Method Of Accounting Chapter 3

15 Questions | Total Attempts: 152

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Accounting Quizzes & Trivia

Questions and Answers
  • 1. 
    On November 1, Rosebriar Apartments received $3,600 from a tenant for four months rent. The receipt was credited to Unearned Rent Revenue. What adjusting entry is needed on Dec 31?
    • A. 

      Debit unearned rent revenue 1800, credit rent revenue 1800

    • B. 

      Debit cash 900, credit rent revenue 900

    • C. 

      Debit unearned rent revenue 900, credit rent revenue 900

    • D. 

      Debit rent revenue 900, credit unearned rent revenue 900

  • 2. 
    Sullivan, Inc. purchased supplies for $1,500 during 2012. At year end, Sullivan had $400 of supplies left. The adjusting entry would be
    • A. 

      Debit supplies expense 1,100

    • B. 

      Credit supplies 400

    • C. 

      Debit supplies 400

    • D. 

      Debit supplies 1,100

  • 3. 
    The accountant for Zero failed to make the adjusting entry to record depreciation for the current year. The effect of this error is which of the following?
    • A. 

      Assets and expenses are understated; net income is understated

    • B. 

      Net income is overstated and liabilities are understated

    • C. 

      Assets, net income, and stockholders' equity are overstated

    • D. 

      Assets are overstated; stockholders' equity and net income are understated

  • 4. 
    Interest earned on a note receivable equals $225. What adjusting entry is required to accrue this interest?
    • A. 

      Debit interest receivable, credit interest revenue

    • B. 

      Debit interest payable, credit interest expense

    • C. 

      Debit interest expense, credit cash

    • D. 

      Debit interest expense, credit interest payable

  • 5. 
    IF a real estate company fails to accrue commission revenue, 
    • A. 

      Liabilities are overstated, and owners' equity is understated

    • B. 

      Assets are understated, and net income is understated

    • C. 

      Net income is understated, stockholders equity is overstated

    • D. 

      Revenues are understated, and net income is overstated

  • 6. 
    Which statement is false?
    • A. 

      The expense recognition principle directs accountants to identify and measure all expenses incurred and deduct them from revenues earned during the same period

    • B. 

      Accrual accounting produces better information than cash-basis accounting

    • C. 

      A fiscal year ends on some date other than Dec 31

    • D. 

      Adjusting entries are required for a business that uses cash basis

  • 7. 
    The account Unearned Revenue is a(n)
    • A. 

      Revenue

    • B. 

      Asset

    • C. 

      Liability

    • D. 

      Expense

  • 8. 
    An adjusting entry that debits an expense and credits a liability is which type?
    • A. 

      Accrued expense

    • B. 

      Prepaid expense

    • C. 

      Depreciation expense

    • D. 

      Cash expense

  • 9. 
    On a trial balance, which of the following would indicate that an error has been made?
    • A. 

      Service revenue has a debit balance

    • B. 

      Accumulated depreciation has a credit balance

    • C. 

      Salary expense has a debit balance

    • D. 

      All of the above are correct

  • 10. 
    The entry to close Management Fee Revenue would be which of the following?
    • A. 

      Debit Management Fee Revenue, credit retained earnings

    • B. 

      Management Fee Revenue does not need to be closed

    • C. 

      Debit retained earnings, credit management fee revenue

    • D. 

      Debit management fee revenue, credit service revenue

  • 11. 
    Which of the following accounts is not closed?
    • A. 

      Dividend

    • B. 

      Interest revenue

    • C. 

      Accumulated depreciation

    • D. 

      Depreciation expense

  • 12. 
    FedEx earns service revenue of $750,000. How does this transaction affect FedEx's transactions?
    • A. 

      Improves the current ratio and hurts the debt ratio

    • B. 

      Hurts the current ratio and improves the debt ratio

    • C. 

      Improves both

    • D. 

      Hurts both

  • 13. 
    A company makes a $200 sale on account. It later collects $200 in cash. Under the accrual method of accounting, revenue is recognized:
    • A. 

      When the cash is collected

    • B. 

      When the sale is made

    • C. 

      Either when the cash is received or the sale is made

    • D. 

      At a time that cannot be determined from the facts

  • 14. 
    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 2011 income statement

    • D. 

      Both statements

  • 15. 
    A company using accrual basis accounting pays $15,000 on Dec. 1 for a television campaign. Commercials will run every Dec, Jan, and Feb. How much expense will be reported on an income statement prepared for the month of Dec?
    • A. 

      0

    • B. 

      5,000

    • C. 

      10,000

    • D. 

      15,000

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