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ACC250 Quiz 2 - Practice Questions

Terms in this set (25)

In the case of a deferred expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the deferred expense was initially recorded as an asset.

True or False?
FALSE
The asset account, Office Supplies had a beginning balance of $5,400. During the accounting period, office supplies were purchased, on account, for $5,400. A physical count, on the last day of the accounting period, shows $2,300 of office supplies on hand. What is the amount of Supplies Expense for the accounting period?

A) $2,300
B) $5,400
C) $3,100
D) $8,500
D) $8,500
If a company fails to make an adjusting entry for accrued revenues, the net income will be overstated.

True or False?
FALSE
Which of the following accounts will be closed by debiting the Income Summary account?

A) Service Revenue
B) Owner, Capital
C) Accounts Receivable
D) Salaries Expense
D) Salaries Expense
The post-closing trial balance shows the net income for the period just ended.

True or False?
FALSE
Under accrual basis accounting, revenue is recorded only when cash is received.

True or False?
FALSE
Which of the following statements is true of accrual basis accounting?

A. Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).

B. Accrual basis accounting records revenue only when cash is received.

C. Accrual basis accounting always results in greater net income than cash basis accounting.

D. Accrual basis accounting records expenses only when cash has been paid for them.
A. Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).
The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.

A. matching
B. accrual
C. revenue recognition
D. comparison
A) Matching
Saturn Services Company signed a one-year $24,000 note payable at 8% interest on May 1, 2017. How much interest expense must be accrued on May 31, 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

A. $1,920
B. $12,800
C. $160
D. $80
C) $160
Mason Painting Services has a weekly payroll of $30,000. December 31 falls on Wednesday and Mason will pay its employees the following Monday (January 5) for the previous full week. Assume that Mason has a five-day workweek and has an unadjusted balance in Salaries Expense of $800,000. What amount should be debited to Salaries Expense on December 31?

A. $18,000
B. $800,000
C. $12,000
D. $30,000
A) 18,000
On January 1, Unearned Revenue of Grossman Company had a beginning balance of $1,400. During January, the company earned $700 of the deferred revenue. The company also collected $4,000 from a new customer for services to be performed the following month. At the end of January, the Unearned Revenue account should have a balance of $4,000.

True or False?
FALSE
Dalton Delivery Service is hired on October 31, 2016 to perform services, beginning on November 1, 2016. The delivery services will be performed for six months at a rate of $3,200 per month. Dalton's fiscal year ends on December 31. What amount of service revenue should be recorded as an adjusting entry on December 31, 2016?

A. $9,600
B. $3,200
C. 0
D. $6,400
D) $6,400
The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.

A. deferred revenue
B. deferred expense
C. accrued expense
D. accrued revenue
A) Deferred Revenue
The accountant of Omega Consulting failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?

A. The total assets will be understated.
B. The total liabilities will be overstated.
C. The total assets will be overstated.
D. The total liabilities will be understated.
B) The Total Liabilities will be overstated.
The accountant of Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?

A. The total revenue will be overstated.
B. The total revenue will be understated.
C. The total expenses will be overstated.
D. The total expenses will be understated.
D. The total expenses will be understated.
All assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called ________.

A. current assets
B. long-term assets
C. fully depreciated assets
D. current liabilities
B. long-term assets
Which of the following is a measure of how quickly an item can be converted to cash?

A. Debt ratio
B. Liquidity
C. Accounting cycle
D. Current ratio
B. Liquidity
Notes Payable due within two years are classified as ________.

A. long-term assets
B. current assets
C. current liabilities
D. long-term liabilities
D. long-term liabilities
Which of the following would be considered a long-term asset?

A. Accounts Payable
B. Cash
C. Land
D. Common Stock
C) Land
In the closing process, the Owner,Withdrawals account is closed to the Owner, Capital account.

True or False?
TRUE
The Accumulated Depreciation account is a permanent account.

True or False?
TRUE
An account that is not closed at the end of the period is called a(n) ________.

A. revenue account
B. permanent account
C. temporary account
D. expense account
B) Permanent Account
Which of the following categories of accounts are temporary accounts that are closed at the end of the year?

A. revenues, expenses, and owner's equity
B. assets, liabilities, and owner's withdrawals
C. revenues, expenses, and owner's withdrawals
D. assets, liabilities, and owner's equity
C. revenues, expenses, and owner's withdrawals
Closing entries are journalized and posted ________.

A. after preparing the financial statements
B. throughout the accounting period
C. before posting the adjusting entries
D. after preparing the post-closing trial balance
A) after preparing the financial statements
The smaller the current ratio, the higher the firm's ability to repay its current debts.

True or False
FALSE
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