Accounting Practice Quiz #2

Generally Accepted Accounting Principles​ (GAAP) require the use of accrual basis of accounting.

True or False
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Generally Accepted Accounting Principles​ (GAAP) require the use of accrual basis of accounting.

True or False
True
At the time the transaction​ occurred, which of the following would result in an increase in net income under the accrual basis of​ accounting, but would not result in an increase in net income under cash basis​ accounting?

a) receipt of cash for services that were performed earlier on account
b) performance of services on account
c) purchase of supplies for cash
d) use of supplies purchased earlier
b) performance of services on account
The revenue recognition principle guides accountants in​ ________.

a) ensuring expenses are deducted from revenues
b) ensuring only revenues received in cash are recorded
c) determining when to record revenues
d) determining when to record expenses
c) determining when to record revenues
Classic​ Artists' Services signed a contract with a maintenance service company to maintain a building that Classic will use for office purposes. The contract states that the work will begin work on February 1 and end on May 31. Classic​ Artists' will pay the maintenance service company​ $16,000 at the end of May. It accrues Maintenance Expense at the end of every month. What is the balance in the Accounts Payable account for amounts owed to the maintenance service company at the end of​ March?

a) credit balance of $8,000
b) debit balance of $16,000
c) credit balance of $16,000
d) debit balance of $8,000
a) credit balance of $8,000
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) $30,000
d) 12,000
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) $3,200
b) $9,600
c) 0
d) $6,400
d) $6,400
The advance cash receipts of future revenues are called __________.

a) deferred revenues
b) accrued revenues
c) deferred expenses
d) accrued expenses
a) deferred revenues
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
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If an adjusting entry includes a debit to Rent​ Expense, it indicates that the payment of rent had been previously recorded as​ a(n) ________.

a) deferred expense
b) accrued expense
c) depreciation expense
d) accrued revenue
a) deferred expense