheet
E)   An operating activity on the statement of cash flowsF) A) and B)
G) B) and D)

Question 14

Which of the following identifies the proper order of the accounting cycle?

Accepted Answer

A)   Analyze, Journalize, Unadjusted Trial Balance
B)   Analyze, Post, Unadjusted Trial Balance
C)   Journalize, Post, Adjusted Trial Balance
D)   Unadjusted Trial Balance, Adjusted Trial Balance, Close
E)   Adjusted Trial Balance, Adjustments, Financial StatementsF) C) and D)
G) D) and E)

Question 15

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n) :

Accepted Answer

A)   Adjusted trial balance
B)   Work sheet
C)   Post-closing trial balance
D)   Unadjusted trial balance
E)   General ledgerF) B) and E)
G) B) and D)

Question 16

The adjusted trial balance contains information pertaining to:

Accepted Answer

A)   Asset accounts only
B)   Balance sheet accounts only
C)   Income statement accounts only
D)   All general ledger accounts
E)   Revenue accounts onlyF) B) and E)
G) B) and C)

Question 17

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Accepted Answer

A) True 
 B)False

Question 18

A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue. If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned, one effect will be:

Accepted Answer

A)   An overstatement of equity
B)   An overstatement of liabilities
C)   An understatement of assets
D)   An understatement of liabilities
E)   An overstatement of assetsF) B) and E)
G) A) and E)

Question 19

Each letter below contains three of the steps found in the accounting cycle. Which presents the given steps in the proper sequence, first to last?

Accepted Answer

A)   Adjust, Analyze transactions, Close
B)   Analyze transactions, Adjust, Close
C)   Prepare post-closing trial balance, Prepare statements, Close
D)   Prepare statements, Post, Close
E)   Prepare adjusted trial balance, Journalize, CloseF) A) and E)
G) D) and E)

Question 20

Which of the following statements is incorrect?

Accepted Answer

A)   An income statement reports revenues earned less expenses incurred
B)   An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments
C)   Interim financial reports can be based on one-month or three-month accounting periods
D)   The fiscal year is any 12 consecutive months (or 52 weeks)  used by a business as its annual accounting period
E)   Property, plant and equipment are referred to as plant assetsF) All of the above
G) B) and E)

Exam 3: Adjusting Accounts and Preparing Financial Statements

Describe the two alternate methods used to account for prepaid expenses.

Correct Answer
verified
The first method places all prepaid expe...
View Answer

How is the current ratio calculated? How is it used to evaluate a company?

Correct Answer
verified
The current ratio is current assets divi...
View Answer

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Correct Answer
verified

Which of the following statements regarding financial statement preparation is false?

Correct Answer
verified

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Correct Answer
verified

A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue. If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned, one effect will be:

Correct Answer
verified

Which of the following statements is incorrect?

Correct Answer
verified

On December 31, 2009, a company forgot to record $7,000 of depreciation on office equipment. What would be the effect on the assets, net income and equity when it comes to the 2009 financial statements?

Correct Answer
verified
1 Assets are overstated by $7,...
View Answer

Which of the following accounts would not be impacted by adjusting journal entries?

Correct Answer
verified

Each letter below contains three of the steps found in the accounting cycle. Which presents the given steps in the proper sequence, first to last?

Correct Answer
verified

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n) :

Correct Answer
verified

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a twelve-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?

Correct Answer
verified

Which of the following identifies the proper order of the accounting cycle?

Correct Answer
verified

Which of the following assets is not depreciated?

Correct Answer
verified

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet?

Correct Answer
verified

Correct Answer
verified

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

Correct Answer
verified

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

Correct Answer
verified

Unearned revenue is reported on the financial statements as:

Correct Answer
verified

The adjusted trial balance contains information pertaining to:

Correct Answer
verified

Exam 3: Adjusting Accounts and Preparing Financial Statements

Describe the two alternate methods used to account for prepaid expenses.

Correct AnswerverifiedThe first method places all prepaid expe...View AnswerShow Answer

How is the current ratio calculated? How is it used to evaluate a company?

Correct AnswerverifiedThe current ratio is current assets divi...View AnswerShow Answer

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

Correct AnswerverifiedShow Answer

Which of the following statements regarding financial statement preparation is false?

Correct AnswerverifiedShow Answer

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Correct AnswerverifiedShow Answer

A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue. If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned, one effect will be:

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

On December 31, 2009, a company forgot to record $7,000 of depreciation on office equipment. What would be the effect on the assets, net income and equity when it comes to the 2009 financial statements?

Correct Answerverified1 Assets are overstated by $7,...View AnswerShow Answer

Which of the following accounts would not be impacted by adjusting journal entries?

Correct AnswerverifiedShow Answer

Each letter below contains three of the steps found in the accounting cycle. Which presents the given steps in the proper sequence, first to last?

Correct AnswerverifiedShow Answer

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n) :

Correct AnswerverifiedShow Answer

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a twelve-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?

Correct AnswerverifiedShow Answer

Which of the following identifies the proper order of the accounting cycle?

Correct AnswerverifiedShow Answer

Which of the following assets is not depreciated?

Correct AnswerverifiedShow Answer

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

Correct AnswerverifiedShow Answer

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

Correct AnswerverifiedShow Answer

Unearned revenue is reported on the financial statements as:

Correct AnswerverifiedShow Answer

The adjusted trial balance contains information pertaining to:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The first method places all prepaid expe...
View Answer

Correct Answer
verified
The current ratio is current assets divi...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
1 Assets are overstated by $7,...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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