Question: The revenue recognition principle
Answer Options:
a. determines when revenue is credited to a revenue account
b. states that revenue is not recorded until the cash is received
c. is not in conflict with the cash method of accounting
d. controls all revenue reporting for the cash basis of accounting
Answer: a. determines when revenue is credited to a revenue account
Question: The matching principle
Answer Options:
a. states that the revenues and related expenses should be reported in the same period
b. determines whether the normal balance of an account is a debit or credit
c. addresses the relationship between the journal and the balance sheet
d. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
Answer: a. states that the revenues and related expenses should be reported in the same period
Question: Using accrual accounting, revenue is recorded and reported only
Answer Options:
a. when cash is received at the time services are rendered
b. if cash is received after the services are rendered
c. when cash is received without regard to when the services are rendered
d. when the services are rendered without regard to when cash is received
Answer: d. when the services are rendered without regard to when cash is received
Question: Adjusting entries are
Answer Options:
a. optional under generally accepted accounting principles
b. needed to bring accounts up to date and match revenue and expense
c. rarely needed in large companies
d. the same as correcting entries
Answer: b. needed to bring accounts up to date and match revenue and expense
Question: Generally accepted accounting principles require that companies use the _____ of accounting.
Answer Options:
a. account basis
b. accrual basis
c. cash basis
d. deferral basis
Answer: b. accrual basis
Question: Which of the following is considered to be unearned revenue?
Answer Options:
a. theater tickets that were not sold for the current performance
b. theater tickets sold last month for yesterday’s performance
c. theater tickets sold yesterday on credit for yesterday’s performance
d. theater tickets sold for next month’s performance
Answer: d. theater tickets sold for next month’s performance
Question: Which of the following accounts would likely be included in an accrual adjusting entry?
Answer Options:
a. Insurance Expense
b. Unearned Rent
c. Interest Expense
d. Prepaid Rent
Answer: c. Interest Expense
Question: Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
Answer Options:
a. debit Salaries Payable, $12,000; credit Cash, $12,000
b. debit Salary Expense, $12,000; credit Dividends, $12,000
c. debit Salary Expense, $12,000; credit Salaries Payable, $12,000
d. debit Dividends, $12,000; credit Cash, $12,000
Answer: c. debit Salary Expense, $12,000; credit Salaries Payable, $12,000
Question: The adjusting entry to record the depreciation of a building for the fiscal period is
Answer Options:
a. debit Depreciation Expense; credit Building
b. debit Accumulated Depreciation; credit Depreciation Expense
c. debit Depreciation Expense; credit Accumulated Depreciation
d. debit Building; credit Depreciation Expense
Answer: c. debit Depreciation Expense; credit Accumulated Depreciation
Question: As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
Answer Options:
a. matching
b. equipment allocation
c. depreciation
d. accumulation
Answer: c. depreciation
Question: Accumulated Depreciation and Depreciation Expense are classified, respectively, as
Answer Options:
a. asset, contra liability
b. expense, contra asset
c. contra asset, expense
d. revenue, asset
Answer: c. contra asset, expense
Question: The net book value of a fixed asset is determined by the original cost
Answer Options:
a. less accumulated depreciation
b. less accumulated depreciation plus depreciation expense
c. less market value
d. plus accumulated depreciation
Answer: a. less accumulated depreciation
Question: Zoey Bella Company has a payroll of $10,000 for a five-day workweek. Its employees are paid each Friday for the five-day workweek. Journalize the adjusting entry required on December 31, assuming the year ends on a Thursday. If an amount box does not require an entry, leave it blank.
Answer Options:
Not applicable (short-answer journal entry)
Answer: Dec. 31
Salaries Expense 8,000
Salaries Payable 8,000
Question: The company determines that the interest expense on a note payable for the period ending December 31 is $775. This amount is payable on January 1. Journalize these transactions for December 31 and January 1. If an amount box does not require an entry, leave it blank.
Answer Options:
Not applicable (short-answer journal entries)
Answer: Dec. 31
Interest Expense 775
Interest Payable 775
Jan. 1
Interest Payable 775
Cash 775