Accounting 201 - Chapter 3 Quiz Questions

40 Questions | Total Attempts: 340

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Accounting Quizzes & Trivia

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

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