accounting test 2: CH 4

Created by marmar9o9 

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Adjusting entries help achieve the goals of accrual accounting by applying the following two accounting principles:*

Realization principle and matching principle.

Adjusting entries are prepared:

Before financial statements and after a trial balance has been prepared.

The normal balance of the Accumulated Depreciation account is:

A credit balance.

Shop supplies are expensed when:

Consumed.

Depreciation expense is:

Only an estimate.

Accumulated Depreciation is:

A contra-asset account.

Depreciation is:

Only an estimate of the decline in value of an asset.

Unearned revenue may also be called:

Deferred revenue

The concept of materiality:

Justifies ignoring the matching principle or the realization principle in certain circumstances.

Which of the following is considered a contra-asset account?

Accumulated depreciation.

The cost of insurance is considered an expense:

Evenly over the term of the policy.

Prepaid expenses appear:

As an asset on the balance sheet.

Hahn Corp. has three employees. Each earns $600 per week for a five day work week ending on Friday. This month the last day of the month falls on a Wednesday. The company should make an adjusting entry

Debiting Wage Expense for $1,080 and crediting Wages Payable for $1,080

Which of the following is the accounting principle that governs the timing of revenue recognition?

Realization principle.

Which of the following situations does not require Empire Company to record an adjusting entry at the end of January?

At the end of January, Empire Company pays the custodian for January office cleaning services.

The adjusting entry to record income taxes at the end of an unprofitable accounting period consists of a:

Credit to Income Tax Expense and a debit to Income Tax Payable.

Which of the following is not considered a basic type of adjusting entry?

An entry to convert an asset to a liability.

Which of the following accounting principles is concerned with offsetting revenue with the expenses incurred in producing that revenue?

matching

Adjusting entries are needed

Whenever transactions affect the revenue or expenses of more than one accounting period.

No adjusting entry should consist of:

A debit to an expense and a credit to revenue.

Under accrual accounting, fees received in advance from customers should be shown as being earned:

When services are performed or goods delivered.

The purpose of adjusting entries is to:

Record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions.

Under accrual accounting, salaries earned by employees but not yet paid should be expensed:

In the period in which they are earned.

During the last month of its fiscal year, Echo Lake Resort accepted numerous deposits from customers. By the end of the month many, but not all, of these guests had completed their stays. The entry to record this event is an example of an adjusting entry:

To apportion unearned revenue.

Rose Corp. has a note receivable from Jewel Co for $80,000. The note matures in 5 years and bears interest of 6%. Rose is preparing financial statements for the month of June. Rose should make an adjusting entry:

Debiting Interest Receivable for $400 and crediting Interest Revenue for $400.

Which of the following entries causes an immediate decrease in assets and in net income?

The entry to record depreciation expense.

The concept of materiality:

Is measured as an item significant enough to influence the decisions of users of financial statements.

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