Accounting 26th Edition Carl Warren James M Reeve Jonathan Duchac – Test Bank

Accounting 26th Edition Carl Warren James M Reeve Jonathan Duchac – Test Bank To Purchase this Complete Test Bank with Answers Click the link Below https://tbzuiqe.com/product/accounting-26th-edition-carl-warren-james-m-reeve-jonathan-duchac-testbank/

If face any problem or Further information contact us At tbzuiqe@gmail.com

Sample Test Chapter 03 The Adjusting Progress

1. The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 2. Generally accepted accounting principles require accrual­basis accounting.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 3. The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

4. The matching concept requires expenses be recorded in the same period that the related revenue is recorded.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 5. For most large businesses, the cash basis of accounting will provide accurate financial statements for user needs.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 6. An example of deferred revenue is Unearned Rent.

1. True 2. False

ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 7. Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

8. If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 9. Proper reporting of revenues and expenses in a period is due to the accounting period concept.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 10.

The revenue recognition concept requires that the reporting of revenue be included in the period when cash for the service is received.

1. True 2. False

ANSWER: False

DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

11.

Revenues and expenses should be recorded in the same period to which they relate.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 12.

The matching concept supports matching expenses with the related revenues.

1. True 2. False

ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 13.

Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of 1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.3­01 – 3­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

14.

The updating of accounts is called the adjusting process.

1. True 2. False

ANSWER: True

DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 15.

Adjusting entries affect balance sheet accounts at the exclusion of income statement accounts.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 16.

Adjusting entries affect only expense and asset accounts.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

17.

An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 18.

An adjusting entry would adjust an expense account so the expense is reported when incurred.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 19.

An adjusting entry to accrue an incurred expense will affect total liabilities.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

20.

The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate

Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 21.

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

1. True 2. False

ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 22.

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

23.

Unearned revenue is a liability.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 24.

The systematic allocation of land’s cost to expense is called depreciation.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02

ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

25.

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

26.

The balance in the accumulated depreciation account is the sum of the depreciation expense recorded in past 1. True 2. False

ANSWER: True DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 27.

Accumulated depreciation accounts are liability accounts.

1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 28.

Accumulated depreciation is reported on the income statement.

1. True 2. False

ANSWER: False DIFFICULTY: Easy

Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

29.

A contra asset account for Land will normally appear on the balance sheet.

1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

30.

Depreciation Expense is reported on the balance sheet as an addition to the related asset.

1. True

2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 31.

A company pays $36,000 for twelve month’s rent on October 1, recording the prepayment as an asset. The adjusting entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

32.

A company receives $360 for a 12­month trade magazine subscription on August 1. The adjusting entry on December 31 is a debit to Unearned Subscription Revenue, $150, and credit to Subscription Revenue, $150.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 33.

A company depreciates its equipment $500 a year. The adjusting entry on December 31 is a debit to Depreciation Expense, $500, and a credit to Equipment, $500.

1. True 2. False

ANSWER: False DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

34.

A company pays an employee $3,000 for a fiveday work week, Monday–Friday. The adjusting entry on December 31, which is a Wednesday, is a debit to Wages Expense, $1,800, and a credit to Wages Payable, $1,800.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

35.

A company receives $6,500 for two season tickets sold on September 1. If $2,500 is earned by December 31, the adjusting entry made at that time is a debit to Cash, $2,500, and a credit to Ticket Revenue, $2,500.

1. True 2. False

ANSWER: False DIFFICULTY: Challenging

Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 36.

A company realizes that the last two day’s revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 37.

At year­end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s :Knowledge

LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

38.

A fixed asset’s market value is reflected on the balance sheet.

1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

39.

If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and owner’s equity will be understated for the period.

1. True

2. False

ANSWER: False DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 40.

If the adjustment to recognize expired insurance at the end of the period is inadvertently omitted, the assets at the end of the period will be understated.

1. True 2. False

ANSWER: False DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

41.

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

1. True 2. False

ANSWER: True DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 42.

If the adjustment for depreciation for the year is inadvertently omitted, the assets on the balance sheet at the end of the period will be understated.

1. True 2. False

ANSWER: False DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 43.

Adjusting journal entries are dated on the last day of the period.

1. True 2. False

ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

44.

By ignoring and not posting the adjusting journal entries to the appropriate accounts, net income will always be 1. True 2. False

ANSWER: False DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­03 – 03­03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

45.

The financial statements are prepared from the unadjusted trial balance.

1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­04 – 03­04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 46.

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the adjusted trial balance is prepared.

1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­04 – 03­04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

47.

The adjusted trial balance verifies that total debits equals total credits before the adjusting entries are prepared.

1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­04 – 03­04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 48.

