Question 1

For each transaction select the letter of the type of adjustment that would be required
-Revenue is earned during the current period, although customers had paid in a previous period

Accepted Answer

The revenue has been earned in the current period but the customer had paid in a previous period. This situation indicates that the cash received is a liability that should be deferred until the service is provided. Therefore, an adjustment of deferred revenue is required.

Question 2

For each transaction select the letter of the type of adjustment that would be required.
-Interest is incurred on money borrowed from the bank, but not yet paid

Accepted Answer

When interest is incurred on money borrowed from the bank, but not yet paid, it represents a liability that has accrued but has not yet been paid. Therefore, the type of adjustment required is an accrued liability.

Question 3

Match the following choices to the listed situation.
-Rent is owed by a tenant but not yet collected

Accepted Answer

Rent owed by a tenant but not yet collected is considered an accrued asset because it represents an amount of money that is owed to the property owner but has not yet been received, thus it is an asset that has been earned but not yet received.

Question 4

Match the following choices to the listed situation.
-Cash was collected from customers for rental of tents for next year

Accepted Answer

Cash collected in advance for rental of tents for next year is considered deferred revenue because the revenue has not yet been earned.

Question 5

For each transaction select the letter of the type of adjustment that would be required.
-Magazine subscriptions are delivered during the current period, although customers had paid in a previous period

Accepted Answer

This situation describes deferred revenue, which is when a company receives payment for goods or services before they are delivered or provided. In this case, the magazine subscriptions were paid for in a previous period but are being delivered in the current period. The revenue was deferred, or pushed forward, to the current period.

Question 6

Select the correct revenue recognition principle for each of the following.
-Merchandise

Accepted Answer

Revenue for merchandise is typically recognized when the customer takes possession of the product, as this is often when the risks and rewards of ownership transfer to the customer.

Question 7

Match the most probable matching method to the costs listed below.
-Commissions earned by sales people

Accepted Answer

Commissions earned by sales people should be directly matched with the specific revenue they helped to generate. This ensures that the cost is accurately allocated to the revenue it helped to produce.

Question 8

Match the following choices to the listed situation.
-A warehouse building was acquired for cash

Accepted Answer

Acquiring a warehouse building for cash is considered a deferred expense because it represents a long-term asset that will provide economic benefits over multiple accounting periods.

Question 9

Match the following choices to the listed situation.
-Income taxes are owed to the federal government at year end

Accepted Answer

Income taxes owed to the federal government at year end represent an accrued liability because the taxes are owed but have not yet been paid.

Question 10

For each transaction select the letter of the type of adjustment that would be required.
-The depreciation on office equipment used during the current year is recorded

Accepted Answer

Recording the depreciation on office equipment used during the current year is an example of a deferred expense adjustment. This is because the expense (depreciation) relates to an asset's use over time, and the adjustment recognizes the expense incurred during the current period.

Question 11

Match the most probable matching method to the costs listed below.
-Warehouse used for storing inventory goods

Accepted Answer

The costs of a warehouse used for storing inventory goods are indirectly matched with the period during which they will provide revenue, as the warehouse supports the sale of goods over time rather than being directly tied to specific sales.

Question 12

Match the most probable matching method to the costs listed below.
-Cost of two-year insurance policy

Accepted Answer

The cost of a two-year insurance policy should be matched indirectly with the period during which it will provide revenue. This is because the policy will provide revenue over the two-year period and should be allocated evenly over that time frame. Option A is not appropriate as the cost cannot be directly linked to a specific revenue source. Option C is not appropriate as future benefits will be expected from the policy.

Question 13

Match the most probable matching method to the costs listed below.
-Taxes owed on income earned during the current period

Accepted Answer

Taxes owed on income earned during the current period are expenses that do not provide future economic benefits and are directly related to the activities of the current period. Therefore, they are recognized immediately.

