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1 | |
An end-of-period journal entry in which the Office Supplies Expense account is debited and the Office Supplies account is credited is an example of an adjusting entry. |
| | A) | True |
| | B) | False |
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2 | |
For most companies, adjusting entries are made on a yearly basis. |
| | A) | True |
| | B) | False |
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3 | |
Most adjusting entries fall into one of three categories. |
| | A) | True |
| | B) | False |
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4 | |
Adjusting entries may involve recording expenses before they are due to be paid. |
| | A) | True |
| | B) | False |
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5 | |
Adjusting entries may involve recording revenues before cash is received. |
| | A) | True |
| | B) | False |
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6 | |
To accrue means to grow or accumulate over time. |
| | A) | True |
| | B) | False |
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7 | |
For every accrued expense there will be a corresponding change in accrued revenue. |
| | A) | True |
| | B) | False |
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8 | |
Most adjusting entries involve the cash account. |
| | A) | True |
| | B) | False |
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9 | |
Adjusting entries are based on the concepts of accrual accounting, not upon monthly bills or month-end transactions. |
| | A) | True |
| | B) | False |
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10 | |
A prepaid expense is an asset account representing advance payment of an expense of future accounting periods. |
| | A) | True |
| | B) | False |
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11 | |
An asset's useful life is the period over which the cost of the asset is allocated to depreciation expense. |
| | A) | True |
| | B) | False |
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12 | |
One way to handle prepaid items is to initially charge them to an appropriate expense account and at the end of the accounting period transfer the unused portion to an appropriate prepaid account. |
| | A) | True |
| | B) | False |
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13 | |
Physical objects with a limited life, such as office equipment and buildings, are known as depreciable assets. |
| | A) | True |
| | B) | False |
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14 | |
The systematic allocation of the cost of an asset to expense during the periods of its useful life is called adjusting. |
| | A) | True |
| | B) | False |
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15 | |
Office equipment, machinery, buildings, and land are subject to depreciation. |
| | A) | True |
| | B) | False |
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16 | |
The rationale for depreciation lies in the realization principle. |
| | A) | True |
| | B) | False |
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17 | |
The widely used approach of recognizing an equal amount of depreciation expense in each period of a depreciable asset's useful life is called straight-line depreciation. |
| | A) | True |
| | B) | False |
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18 | |
An accumulated depreciation account is a contra-asset account shown as a deduction from the related asset account in the balance sheet. |
| | A) | True |
| | B) | False |
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19 | |
For depreciable assets, book value represents cost minus accumulated depreciation. |
| | A) | True |
| | B) | False |
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20 | |
The Accumulated Depreciation account is an example of an account with a normal debit balance. |
| | A) | True |
| | B) | False |
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21 | |
An asset with a cost of $10,000, a life of 10 years, and no salvage value, will have a book value of $5,000 at the end of the five years using straight-line depreciation. |
| | A) | True |
| | B) | False |
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22 | |
The receipt of payment for services in advance of performing those services is treated as deferred revenue. |
| | A) | True |
| | B) | False |
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23 | |
It is unacceptable to record as revenue a payment received by a customer for services to be performed in a subsequent accounting period. |
| | A) | True |
| | B) | False |
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24 | |
To accrue expenses is to record the delay in the recognition of expenses until after they have been paid. |
| | A) | True |
| | B) | False |
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25 | |
The October 31 accrual of interest expense on a 30-day, 6%, $6,000 note payable that is dated October 15 will be $6. |
| | A) | True |
| | B) | False |
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26 | |
Accruing uncollected revenue involves an adjustment to a liability account. |
| | A) | True |
| | B) | False |
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27 | |
Adjusting for income tax at the end of the accounting period requires a debit to an income tax expense account and a credit to an income tax payable account. |
| | A) | True |
| | B) | False |
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28 | |
The realization principle is the rationale for recording services paid in advance of performing the services as a liability (unearned revenue). |
| | A) | True |
| | B) | False |
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29 | |
The accounting principle of realization is the authority for recording adjusting entries for accrued expenses. |
| | A) | True |
| | B) | False |
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30 | |
Debiting the Office Supplies account for the purchase of a small amount of miscellaneous office supplies (physical assets) is a convenient and efficient method of recording the expenditure when the amounts or items are immaterial in nature. |
| | A) | True |
| | B) | False |
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31 | |
The accounting treatment accorded to immaterial items may be guided by convenience rather than by theoretical principles. |
| | A) | True |
| | B) | False |
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32 | |
There are very specific rules governing when an amount is 'material' and when it is 'immaterial.' |
| | A) | True |
| | B) | False |
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33 | |
Every adjusting entry for an accrual or a deferral will have an effect on either revenues or expenses of the time period. |
