acct test 2

Question 1

Dividends are closed to the Retained Earnings account during the end-of-period closing process

Answer 1

true

Question 2

One effect of recognizing deprecation is to decrease net income

Answer 2

true

Question 3

Three months before its year-end, a company signed a $250,000, 12%, 8-month note. Principal and interest will be paid at maturity. No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures

Answer 3

false

Question 4

Question Content Area
A worksheet facilitates the preparation of the income statement and retained earnings statement, but not the balance sheet

Answer 4

false

Question 5

When an expense is incurred prior to the payment of cash for that expense, an adjustment that increases an expense account and increases a liability is prepared.

Answer 5

true

Question 6

A cost can be an asset or expense depending on whether or not the future economic benefits have expired.

Answer 6

true

Question 7

Adjusting entries are recorded at the end of each accounting period so that net income is accurately reflected in the financial statements for the period

Answer 7

true

Question 8

When a company recognizes the portion of supplies used during a year, the effect is a decrease in net income

Answer 8

true

Question 9

the balance in the account, Rent Collected in Advance, is reported as a liability on the balance sheet of the landlord

Answer 9

true

Question 10

Adjusting entries are prepared using the accrual basis of accounting for preparing financial statements

Answer 10

true

Question 11

When is revenue recorded during cash basis accounting

Answer 11

When cash is received, regardless of when revenue is earned

Question 12

When are expenses recorded during cash basis accounting

Answer 12

When cash is paid, regardless of when the expense occured

Question 13

What type of accounting is required by GAAP when preparing financial statements

Answer 13

``Accrual Basis of accounting

Question 14

Three key principles of the Accrual Basis of Accounting

Answer 14

Revenue recognition, expense recognition( matching) , time period

Question 15

Revenue is recorded in a period when a company satisfies its performance
obligation (i.e., company performs a service or delivers a product) regardless
of when cash is received

Answer 15

Revenue recognition principle

Question 16

Expenses are recorded when incurred regardless of when cash is paid

Answer 16

Expense recognition/ matching

Question 17

Accrual accounting requires that we assign revenues and expenses to the
proper time/accounting period,

Answer 17

Time period assumption

Question 18

When are accounts required to be adjusted, if it spans longer than 1 accounting period

Answer 18

At the end of an accounting period

Question 19

What is the purpose of adjusting journal entries

Answer 19

To make sure revenues/ expenses are recorded in proper time period

Question 20

All accrual accounting journal entries will affect

Answer 20

at least one income statement accounting and one balance sheet account

Question 21

What is never affected by adjusting entries

Answer 21

cash

Question 22

The Expense Recognition (matching) Principle requires companies to
systematically assign or allocate the cost of these assets (PPE) as expense to
each period in which they are used. This process is called

Answer 22

Depreciation

Question 23

What type of adjustment is a PPE ajustment

Answer 23

deferral

Question 24

Adjustment to record depreciation increases an expense and decreases the
value of assets by using a contra-asset account called

Answer 24

Accumulated depreciation

Question 25

How does the adjusted deferral look in a journal entry

Answer 25

Depreciation expense $$
Accumulated Depreciation $$

Question 26

The unused portion of a long-lived asset is reported on the balance sheet at
its

Answer 26

Book value

Question 27

What is the formula for book value

Answer 27

Historical Cost - Accumulated depreciation

Question 28

an account that has a
normal balance opposite of the balance in its related account.

Answer 28

Contrasset

Question 29

Equipment has a normal debit balance, and the Accumulated
Depreciation for Equipment has a normal credit balance.

What type of relation is this

Answer 29

contra asset

Question 30

Is land a depreciable asset

Answer 30

NO

Question 31

How do we calculate Annual depreciation expense

Answer 31

(Historical Cost - Salvage Value) / Estimated useful life

Question 32

How do companies check to make sure debits = credits, after AJE

Answer 32

Adjusted trial balance

Question 33

What is the order financial statements are prepared in

Answer 33

Income statements, retained earning, balance, statement of cash flow

Question 34

Balance sheets are _________ accounts in that their balances are carried forward from the current accounting period to future accounting periods. We do not clost balance sheet accounts

Answer 34

Permanent

Question 35

Revenues, expenses, gains, losses, and dividends are used to collect the activities for only _____ period. This makes them a ______ account

Answer 35

One, temporary

Question 36

What is the balance of a temporary account at the start of a new accounting period

Answer 36

Zero Balance

Question 37

First step of closing entries

Answer 37

Close revenue and gain accounts
to income summary.

Question 38

Second step of closing entries

Answer 38

Close expense and loss accounts
to income summary

Question 39

Third step to closing entries

Answer 39

Close income summary to
retained earnings (RE).

Question 40

Fourth step in closing entries

Answer 40

Close dividends to RE

Question 41

RE XXX
Dividends XXX

Answer 41

Dividends summary

Question 42

Income Summary xx
RE xx
(If there is Net Income)

Or

RE xx
income Summary xx
(If there is Net Loss)

Answer 42

Close income summary to RE

Question 43

Income Summary xx
Expense/Loss x

Answer 43

Close expense and loss accounts to income summary

Question 44

Revenue/Gain xx
Income Summary xx

Answer 44

Close revenue and gain accounts
to income summary