Deck 3: The Accounting Cycle: End of the Period

Question 1

Unearned revenues occur when cash is received after the revenue is earned.

Answer 1

False

Question 2

The matching principle states that we recognize expenses in the same period as the revenues they help to generate.

Answer 2

True

Question 3

Prepaid expenses involve payment of cash (or an obligation to pay cash)for the purchase of an asset before the expense is incurred.

Answer 3

True

Question 4

Because cash-basis accounting violates both the revenue recognition principle and the matching principle,it is generally not accepted in preparing financial statements.

Question 5

According to the concept of expense recognition under accrual-basis accounting,if costs associated with producing revenue in the current year are not paid in cash until the following year,the costs should be expensed in the current year.

Question 6

Accrued revenues involve the receipt of cash after the revenue has been earned and an asset has been recorded.

Question 7

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

Question 8

Adjusting entries should be prepared after financial statements are prepared.

Question 9

Under cash-basis accounting,if costs associated with producing revenue in the current year are not paid in cash until the following year,the costs should be expensed in the following year.

Question 10

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

Question 11

The revenue recognition principle states that we record revenue in the period in which we collect cash.

Question 12

Under cash-basis accounting,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.

Question 13

Accrual-basis accounting involves recording revenues when earned and recording expenses with their related revenues.

Question 14

The adjusting entry for a prepaid expense always includes a debit to an expense account and a credit to a liability account.

Question 15

Under cash-basis accounting,the timing of cash inflows and outflows exactly matches the reporting of revenues and expenses in the income statement.

Question 16

Because adjusting entries allow the proper application of the revenue recognition principle or the matching principle,they are a necessary part of cash-basis accounting.

Question 17

The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

Question 18

Adjusting entries involve recording events that have occurred but that have not yet been recorded by the end of the period.

Question 19

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.

Question 20

Jones Corporation provides services to a customer on June 17,but the customer does not pay for the services until August 12.According to the revenue recognition principle,Jones Corporation should record the revenue on August 12.

Question 21

Long-term assets are assets that provide a benefit to a company for more than one year.

Question 22

A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries.

Question 23

On November 1,2015,a company receives $1,800 for services to be provided evenly over the next six months.The December 31,2015,adjusting entry for the company would include a credit to Unearned Revenue for $600.

Question 24

Adjusting entries are unnecessary for transactions that do not involve revenue or expense activities,such as selling common stock or paying dividends.

Question 25

Adjusting entries are not necessary when cash is paid at the same time expenses are incurred.

Question 26

Current liabilities are liabilities due within one year.

Question 27

The adjusting entry for an accrued expense always includes a debit to an expense account and a credit to a liability account.

Question 28

Once the adjusted trial balance is complete,financial statements are prepared.

Question 29

The adjusting entry for an accrued revenue always includes a debit to a liability account and a credit to a revenue account.

Question 30

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

Question 31

On December 31,2015,employees who earn $500 per day have worked eight days and will be paid on January 6,2016.The adjusting entry on December 31,2015,includes a debit to Salaries Expense for $4,000.

Question 32

At December 31,2015,a company has received,but not paid,a utility bill for $250.The amount of utility expense for 2015 equals $250.

Question 33

The adjusting entry for an unearned revenue always includes a debit to an asset account and a credit to a revenue account.

Question 34

Adjusting entries are not necessary when cash is received at the same time revenues are earned.

Question 35

A classified balance sheet separates assets into current and long-term,and separates liabilities into current and long-term.

Question 36

The adjusting entry for an accrued expense has the effects of decreasing net income and decreasing liabilities.

Question 37

Current assets are assets that provide a benefit to a company over more than one year.

Question 38

The Supplies account is an example of an accrued expense.

Question 39

Suppose Simeon Company begins the year with $1,000 in supplies,purchases an additional $5,500 of supplies during the year,and ends the year with $700 in supplies.The year-end adjusting entry includes Supplies Expense of $7,200.

Question 40

The adjusting entry for an accrued revenue has the effects of increasing assets and increasing net income.

Question 41

The components of retained earnings include assets,expenses,and dividends.

Question 42

Closing entries transfer the balances of all temporary accounts (revenues,expenses,and dividends)to the Common Stock account.

Question 43

Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?

A)Accounting equation.
B)Revenue recognition.
C)Matching.
D)Conservatism.

Question 44

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

Question 45

Which accounting principle states that a company should "record revenues when they are earned"?

A)Matching.
B)Revenue recognition.
C)Conservatism.
D)Materiality.

Question 46

The matching principle is the principle that states:

A)All costs that are used to generate revenue are recorded in the period the revenue is recognized.
B)All transactions are recorded at the exchange price.
C)The business is separate from its owners.
D)The business will continue to operate indefinitely unless there is evidence to the contrary.

Question 47

If the beginning balance of Retained Earnings equals $12,000,the ending balance of Retained Earnings equals $15,000,and dividends for the year equal $1,000,then net income for the year equals $4,000.

Question 48

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?

