Accounting 201 - Chapter 3 Quiz Questions

40 Questions | By Mm8167 | Updated: Mar 20, 2022 | Attempts: 477

Questions

Settings

Create your own Quiz

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