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acct ch 4 adaptive practice

Terms in this set (20)

Which of the following statements about accrual-basis accounting is true?
Accrual-basis accounting recognizes expenses when they are incurred.
If a company spends $12 million dollars for a warehouse, when should the cost be written off?
over the useful life of the warehouse
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.
Which of the following is true about unearned revenues?
They are received and recorded as liabilities before they are earned.
What does the periodicity assumption state?
The economic life of a business can be divided into artificial time periods.
Which of the following has an asset-expense relationship?

A : revenue accounts
B : liability accounts
C : prepaid expense adjusting entries
D : accrued expense adjusting entries
prepaid expense adjusting entries
:
Which of the following explains the process of depreciation?

A : writing down an asset to its fair value each accounting period
B : allocating the cost of an asset to expense over its useful life in a rational and systematic manner
C : increasing the value of an asset over its useful life to reflect its book value
D : valuing an asset at its fair value
allocating the cost of an asset to expense over its useful life in a rational and systematic manner
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.
Which of the following is an example of a deferral?
A : recording an expense in the same period in which it was paid
B : expensing wages and salaries that will not be paid until the next period
C : expensing a part of the cost of a building
D : recording revenues that have been earned on account
expensing a part of the cost of a building
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.
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.
Which of the following is an example of an accrual?
A : Record Wage Expense that is incurred and paid in the same period.
B : Record Revenues that were received in cash in an earlier period.
C : Record Rent Expense that was prepaid.
D : Record Revenues that will be received in cash in a subsequent period.
Record Revenues that will be received in cash in a subsequent period.
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.
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.
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 entry 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.
Closing entries and a post-closing trial balance are steps in the accounting cycle that occur
A : quarterly.
B : daily.
C : monthly.
D : annually.
annually
An adjusted trial balance is created after
preparing all adjusting entries.
adjusting entries have been journalized and posted.
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
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.
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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