Accounting 201 - Chapter 3 Review Test Quiz

40 Questions | By Jc173 | Updated: Mar 21, 2022 | Attempts: 541

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Accounting 201 - Chapter 3 Review Test Quiz We have just covered business statements and how to prepare them. The quiz below is designed to test your understanding of all we covered in the chapter. Can you identify how these changes in assets and liabilities are treated in different statements? All the best as you tackle it.

Questions and Answers

1.

Under accrual accounting, revenue is recorded
- A.
  
  When the cash is collected, regardless of when the services are performed
- B.
  
  When the services are performed, regardless of when the cash is received
- C.
  
  Either when the cash is received or the sale is made
2.

A company using the accrual basis of accounting pays $15,000 for a television advertising campaign. Commercials will run evenly in December, January, and February. How much expense will be reported on an income statement prepared for the month of December?
- A.
  
  $0
- B.
  
  $5,000
- C.
  
  $10,000
- D.
  
  $15,000
3.

To obtain a new customer, a business sells merchandise to the customer for $65. Normally, the merchandise sells for $85. For this sale, the business should record revenue of
- A.
  
  $85
- B.
  
  $65
- C.
  
  Neither amount
4.

Adjusting entries are:
- A.
  
  Not needed under the accrual basis of accounting
- B.
  
  Prepared at the option of the accountant
- C.
  
  Prepared at the beginning of the accounting period to update all accounts.
- D.
  
  Prepared at the end of the accounting period to update certain accounts.
5.

Prepaid insurance is reported on the balance sheet as a(n):
- A.
  
  Expense
- B.
  
  Liability
- C.
  
  Asset
- D.
  
  Contra asset
6.

The book value of a plant asset is the
- A.
  
  Accumulated depreciation less the cost of the asset
- B.
  
  Cost of the asset
- C.
  
  Balance in the accumulated depreciation account
- D.
  
  Cost of the asset less the accumulated depreciation
7.

A liability that arises from an expense that has not yet been paid is a(n):
- A.
  
  Unearned expense
- B.
  
  Prepaid expense
- C.
  
  Accrued expense
- D.
  
  Accrued revenue
8.

Unearned revenue is a(n):
- A.
  
  Asset account
- B.
  
  Liability account
- C.
  
  Revenue account
- D.
  
  Expense account
9.

Which account is debited in the adjusting entry to record salaries owed to employees, but not paid until next accounting period?
- A.
  
  Salary Expense
- B.
  
  Unearned Salaries
- C.
  
  Salary Payable
- D.
  
  Deferred Salary
10.

The book value of an asset that cost $20,000 and has accumulated depreciation of $6,000 is
- A.
  
  $20,000
- B.
  
  $ 6,000
- C.
  
  $26,000
- D.
  
  $14,000
11.

A company has $800 in beginning supplies and $150 of supplies on hand at the end of the month. The adjusting entry for this company is:
- A.
  
  Debit supplies of $150 and a credit of $150 to Supplies Expense
- B.
  
  Debit supplies Expense of $150 and a credit of $150 to Supplies
- C.
  
  Debit supplies Expense of $650 and a credit of $650 to Supplies
- D.
  
  There is not enough information given to prepare the entry
12.

An accrual refers to an event where the
- A.
  
  Expense or revenue is not recorded after the cash settlement
- B.
  
  Liability is recorded after the cash settlement
- C.
  
  Expense or revenue is recorded before the cash settlement
- D.
  
  Asset is recorded only after the cash settlement
13.

The financial statements are prepared from the
- A.
  
  Adjustments
- B.
  
  Unadjusted trial balance
- C.
  
  Ledger
- D.
  
  Adjusted trial balance
14.

How does an accrued expense adjustment affect the financial statements? The adjustment
- A.
  
  Increases expenses and decreases assets
- B.
  
  Increases expenses and increases liabilities
- C.
  
  Decreases expenses and increases liabilities
- D.
  
  Decreases expenses and increases assets
15.

What effect does an accrued revenue adjustment have on a company’s net income?
- A.
  
  The adjustment has no effect on net income
- B.
  
  The adjustment increases net income for the period
- C.
  
  The adjustment decreases net income for the period
- D.
  
  The effect of the adjustment cannot be determined with the information given
16.

Which of the following is NOT true regarding the adjusting process?
- A.
  
  The adjusting process updates the balance sheet.
- B.
  
  Every adjusting entry affects the balance sheet and the income statement.
- C.
  
  Adjustments are made during the month.
- D.
  
  The main adjusting entries are deferrals, depreciation and accruals.
17.

After the adjustments are journalized and posted, a(n) _____________ can be prepared to aid in the preparation of the financial statements:
- A.
  
  Balance sheet
- B.
  
  Adjusted trial balance
- C.
  
  Post-close trial balance
- D.
  
  Income statement
18.

Accounts that relate to a limited period are called:
- A.
  
  Asset and liability accounts
- B.
  
  Permanent accounts
- C.
  
  Real accounts
- D.
  
  Temporary accounts
19.

Which of the following accounts is considered a "temporary" account?
- A.
  
  Inventory
- B.
  
  Rent Expense
- C.
  
  Accounts Payable
- D.
  
  Common Stock
20.

Closing entries transfer the revenue, expense, and dividends balances to:
- A.
  
  Retained earnings
- B.
  
  Permanent accounts
- C.
  
  Temporary accounts
- D.
  
  None of the above
21.

On September 1, Boz sold to Skaggs prepaid maintenance for $6,000 for six months. As of December 31, what is the amount that has been earned?
- A.
  
  $0
- B.
  
  $2000
- C.
  
  $4000
- D.
  
  $6000
22.

Which of the following financial statements is prepared using the adjusted trial balance?
- A.
  
  Both the balance sheet and the income statement
- B.
  
  Neither the balance sheet nor the income statement
- C.
  
  The balance sheet only
- D.
  
  The income statement only
23.

Which account is debited in the adjusting entry to record insurance expired during the current period?
- A.
  
  Prepaid Insurance
- B.
  
  Insurance Expense
- C.
  
  Accrued Insurance
- D.
  
  Insurance Payable
24.

An expense incurred in 2010 is not paid until 2011. Using the accrual basis of accounting, the expense should appear on:
- A.
  
  ) the 2010 income statement
- B.
  
  The 2011 income statement
- C.
  
  Neither the 2010 nor the 2011 income statement
- D.
  
  Both the 2010 and 2011 income statements
25.

According to the revenue principle, revenue should be recorded
- A.
  
  Before it has been earned
- B.
  
  When the cash is received
- C.
  
  When it has been earned
- D.
  
  Whenever the company needs to record the revenue