Accumulated Depreciation is reported on the income statement.

True

False

A fixed asset’s market value is reflected in the Balance Sheet.

True

False

The updating of accounts is called the adjusting process.

True

False

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

True

False

A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription Revenue, $150.

True

False

The net income reported on the income statement is $58,000. However, adjusting entries have not been made at the end of the period for supplies expense of $2,200 and accrued salaries of $1,300. Net income, as corrected, is

A. $56,700

B. $54,500

C. $58,000

D. $55,800

B. $54,500

58,000 - 2,200 - 1,300 = 54,500

The revenue recognition concept

A. is not in conflict with the cash method of accounting

B. states that revenue is not recorded until the cash is received

C. controls all revenue reporting for the cash basis of accounting

D. determines when revenue is credited to a revenue account

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

Supplies Expense     730

          Supplies                     730

                  ????????????????

A. Reduce supplies expense.

B. Record sale of supplies.

C. Adjust supplies inventory to actual.

D. Record purchase of supplies.

When is the adjusted trial balance prepared?

A. before adjusting journal entries are posted

B. after the adjusting journal entries are journalized

C. before the adjusting journal entries are journalized

D. after adjusting journal entries are posted

Data for an adjusting entry described as "accrued wages, $2,020" would result in

A. a debit to Dividends and a credit to Wages Payable

B. a debit to Accounts Receivable and a credit Wages Expense

C. a debit to Wages Payable and a credit to Wages Expense

D. a debit to Wages Expense and a credit to Wages Payable

The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is unearned at the end of the accounting period, the amount of the adjusting entry is

A. $36,000

B. $90,000

C. $54,000

D. $18,000

C. $54,000

72,000 -18,000 = 54,000

All of the following statements regarding vertical analysis are true except

A. In a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets.

B. In a vertical analysis of an income statement, each item is stated as a percent of total expenses.

C. Vertical analysis may be prepared for several periods to analyze changes in relationships over time.

D. Major differences between a company’s vertical analysis and industry averages should be investigated.

Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n)

A. expense

B. contra asset

C. liability

D. asset

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

A. depreciation

B. matching

C. equipment allocation

D. accumulation

The account type and normal balance of Unearned Revenue is

A. revenue, credit

B. liability, credit

C. asset, debit

D. expense, debit

How will the following adjusting journal entry affect the accounting equation?

Unearned Subscriptions        11,500

         Subscriptions Earned                  11,500

A. increase liabilities, increase revenues

B. decrease liabilities, increase revenues

C. decrease liabilities, decrease revenues

D. increase assets, increase revenues

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n)

A. asset

B. liability

C. equity

D. revenue

Which of the following is not a characteristic of accrual basis of accounting?

A. Revenues and expenses are reported in the period in which cash is received or paid

B. Revenues are reported in the income statement in the period in which they are earned

C. Supports the matching concept

D. All are correct.

Prior to the adjusting process, accrued expenses have

A. been incurred, not paid, and not recorded

B. not yet been incurred, paid, or recorded

C. been paid but have not yet been incurred

D. been incurred, not paid, but have been recorded

Which of the following is considered to be unearned revenue?

A. Concert tickets sold for next month’s performance.

B. Concert tickets sold last month for yesterday’s performance.

C. Concert tickets sold yesterday on credit for yesterday’s performance.

D. Concert tickets that were not sold for the current performance.

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

True

False

A contra asset account for Land will normally appear in the balance sheet.

True

False

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

True

False

The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting.

True

False

Proper reporting of revenues and expenses in a period is due to the accounting period concept.

True

False