| | A) | True |
| | B) | False |
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34 | |
A schedule indicating the balances in ledger accounts after end-of-period adjusting entries have been posted is called an adjusted trial balance. |
| | A) | True |
| | B) | False |
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35 | |
Which of the following is not one of the four general categories of adjusting entries? |
| | A) | Converting assets to expenses |
| | B) | Converting liabilities to revenues |
| | C) | Converting liabilities to expenses |
| | D) | Accruing unpaid expenses |
| | E) | Accruing uncollected revenue |
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36 | |
Every adjusting entry involves the recognition of either revenue or expense. Which of the following is also true? |
| | A) | There also must be a corresponding change in owners' equity. |
| | B) | There also must be a corresponding change in either assets or liabilities. |
| | C) | There also must be a corresponding change in the cash account. |
| | D) | A and B |
| | E) | None of the above |
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37 | |
When adjusting a prepaid expense account, which of the following should occur? |
| | A) | A portion of an asset is recognized as an expense. |
| | B) | A portion of an asset is recognized as revenue. |
| | C) | A portion of an asset is recognized as a liability. |
| | D) | A portion of an asset is recognized as another asset. |
| | E) | None of the above will occur. |
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38 | |
Which of the following is true about recording prepayments directly to an expense account? |
| | A) | It is an acceptable practice. |
| | B) | It is rarely, if ever, done. |
| | C) | It should never be done. |
| | D) | It will have an adverse effect net income. |
| | E) | It will understate net income. |
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39 | |
The original cost of a physical asset was $45,000. It was purchased on January 5, 1995. It has an estimated useful life of 10 years and has been depreciated under the straight-line method for 5 years. At the end of the 6th year, after adjusting entries have been recorded and posted, the book value of the physical asset is which of the following? |
| | A) | $22,500 |
| | B) | $27,000 |
| | C) | $18,000 |
| | D) | $40,500 |
| | E) | $45,000 |
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40 | |
The original cost of a physical asset was $45,000. It was purchased on July 5, 1995. It has an estimated useful life of 10 years and has been depreciated under the straight-line method for 5 years. At the end of the 6th year, after adjusting entries have been recorded and posted, the book value of the physical asset is which of the following? |
| | A) | $20,250 |
| | B) | $27,000 |
| | C) | $18,000 |
| | D) | $40,500 |
| | E) | $22,500 |
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41 | |
When adjusting an unearned revenue account, which of the following should occur? |
| | A) | A portion of a liability is recognized as an expense. |
| | B) | A portion of a liability is recognized as revenue. |
| | C) | A portion of a revenue account is recognized as a liability. |
| | D) | A portion of a liability is recognized as another liability. |
| | E) | None of the above will occur. |
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42 | |
On November 18, the company received $24,000 for services to be performed over the following three months. Cash was debited for $24,000 and Unearned Services Revenue was credited for $24,000. None of the services were provided in November. One-third of the services were completed by December 31. The adjusting entry for December 31 would include which of the following? |
| | A) | a debit to Unearned Services Revenue of $8,000. |
| | B) | a credit to Services Revenue of $16,000. |
| | C) | a credit to Services Revenue of $8,000. |
| | D) | a debit to Services Revenue of $16,000. |
| | E) | A and C. |
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43 | |
When adjusting for an unpaid expense that has been incurred but not recorded, which of the following occur? |
| | A) | An expense is increased and a liability is increased. |
| | B) | An expense is increased and an asset is decreased. |
| | C) | An expense is increased and a liability is decreased. |
| | D) | An expense is increased and an asset is increased. |
| | E) | None of the above will occur. |
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44 | |
On November 16, the company borrowed $24,000 for 90 days at 6% interest. Interest expense was not adjusted at the end of November. The adjusting entry made on December 31 would include which of the following? |
| | A) | A debit to Interest Expense of $360 |
| | B) | A debit to Interest Expense of $120 |
| | C) | A credit to Interest Payable of $180 |
| | D) | A credit to Interest Payable of $480 |
| | E) | None of the above |
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45 | |
On November 16, the company borrowed $24,000 for 60 days at 8% interest. An adjusting entry for accrued interest payable was made on December 31, the end of the fiscal year. When the note is paid on January 15, the debit to Interest Expense will be which of the following? |
| | A) | $320 |
| | B) | $160 |
| | C) | $240 |
| | D) | $80 |
| | E) | None of the above |
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46 | |
When adjusting for revenue that has accrued but has not been recorded, which of the following will occur? |
| | A) | A revenue account is increased and an asset account is decreased. |
| | B) | A revenue account is increased and an expense account is increased. |
| | C) | A revenue account is increased and a liability account is decreased. |
| | D) | A revenue account is increased and a liability account is increased. |
| | E) | None of the above will occur. |
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47 | |
The final adjusting entry usually involves which of the following? |
| | A) | Unearned revenues |
| | B) | Accrued revenues |
| | C) | Accrued income taxes |
| | D) | Prepaid expenses |
| | E) | None of the above |
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48 | |
After the end-of-period adjusting entries are recorded and posted, the next step in the end-of-period procedures is which of the following? |
| | A) | Recording business transactions of the subsequent period |
| | B) | Preparing an adjusted trial balance |
| | C) | Preparing financial statements |
| | D) | Determining which adjusting entries to erase to reduce the income tax burden |
| | E) | None of the above |
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2002 McGraw-Hill Higher Education