Question 1

 

Monthly and quarterly time periods are called

            fiscal periods.

            calender periods.

            interim periods.

            quarterly periods.

Question 2

 

The time period assumption states that

            a transaction can only affect one period of time.

            the economic life of a business can be divided into artificial time periods.

            estimates should not be made if a transaction affects more than one time period.

            adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations.

Question 3

 

The revenue recognition principle dictates that revenue should be recognized in the accounting records

            when it is earned.

            when cash is received.

            at the end of the month.

            in the period that income taxes are paid.

Question 4

 

Adjusting entries are required

            quarterly.

            monthly.

            every time financial statements are prepared.

            yearly.

Question 5

 

Adjusting entries are required

            when the company's profits are below the budget.

            when expenses are recorded in the period in which they are incurred.

            when revenues are recorded in the period in which they are earned.

            because some costs expire with the passage of time and have not yet been journalized

Question 6

 

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

            an expense should be recorded when the bill is received.

            an adjusting entry should be made recognizing the expense.

            an expense should be recorded when the cash is paid out.

            it is optional whether to record the expense before the bill is received

Question 7

 

Unearned revenues are

            earned but not yet received or recorded.

            earned and already received and recorded.

            received and recorded as liabilities before they are earned.

            earned and recorded as liabilities before they are received.

Question 8

 

If an adjustment is needed for prepaid expenses, the

            asset is overstated and the related expense is understated before adjustment.

            asset and related expense are understated before adjustment.

            asset is understated and the related expense is overstated before adjustment.

            asset and related expense are overstated before adjustment.

Question 9

 

A company usually determines the amount of supplies used during a period by

            summing the amount of supplies purchased during the period.

            taking the difference between the balance of the Supplies account and the cost of supplies on hand.

            adding the supplies on hand to the balance of the Supplies account.

            taking the difference between the supplies purchased and the supplies paid for during the period.

Question 10

 

Sue Smiley has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sue make?

            Debit Accounts Receivable and credit Service Revenue

            Debit Unearned Revenue and credit Service Revenue

            Debit Accounts Receivable and credit Unearned Revenue

            Debit Cash and credit Unearned Revenue

Question 11

 

Employees at B Corporation are paid $5,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary expense should be recorded two days later on January 2?

            $2,000

            $5,000

            $3,000

            None, matching requires the weekly salary to be accrued on December 31.

Question 12

 

Al is a barber who does his own accounting for his shop. When he buys supplies he routinely debits Supplies Expense. Al purchased $1,500 of supplies in January and his inventory at the end of January shows $400 of supplies remaining. What adjusting entry should Al make on January 31?

            Supplies Expense                  400    

            Supplies                                 400

 

            Supplies                     400    

            Supplies Expense                              400

 

            Supplies Expense                  1,500 

            Cash                            1,500

 

            Supplies Expense                  1,100 

            Supplies                                 1,100

 

 

 

 

 

 

 

Question 13

 

Which of the following statements concerning accrual-basis accounting is incorrect?

            Accrual-basis accounting recognizes expenses when they are paid.

            Accrual-basis accounting is the method required by generally accepted accounting principles.

            Accrual-basis accounting follows the matching principle.

            Accrual-basis accounting follows the revenue recognition principle.

Question 14

 

If the adjusting entry for depreciation is not made,

            expenses will be understated.

            assets will be understated.

            stockholders' equity will be understated.

            net income will be understated.

 

            Question 15

 

Financial statements are prepared directly from the

            ledger.

            trial balance.

            adjusted trial balance.

            general journal.