Question 14

For each transaction select the letter of the type of adjustment that would be required.
-Amounts earned, not received from customers are recorded

Accepted Answer

Amounts earned but not yet received from customers are recorded as accrued assets, indicating that the company has earned the revenue but has not yet received payment, thus increasing its assets.

Question 15

For each transaction select the letter of the type of adjustment that would be required
-The cost of supplies used during the current year is determined and recorded

Accepted Answer

The cost of supplies used during the current year represents an expense that has been incurred but has not yet been paid. As a result, an adjustment in the form of a deferred expense account is required.

Question 16

Match the following choices to the listed situation.
-One year's premium on truck insurance was paid in advance

Accepted Answer

The payment of one year's premium on truck insurance is a prepaid expense, also known as a deferred expense. This means that the expense has been paid in advance and will be recognized as an expense over the period for which the insurance covers.

Question 17

For each transaction select the letter of the type of adjustment that would be required
-Depreciation on a delivery truck is recorded

Accepted Answer

Depreciation on a delivery truck is recorded as a deferred expense because it allocates the cost of the truck over its useful life, recognizing the expense gradually rather than immediately at the time of purchase.

Question 18

Select the correct revenue recognition principle for each of the following.
-Carpet cleaning

Accepted Answer

Revenue should be recognized when the service (carpet cleaning) is performed.

Question 19

For each transaction select the letter of the type of adjustment that would be required
-The cost of salaries earned by employees, but not paid at the end of the accounting period is recorded

Accepted Answer

This transaction represents an accrued liability, meaning that the company owes money to its employees for the salaries that have been earned but not yet paid. A deferred expense would be for a payment made in advance of the expense being incurred, while a deferred revenue would be for money received in advance of the revenue being earned. An accrued asset would be for money that the company has earned but not yet received.

Question 20

For each transaction select the letter of the type of adjustment that would be required
-Interest earned on notes receivable, but not yet received is recorded

Accepted Answer

Interest earned on notes receivable is an accrued asset, meaning that it has been earned but not yet received or recorded. Therefore, choice D, Accrued asset, is the correct answer.

Quiz 4: Income Measurement and Accrual Accounting

For each transaction select the letter of the type of adjustment that would be required -Revenue is earned during the current period, although customers had paid in a previous period

For each transaction select the letter of the type of adjustment that would be required. -Interest is incurred on money borrowed from the bank, but not yet paid

Match the following choices to the listed situation. -Rent is owed by a tenant but not yet collected

Match the following choices to the listed situation. -Cash was collected from customers for rental of tents for next year

For each transaction select the letter of the type of adjustment that would be required. -Magazine subscriptions are delivered during the current period, although customers had paid in a previous period

Select the correct revenue recognition principle for each of the following. -Merchandise

Match the most probable matching method to the costs listed below. -Commissions earned by sales people

Match the following choices to the listed situation. -A warehouse building was acquired for cash

Match the following choices to the listed situation. -Income taxes are owed to the federal government at year end

For each transaction select the letter of the type of adjustment that would be required. -The depreciation on office equipment used during the current year is recorded

Match the most probable matching method to the costs listed below. -Warehouse used for storing inventory goods

Match the most probable matching method to the costs listed below. -Cost of two-year insurance policy

Match the most probable matching method to the costs listed below. -Taxes owed on income earned during the current period

For each transaction select the letter of the type of adjustment that would be required. -Amounts earned, not received from customers are recorded

For each transaction select the letter of the type of adjustment that would be required -The cost of supplies used during the current year is determined and recorded

Match the following choices to the listed situation. -One year's premium on truck insurance was paid in advance

For each transaction select the letter of the type of adjustment that would be required -Depreciation on a delivery truck is recorded

Select the correct revenue recognition principle for each of the following. -Carpet cleaning

For each transaction select the letter of the type of adjustment that would be required -The cost of salaries earned by employees, but not paid at the end of the accounting period is recorded

For each transaction select the letter of the type of adjustment that would be required -Interest earned on notes receivable, but not yet received is recorded