Vertical analysis compares each item in a financial statement with a total amount from the same statement.

1. True 2. False

ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­05 – 03­05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.ACBSP.APC.23 – Financial Statement Analysis ACCT.AICPA.FN.03 – Measurement

BUSPROG: Analytic

49.

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net 1. True 2. False

ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­05 – 03­05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.ACBSP.APC.23 – Financial Statement Analysis ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

50.

Vertical analysis is useful for analyzing financial statement changes over time.

1. True 2. False

ANSWER: True DIFFICULTY: Easy

Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­05 – 03­05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements ACCT.ACBSP.APC.23 – Financial Statement Analysis ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

51.

The revenue recognition concept 1. is not in conflict with the cash method of accounting.

2. determines when revenue is credited to a revenue account.

3. states that revenue is not recorded until the cash is received.

4. controls all revenue reporting for the cash basis of accounting.

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 52.

The matching concept 1. addresses the relationship between the journal and the balance sheet.

2. determines whether the normal balance of an account is a debit or credit.

3. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance.

4. states that the revenues and related expenses should be reported in the same period.

ANSWER: d DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

53.

Using accrual accounting, revenue is recorded and reported only 1. when cash is received without regard to when the services are rendered.

2. when the services are rendered without regard to when cash is received.

3. when cash is received at the time services are rendered.

4. if cash is received after the services are rendered.

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 54.

Using accrual accounting, expenses are recorded and reported only 1. when they are incurred, whether or not cash is paid 2. when they are incurred and paid at the same time 3. if they are paid before they are incurred 4. if they are paid after they are incurred

ANSWER: a DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 55.

The accounting concepts upon which deferrals and accruals are based is 1. matching 2. cost 3. price­level adjustment 4. conservatism

ANSWER: a

DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

56.

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?

1. decreases the balance of an owner’s equity account 2. increases the balance of a liability account 3. increases the balance of an asset account 4. decreases the balance of an expense account

ANSWER: b DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

57.

If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?

1. increases the balance of a contra asset account 2. increases the balance of an asset account 3. decreases the balance of an owner’s equity account 4. increases the balance of an expense account

ANSWER: d DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 58.

Prior to the adjusting process, accrued expenses have 1. not yet been incurred, paid, or recorded 2. been incurred, not paid, but have been recorded 3. been incurred, not paid, and not recorded 4. been paid but have not yet been incurred

ANSWER: c DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

59.

Prior to the adjusting process, accrued revenue has 1. been earned and cash received 2. been earned and not recorded as revenue 3. not been earned but recorded as revenue 4. not been recorded as revenue but cash has been received

ANSWER: b DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 60.

Deferred expenses have 1. not yet been recorded as expenses but have been paid 2. been recorded as expenses and paid 3. been incurred and paid 4. not yet been recorded as expenses

ANSWER: d DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.16 – Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

61.

Deferred revenue is revenue that is 1. earned and the cash has been received 2. earned but the cash has not been received 3. not earned and the cash has not been received 4. not earned but the cash has been received

ANSWER: d DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

62.

Adjusting entries are 1. the same as correcting entries 2. needed to bring accounts up to date and match revenue and expense 3. optional under generally accepted accounting principles 4. rarely needed in large companies

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

63.

Adjusting entries affect at least one 1. income statement account and one balance sheet account 2. revenue and the drawing account 3. asset and one owner’s equity account 4. revenue and one capital account

ANSWER: a DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 64.

The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is 1. prepaid 2. deferred 3. accrued 4. matched

ANSWER: c DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.16 – Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

65.

Which of the following is not a characteristic of accrual basis of accounting?

1. Revenues and expenses are reported in the period in which cash is received or paid.

2. Revenues are reported on the income statement in the period in which they are earned.

3. Accrual basis of accounting supports the matching concept.

4. Expenses are reported in the same period as the revenues to which they relate.

ANSWER: a DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 66.

Generally accepted accounting principles require that companies use the of accounting.

1. cash basis 2. deferral basis 3. accrual basis 4. account basis

ANSWER: c DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

67.

The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting 1. records revenues when they are earned and expenses when they are paid 2. records revenues and expenses when they are incurred 3. records revenues when cash is received and expenses when they are incurred 4. records revenues and expenses when the company needs to apply for a loan

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

68.

By matching revenues and expenses in the same period in which they incur 1. net income or loss will always be underestimated 2. net income or loss will always be overestimated 3. net income or loss will be properly reported on the income statement

4. net income or loss will not be determined

ANSWER: c DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 69.

Adjusting entries always include 1. only income statement accounts 2. only balance sheet accounts 3. the cash account 4. at least one income statement account and one balance sheet account

ANSWER: d DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 70.

