Question 1

The primary difference between accrual-basis and cash-basis accounting is:

Accepted Answer

A)  The timing of when revenues and expenses are recorded.
B)  Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting.
C)  Accrual-basis accounting violates both the revenue recognition and matching principles.
D)  Adjusting entries are only a necessary part of cash-basis accounting.E) B) and C)
F) All of the above

Question 2

Consider the following events for Sophia Incorporated:  Under cash-basis accounting,what is the appropriate day to record the revenues related to the sand volleyball camp?

Accepted Answer

A)  April 5.
B)  April 12.
C)  April 21.
D)  April 23.E) B) and C)
F) A) and C)

Question 3

Permanent accounts would not include:

Accepted Answer

A)  Accounts Payable.
B)  Office Supplies.
C)  Utilities Expense.
D)  Common Stock.E) B) and D)
F) None of the above

Question 4

Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

Accepted Answer

A)  Received $600 from customers for services to be provided in May.
B)  Paid $1,800 for a six-month insurance policy covering the period July 1-December 31.
C)  Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun newspaper.
D)  Received $300 from customers for services performed in March.E) C) and D)
F) B) and D)

Question 5

Under cash-basis accounting,we record revenues at the time we receive cash and expenses at the time we pay cash.

Accepted Answer

A) True 
 B)False

Question 6

Allen Inc.took out a 1-year,8%,$100,000 loan on March 31,2015.Interest is due upon maturity of the loan.The loan and interest must be paid back on March 31,2016.As of December 31,2015,what amount,if any,should Allen Inc.report for interest payable?

Accepted Answer

A)  $6,000.
B)  $2,000.
C)  $0.
D)  $8,000.E) A) and B)
F) None of the above

Question 7

The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.

Accepted Answer

A) True 
 B)False

Question 8

The following information pertains to Sooner Company:  Assuming that Sooner Company uses cash-basis accounting,when would the company record the expense related to the supplies?

Accepted Answer

A)  May 2.
B)  May 8.
C)  May 15.
D)  May 20.E) A) and C)
F) B) and D)

Question 9

The following table contains financial information for Trumpter's Inc.before closing entries:  What is the amount of Trumpter's total stockholders' equity?

Accepted Answer

A)  $5,000.
B)  $78,500.
C)  $68,500.
D)  $83,500.E) A) and B)
F) None of the above

Question 10

Long-term asset categories include investments;property,plant,and equipment;and intangible assets.

Accepted Answer

A) True 
 B)False

Question 11

The adjusting entry for an unearned revenue has the effects of reducing liabilities and increasing net income.

Accepted Answer

A) True 
 B)False

Question 12

The adjusted trial balance for China Tea Company at December 31,2015,is presented below:
  Prepare a classified balance sheet for China Tea Company as of December 31,2015:

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (1)Beginning RE ($5...

Question 13

Which transaction would not be recorded under cash-basis accounting?

Accepted Answer

A)  Providing services to customers for cash.
B)  Paying one year of rent in advance.
C)  Paying salaries to employees.
D)  Purchasing supplies on account.E) B) and D)
F) A) and B)

Question 14

A company pays $1,200 on account for supplies purchased last month.All supplies were used last month.Record the payment using (a)accrual-basis accounting and (b)cash-basis accounting.

Accepted Answer

The answer of A company pays $1,200 on account for...

Question 15

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?

Accepted Answer

A)  January.
B)  February.
C)  April.
D)  Evenly in each of the three months.E) C) and D)
F) None of the above

Question 16

Which of the following accounts will NOT be involved in closing entries?

Accepted Answer

A)  Prepaid Insurance.
B)  Service Revenue.
C)  Utilities Expense.
D)  Retained Earnings.E) B) and C)
F) A) and B)

Question 17

Which of the following is a possible adjusting journal entry?

Accepted Answer

A)  Debit Cash,credit Accounts Payable.
B)  Debit Service Revenue,credit Cash.
C)  Debit Salaries Expense,credit Salaries Payable.
D)  Debit Utilities Expense,credit Retained Earnings.E) B) and C)
F) None of the above

Question 18

According to the revenue recognition principle,if a company provides services to a customer in the current year but does not collect cash until the following year,the company should report the revenue in the current year.

Accepted Answer

A) True 
 B)False

Question 19

Accrued expenses involve the payment of cash before recording an expense and a liability.

Accepted Answer

A) True 
 B)False

Question 20

A customer purchased a drill press on November 14 on account from Sears.The drill press was delivered two weeks later.The customer paid for the drill press on December 5.When should Sears record the revenue for this transaction according to the revenue recognition principle?

Accepted Answer

A)  November.
B)  December.
C)  Evenly in each of the two months.
D)  One-third in November and two-thirds in December.E) A) and C)
F) A) and D)

Exam 3: The Accounting Cycle: End of the Period

Allen Inc.took out a 1-year,8%,$100,000 loan on March 31,2015.Interest is due upon maturity of the loan.The loan and interest must be paid back on March 31,2016.As of December 31,2015,what amount,if any,should Allen Inc.report for interest payable?

Correct AnswerverifiedShow Answer

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?

Correct AnswerverifiedShow Answer

Long-term asset categories include investments;property,plant,and equipment;and intangible assets.

Correct AnswerverifiedShow Answer

The following information pertains to Sooner Company: Assuming that Sooner Company uses cash-basis accounting,when would the company record the expense related to the supplies?

Correct AnswerverifiedShow Answer

Accrued expenses involve the payment of cash before recording an expense and a liability.

Correct AnswerverifiedShow Answer

The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.

Correct AnswerverifiedShow Answer

Which transaction would not be recorded under cash-basis accounting?

Correct AnswerverifiedShow Answer

A customer purchased a drill press on November 14 on account from Sears.The drill press was delivered two weeks later.The customer paid for the drill press on December 5.When should Sears record the revenue for this transaction according to the revenue recognition principle?

Correct AnswerverifiedShow Answer

Consider the following events for Sophia Incorporated: Under cash-basis accounting,what is the appropriate day to record the revenues related to the sand volleyball camp?

Correct AnswerverifiedShow Answer

The adjusting entry for an unearned revenue has the effects of reducing liabilities and increasing net income.

Correct AnswerverifiedShow Answer

The adjusted trial balance for China Tea Company at December 31,2015,is presented below: Prepare a classified balance sheet for China Tea Company as of December 31,2015:

Correct Answerverified (1)Beginning RE ($5...View AnswerShow Answer

Which of the following is a possible adjusting journal entry?

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The primary difference between accrual-basis and cash-basis accounting is:

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Permanent accounts would not include:

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Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

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Which of the following accounts will NOT be involved in closing entries?

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The following table contains financial information for Trumpter's Inc.before closing entries: What is the amount of Trumpter's total stockholders' equity?

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A company pays $1,200 on account for supplies purchased last month.All supplies were used last month.Record the payment using (a)accrual-basis accounting and (b)cash-basis accounting.

Correct AnswerverifiedShow Answer

Under cash-basis accounting,we record revenues at the time we receive cash and expenses at the time we pay cash.

Correct AnswerverifiedShow Answer

According to the revenue recognition principle,if a company provides services to a customer in the current year but does not collect cash until the following year,the company should report the revenue in the current year.

Correct AnswerverifiedShow Answer

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(1)Beginning RE ($5...
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