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

Question 49

The post-closing trial balance is a list of all accounts and their balances at a particular date after the account balances have been updated for closing entries.

Question 50

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

Question 51

After closing entries are prepared,the balance of Retained Earnings is updated to reflect the activity in the revenue,expense,and dividend accounts for the period.

Question 52

If the beginning balance of Retained Earnings equals $10,000,net income for the year equals $6,000,and dividends for the year equal $2,000,then the ending balance of Retained Earnings equals $18,000.

Question 53

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

Question 54

The post-closing trial balance does not include any assets or liabilities,because these accounts all have zero balances after closing entries.

Question 55

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?

A)January.
B)February.
C)April.
D)Evenly in each of the three months.

Question 56

The revenue recognition principle states that:

A)Revenue should be recognized in the period the cash is received.
B)Revenue should be recognized in the period earned.
C)Revenue should be recognized in the balance sheet.
D)Revenue is a component of common stock.

Question 57

The following events pertain to Jasper Corporation: May 1 Jasper purchased office supplies of $3,000 on account.
May 5 The office supplies were shipped to Jasper.
May 8 Jasper used these office supplies for a one-time event.
May 9 Jasper paid $3,000 cash for the office supplies purchased on May 1.
Using cash-basis accounting,on which date should Jasper record supplies expense?

A)May 1.
B)May 5.
C)May 8.
D)May 9.

Question 58

Long-term liabilities are liabilities due in more than one year.

Question 59

After closing entries are posted to the accounts in the general ledger,all asset and liability accounts have a balance of zero.

Question 60

The closing entry for dividends includes a debit to the Dividends account and a credit to Retained Earnings.

Question 61

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

A)April 5.
B)April 6.
C)April 12.
D)April 21.

Question 62

On July 1,2015,Rents-A-Lot Inc.paid $72,000 for 36 months of advance rent on its warehouse.What would be the amount of rent expense in the 2016 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

A)Cash-basis = $24,000;Accrual-basis = $24,000.
B)Cash-basis = $72,000;Accrual-basis = $12,000.
C)Cash-basis = $0;Accrual-basis = $24,000.
D)Cash-basis = $0;Accrual-basis = $12,000.

Question 63

Which of the following statements are correct? For accrual-basis accounting:
(1)record revenues when earned.
(2)record expenses when cash is paid.
For cash-basis accounting:
(3)record revenue when cash is received.
(4)record expenses when benefit is received.

A)(1)and (4).
B)(2)and (3).
C)(1)and (3).
D)(2)and (4).

Question 64

Consider the following events for Betterment Incorporated: Under accrual-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

A)January 1.
B)January 7.
C)January 12.
D)January 13.

Question 65

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?

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 66

The following events pertain to Bills Company: January 11,2016 - Bills provided accounting and tax services to the customer. Using cash-basis accounting,on which date should Bills Company record revenue for the accounting and tax services?

A)December 30,2015.
B)December 31,2015.
C)January 4,2016
D)January 11,2016.

Question 67

Consider the following events for Betterment Incorporated: Under cash-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

A)January 1.
B)January 9.
C)January 12.
D)January 13.

Question 68

Which of the following is(are)true regarding the characteristics of adjusting entries?

A)Adjusting entries reduce the balance of revenue,expense,and dividend accounts to zero.
B)Adjusting entries allow for the proper recognition of revenue.
C)Adjusting entries allow for the proper recognition of expenses.
D)Both b and c are true.

Question 69

Consider the following events for Betterment Incorporated: Under accrual-basis accounting,what is the appropriate day to record the revenues related to lawn services?

A)January 1.
B)January 7.
C)January 9.
D)January 12.

Question 70

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?

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.

Question 71

When a company provides services on account,which of the following would be recorded using cash-basis accounting?

A)Debit to Cash.
B)Debit to Service Revenue.
C)Credit to Unearned Revenue.
D)No entry would be recorded.

Question 72

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

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.

Question 73

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?

A)May 2.
B)May 8.
C)May 15.
D)May 20.

Question 74

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

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 75

When the balance of the Unearned Revenue account decreases during an accounting period:

A)Accrual-basis revenues exceed cash collections from customers.
B)Accrual-basis expenses exceed cash collections from customers.
C)Accrual-basis revenues are less than cash collections from customers.
D)Accrual-basis net income is less than cash-basis net income.

Question 76

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

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 77

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?

A)Purchased $500 of office supplies on account (supplies were used in May and paid for 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 May 17 edition of the Las Vegas Sun newspaper.
D)Received $300 from customers for services performed in March.

Question 78

When the amount of interest receivable decreases during an accounting period:

A)Accrual-basis revenues exceed cash collections from borrowers.
B)Accrual-basis net income exceeds cash-basis net income.
C)Accrual-basis revenues are less than cash collections from borrowers.
D)Accrual-basis expenses are less than cash payments to borrowers.

Question 79

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

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.

Question 80

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

A)May 2.
B)May 8.
C)May 15.
D)May 20.