Prepaid expenses are eventually expected to 1. become expenses when their future economic value expires 2. become revenues when services are performed

3. become expenses in the period when they are paid 4. become revenues when the liability is no longer owed

ANSWER: a DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

71.

Which of the following is considered to be unearned revenue?

1. theater tickets sold last month for yesterday’s performance 2. theater tickets sold yesterday on credit for yesterday’s performance 3. theater tickets that were not sold for the current performance 4. theater tickets sold for next month’s performance

ANSWER: d DIFFICULTY: Challenging Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.ACBSP.APC.16 – Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

72.

Which of the following is an example of accrued revenue?

1. snow removal services that have been paid for three months in advance 2. snow removal services that have been provided but have not been billed or paid 3. an agreement that has been signed for snow removal services for the next three months 4. snow removal services that has been provided and paid on the same day

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.ACBSP.APC.15 – Current Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

73.

Which of the following is considered to be an accrued expense?

1. A computer technician has installed the latest software updates and was paid on the same day.

2. A computer technician has been paid in advance to install software updates as they become available.

3. A computer technician has just signed an agreement with you regarding pricing for future work.

4. A computer technician has installed the latest software updates, but you have not received an invoice or made payment.

ANSWER: d DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.ACBSP.APC.16 – Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 74.

Which account would normally not require an adjusting entry?

1. Wages Expense 2. Accounts Receivable 3. Accumulated Depreciation 4. Cash

ANSWER: d DIFFICULTY: Challenging

Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 75.

Which one of the accounts below would likely be included in an accrual adjusting entry?

1. Insurance Expense 2. Prepaid Rent 3. Interest Expense 4. Unearned Rent

ANSWER: c DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 76.

Which of the following accounts would likely be included in a deferral adjusting entry?

1. Interest Revenue 2. Unearned Revenue 3. Salaries Payable 4. Accounts Receivable

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­01 – 03­01 ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

77.

The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months’ rent paid on December 1. The adjusting entry required on December 31 is 1. debit Rent Expense, $8,000; credit Prepaid Rent, $8,000 2. debit Prepaid Rent, $24,000; credit Rent Expense, $8,000 3. debit Rent Expense, $24,000; credit Prepaid Rent, $8,000 4. debit Prepaid Rent, $8,000; credit Rent Expense, $8,000

ANSWER: a DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

78.

The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 30 were $2,000. The amount to be used for the appropriate adjusting entry is 79.

$4,300

80.

$12,000

81.

$5,000

82.

$8,000

ANSWER: d DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 79.

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

1. debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000 2. debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000 3. debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000 4. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

ANSWER: d DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

80.

The entry to adjust for the cost of supplies used during the accounting period is 1. debit Supplies Expense; credit Supplies 2. debit Owner Capital; credit Supplies 3. debit Accounts Payable; credit Supplies 4. debit Supplies; credit Owner Capital

ANSWER: a DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 81.

Buster Industries pays weekly salaries of $30,000 on Friday for a five­day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is 1. debit Salaries Payable, $12,000; credit Cash, $12,000

2. debit Salary Expense, $12,000; credit Drawing, $12,000 3. debit Salary Expense, $12,000; credit Salaries Payable, $12,000 4. debit Drawing, $12,000; credit Cash, $12,000

ANSWER: c DIFFICULTY: Challenging Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 82.

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed 1. historical cost 2. contra asset 3. book value 4. market value

ANSWER: c DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

83.

The adjusting entry to record the depreciation of a building for the fiscal period is 1. debit Depreciation Expense; credit Building.

2. debit Depreciation Expense; credit Accumulated Depreciation.

3. debit Accumulated Depreciation; credit Depreciation Expense.

4. debit Building; credit Depreciation Expense.

ANSWER: b DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 84.

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called 1. equipment allocation 2. depreciation 3. accumulation 4. matching

ANSWER: b DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.13 – Long­term Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

85.

The entry to adjust the accounts for salaries accrued at the end of the accounting period is 1. debit Salaries Payable; credit Salaries Income 2. debit Salaries Income; credit Salaries Payable 3. debit Salaries Payable; credit Salaries Expense 4. debit Salaries Expense; credit Salaries Payable

ANSWER: d DIFFICULTY: Moderate Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

86.

The supplies account has a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is 87.

$400

88.

$2,000

89.

$6,800

90.

$6,400

ANSWER: d DIFFICULTY: Moderate Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.ACBSP.APC.09 – Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic 87.

Smokey Company purchases a one­year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is 1. debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800 2. debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500 3. debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100 4. debit Prepaid Insurance, $1,800; credit Cash, $1,800

ANSWER: a DIFFICULTY: Challenging Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.03­02 – 03­02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic