Question 1

The failure to record an accrual adjustment relating to salaries and wages would not affect the:

Accepted Answer

A)   balance sheet
B)   income statement
C)   statement of retained earnings
D)   statement of cash flowsE) A) and C)
F) A) and B)

Question 2

A company reports Equipment on its classified balance sheet.The balance of the Accumulated Depreciation account appears on a classified balance sheet as:

Accepted Answer

A)   an addition to arrive at the amount of Equipment, Net.
B)   a subtraction to arrive at the amount of Equipment, Net
C)   part of Total Liabilities section.
D)   a subtraction in the Total Liabilities section.E) None of the above
F) B) and C)

Question 3

How do accrual adjustments affect liabilities and expenses?

Accepted Answer

A)   Accrual adjustments can increase liabilities and increase expenses.
B)   Accrual adjustments can increase liabilities and decrease expenses.
C)   Accrual adjustments can decrease liabilities and decrease expenses.
D)   Accrual adjustments can decrease liabilities and increase expenses.E) C) and D)
F) None of the above

Question 4

An adjusted trial balance should be prepared immediately:

Accepted Answer

A)   after the financial statements, but before closing.
B)   before posting adjusting entries.
C)   after posting adjusting entries.
D)   after journalizing adjusting entries.E) B) and D)
F) A) and D)

Question 5

On December 31,2015,the balance in Retained Earnings is $20,000.On December 31,2016,the balance in Retained Earnings is $19,100.During 2016,dividends of $4,000 were declared and paid.What is the amount of net income for 2016?

Accepted Answer

A)   $4,900
B)   $3,100
C)   $900
D)   $(900) E) B) and C)
F) None of the above

Question 6

Assuming that revenues exceed expenses,which of the following correctly indicates the structure of the journal entry that is used to close revenue and expense accounts?

Accepted Answer

A)   Debit Retained Earnings, credit Expenses, and credit Revenues
B)   Debit Revenues, credit Expenses, and credit Retained Earnings
C)   Debit Revenues, debit Expenses, and credit Retained Earnings
D)   Debit Expenses, credit Revenues, and credit Retained EarningsE) A) and B)
F) All of the above

Question 7

What are the effects on the financial condition of the business from the adjustment for revenues earned,but not yet collected,during the accounting period?

Accepted Answer

A)   Total assets will increase and total stockholders' equity will decrease.
B)   Total assets will decrease and total stockholders' equity will decrease.
C)   Total assets will increase and total stockholders' equity will increase.
D)   Total assets will decrease and total stockholders' equity will increase.E) A) and C)
F) A) and B)

Question 8

How do deferral adjustments for prepaid expenses-such as rent -that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement?

Accepted Answer

A)   Deferral adjustments increase assets and increase expenses.
B)   Deferral adjustments increase assets and decrease expenses.
C)   Deferral adjustments decrease assets and decrease expenses.
D)   Deferral adjustments decrease assets and increase expenses.E) B) and D)
F) None of the above

Question 9

Adjusting entries affect:

Accepted Answer

A)   only balance sheet accounts.
B)   only income statement accounts.
C)   only statement of cash flow accounts.
D)   both income statement and balance sheet accounts.E) B) and D)
F) A) and B)

Question 10

After the adjustments have been completed,the adjusted balance the Unearned Revenue represents the:

Accepted Answer

A)   amount of the sales or services still owed to the customer
B)   amount of revenues earned during the current period
C)   amount of revenues that have been earned, but not collected during the period
D)   total cash received during the period from the sale of goods or servicesE) All of the above
F) B) and C)

Question 11

Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period,what will be the effect on the accounts when the salaries and wages are paid?

Accepted Answer

A)   Salaries and Wages Expense will increase and Cash will decrease.
B)   Salaries and Wages Payable will decrease and Cash will decrease.
C)   Salaries and Wages Expense will increase and Salaries and Wages Payable will decrease.
D)   Salaries and Wages Expense will decrease and Cash will decrease.E) A) and B)
F) A) and C)

Question 12

Farnworth Corp.pays income tax at an average rate of 30 percent.This year its revenue is $100,000 and its expenses are $70,000.The adjusting entry to record the income tax expense will:

Accepted Answer

A)   decrease net income by $30,000.
B)   increase stockholders' equity by $9,000.
C)   decrease stockholders' equity by $9,000.
D)   increase liabilities by $9,000.E) None of the above
F) A) and D)

Question 13

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 14

Deferring a revenue or expense account in accounting means that the amount:

Accepted Answer

A)   will not be reported in the accounting records
B)   will be reported as a revenue or an expense in a later period
C)   will be reported as a revenue or an expense in the current period
D)   was reported as a revenue or an expense in a prior period.E) A) and D)
F) A) and B)

Question 15

The Accumulated Depreciation account is a(n) :

Accepted Answer

A)   expense account.
B)   liability account.
C)   asset account.
D)   contra-asset account.E) A) and C)
F) A) and D)

Question 16

A closing entry includes a:

Accepted Answer

A)   debit to Sales Revenue
B)   credit to Cash
C)   credit to Accounts Receivable
D)   debit to Interest ExpenseE) A) and B)
F) None of the above

Question 17

Which of the following errors cause net income to be understated?

Accepted Answer

A)   Employee wages that have not been paid are not recorded.
B)   Depreciation Expense is not recorded.
C)   Collection of an accounts receivable is not recorded.
D)   Revenue that has been earned but not yet collected has not been recorded.E) All of the above
F) C) and D)

Question 18

Recording an adjusting journal entry to recognize depreciation would cause which of the following?

Accepted Answer

A)   An increase in assets, an increase in liabilities, and a decrease in expenses
B)   A decrease in assets, an increase in liabilities, and an increase in expenses
C)   An increase in liabilities, an increase in expenses, and a decrease in stockholders' equity
D)   A decrease in assets, a decrease in stockholders' equity, and an increase in expensesE) B) and C)
F) A) and C)

Question 19

One major difference between deferral and accrual adjustments is that deferral adjustments:

Accepted Answer

A)   involve previously recorded assets and liabilities and accrual adjustments involve previously unrecorded assets and liabilities.
B)   are made after financial statements are prepared and accrual adjustments are made before financial statements are prepared.
C)   are made annually and accrual adjustments are made monthly.
D)   are influenced by estimates of future events and accrual adjustments are not.E) B) and C)
F) A) and B)

Question 20

Which of the following is not a term for the value at which an asset is reported on a financial statement?

Accepted Answer

A)   Carrying value
B)   Book value
C)   Equipment, net
D)   Accrual valueE) All of the above
F) B) and C)

Exam 4: Adjustments,financial Statements,and Financial Results

A company reports Equipment on its classified balance sheet.The balance of the Accumulated Depreciation account appears on a classified balance sheet as:

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Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period,what will be the effect on the accounts when the salaries and wages are paid?

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Assuming that revenues exceed expenses,which of the following correctly indicates the structure of the journal entry that is used to close revenue and expense accounts?

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Deferring a revenue or expense account in accounting means that the amount:

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Recording an adjusting journal entry to recognize depreciation would cause which of the following?

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What are the effects on the financial condition of the business from the adjustment for revenues earned,but not yet collected,during the accounting period?

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How do accrual adjustments affect liabilities and expenses?

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One major difference between deferral and accrual adjustments is that deferral adjustments:

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The failure to record an accrual adjustment relating to salaries and wages would not affect the:

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How do deferral adjustments for prepaid expenses-such as rent -that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement?

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Adjusting entries affect:

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Which of the following is not a term for the value at which an asset is reported on a financial statement?

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On December 31,2015,the balance in Retained Earnings is $20,000.On December 31,2016,the balance in Retained Earnings is $19,100.During 2016,dividends of $4,000 were declared and paid.What is the amount of net income for 2016?

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A closing entry includes a:

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Farnworth Corp.pays income tax at an average rate of 30 percent.This year its revenue is $100,000 and its expenses are $70,000.The adjusting entry to record the income tax expense will:

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The Accumulated Depreciation account is a(n) :

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An adjusted trial balance should be prepared immediately:

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After the adjustments have been completed,the adjusted balance the Unearned Revenue represents the:

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The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

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Which of the following errors cause net income to be understated?

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