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Which of the following statements about accrual-basis accounting is true? |
Accrual-basis accounting recognizes expenses when they are incurred. |
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If a company spends $12 million dollars for a warehouse, when should the cost be written off? |
over the useful life of the warehouse |
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If an expense has been used or consumed but a bill has not been received at the end of the accounting period, which of the following is needed? |
An adjusting entry should be made recognizing the expense. |
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Which of the following is true about unearned revenues? |
They are received and recorded as liabilities before they are earned. |
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What does the periodicity assumption state? |
The economic life of a business can be divided into artificial time periods. |
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Which of the following exemplifies an asset-expense relationship? |
prepaid expense adjusting entries |
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Which of the following explains the process of depreciation? |
allocating the cost of an asset to expense over its useful life in a rational and systematic manner |
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From an accounting standpoint, the acquisition of a long-lived asset such as a building can be thought of as a long-term |
prepayment for the use of the asset. |
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Which of the following is an example of a deferral? |
expensing a part of the cost of a building |
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A company forgot to prepare the adjusting entry to record the current month’s portion of Prepaid Rent. What is the resulting impact on the financial statements? |
Assets will be overstated and net income will be overstated. |
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Suppose that a company did not make an adjusting entry to record revenue earned but not yet billed to customers. The result of this error would be to |
understate assets, net income, and stockholders’ equity. |
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Q 4.12: Which of the following is an example of an accrual? |
Record Revenues that will be received in cash in a subsequent period. |
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Salaries and Wages Expense should have been accrued on December 31st, but the entry was not made. The result of this oversight is that |
liabilities are understated. |
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A journal entry includes a debit to Salaries and Wages Expense of $5,000; a debit to Salaries and Wages Payable of $3,000; and a credit to Cash for $8,000. Which explains this entry? |
The entry reflects $5,000 payment of wages and salaries for the current period and $3,000 for wages and salaries accrued previously. |
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Q 4.15: In late August, a company provided one of its customers with services worth $500; however, the company did not send the customer a bill for those services until early September. What journal entries should the company make in August to denote this delivery of services? |
The company should debit Accounts Receivable for $500 and credit Service Revenue for $500. |
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Closing entries and a post-closing trial balance are steps in the accounting cycle that occur |
at the end of the accounting period. |
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An adjusted trial balance is created after |
preparing all adjusting entries. |
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Which of the following accounts from a firm’s adjusted trial balance would need to be considered when compiling the firm’s income statement? |
Service Revenue |
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Lorna just finished compiling her company’s income statement for the month ended March 31. Her next step in preparing the company’s financial statements should be to |
add the company’s net income for March to the company’s retained earnings as of March 1. |
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David just finished compiling his firm’s retained earnings statement for the month ended May 31. What should he do with the figure he calculates at the bottom of this statement? |
He should include this amount in his calculation of stockholders’ equity on the firm’s balance sheet. |
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