Chapter 3 Flashcards
Using accrual accounting, revenue is recorded and reported only:
a. if cash is received after the services are rendered.
b. when cash is received before services are rendered. c. when cash is received without regard to when the services are rendered. d. when the services are rendered without regard to when cash is received.
d. when the services are rendered without regard to when cash is received.
Using accrual accounting, expenses are recorded and reported only:
a. if they are paid after they are incurred.
b. if they are paid before they are incurred. c. when they are incurred, whether or not cash is paid. d. when they are incurred and paid at the same time.
c. when they are incurred, whether or not cash is paid.
Which of the following accounts would likely be included in a deferral adjusting entry?
a. Unearned Revenue
b. Salaries Payable c. Accounts Receivable d. Interest Revenue
a. Unearned Revenue
Unearned revenue is what type of an account?
a. Asset
b. Revenue c. Liability d. Stockholders' equ
c. Liability
On April 1, Smart, Inc. paid $7,200 for an insurance premium on a three-year insurance policy. How does this transaction affect Smart’s accounts?
a. Increase prepaid insurance and decrease retained earnings by $7,200 each
b. Increase prepaid insurance and decrease cash by $7,200 each c. Increase insurance expense and decrease cash by $7,200 each d. Increase unearned insurance and decrease cash by $7,200 each
b. Increase prepaid insurance and decrease cash by $7,200 each
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. equipment allocation.
b. accumulation. c. matching. d. depreciation.
d. depreciation.
lectrodo Co. purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable. What effect does this transaction have on the accounts under the accrual basis of accounting?
a. Net increase in assets of $75,000 and a net decrease in liabilities of $30,000
b. Net increase in assets and liabilities of $55,000 c. Net increase in assets of $55,000 and a net decrease in liabilities of $35,000 d. Net increase in assets of $35,000 and a net increase in liabilities of $35,000
d. Net increase in assets of $35,000 and a net increase in liabilities of $35,000
XYZ Co. received $3,000 in payments from clients for services billed in a previous month. Which accounts will be affected and by what amounts under the accrual basis of accounting?
a. Accounts receivable will increase by $3,000 and cash will increase by $3,000.
b. Accounts receivable will increase by $3,000 and revenue will increase by $3,000. c. Cash will increase by $3,000 and revenues will increase $3,000. d. Cash will increase by $3,000 and accounts receivable decrease by $3,000
d. Cash will increase by $3,000 and accounts receivable decrease by $3,000.
Fees receivable would appear on the balance sheet as a(n):
a. liability.
b. fixed asset. c. asset. d. unearned revenue
c. asset.
Depreciation Expense and Accumulated Depreciation are classified, respectively, as:
a. revenue and asset.
b. expense and contra asset. c. asset and contra liability. d. contra asset and expense.
b. expense and contra asset.
he balance in the office supplies account on May 1 was $6,380, supplies purchased during May were $4,740, and the supplies on hand at May 31 were $2,360. The amount to be used for the appropriate adjusting entry is:
a. $8,760.
b. $13,480. c. $8,740. d. $4,740.
$8,760.
When cash is paid to suppliers on account, which section of the Statement of Cash Flows is affected?
a. There is no effect on the Statement of Cash Flows.
b. Cash Flow from Operating Activities. c. Cash Flow from Financing Activities. d. Cash Flow from Investing Activities.
b.Cash Flow from Operating Activities.
If prepaid insurance expires over time, this asset account becomes a(n):
a. another asset.
b. revenue. c. expense. d. liability.
c. expense
Which of the following is an example of a deferred expense?
a. Prepaid advertising
b. Accounts payable c. Unearned revenue d. Accounts receivable
a. Prepaid advertising
Perill Co. has a five-day workweek (Monday through Friday). Employees earn $650 per day.
Refer to Perill Co. If the month ends on Wednesday, and wages will not be paid until Friday, how much wage expense should be accrued on Wednesday?
a. $1,300
b. $3,250 c. $1,950 d. $650
c. $1,950
Accumulated depreciation is _____ to get the carrying value.
a. subtracted from equipment
b. added to equipment c. subtracted from accounts payable d. added to accounts payable
a. subtracted from equipment
The liabilities that are due to be paid usually within a year or less are called:
a. long-term liabilities.
b. contingent liabilities. c. deferred liabilities. d. current liabilities.
d. current liabilities
The following assets are included in Fortible Auto Parts, Inc.’s December 31, 2015, balance sheet.
Accounts Receivable (net of Allowance for Uncollectible Accounts) $ 65,000 Accumulated Depreciation, Building 32,000 Building 150,000 Cash 80,000 Land 160,000 Merchandise Inventory 90,000 Trademark 125,500
The total dollar amount of assets classified as property, plant, and equipment on Fortible Auto Part’s December 31, 2015, classified balance sheet is:
a. $250,000.
b. $278,000. c. $310,000. d. $375,000.
b. $278,000
Working capital is calculated as _____.
a. current assets less current liabilities
b. current assets less stockholders' equity c. stockholders' equity plus current assets d. current assets plus current liabilities
a. current assets less current liabilities
Which of the following is true about quick ratio?
a. If it is less than 1.0, it raises liquidity concerns for creditors.
b. It includes cash, inventory, and short-term investments. c. It is a suitable measure to derive the profitability of the company. d. It is computed as quick assets multiplied by current liabilities.
a. If it is less than 1.0, it raises liquidity concerns for creditors
om the following data for David ProElecticals, calculate the quick ratio.
Cash $ 68,500 Accounts receivable 130,000 Inventories 213,000 Prepaid expenses 25,000 Total current assets $436,500 Less current liabilities 275,000 Working capital $161,500 a. 0.7 b. 0.3 c. 1.5 d. 1.6
a. 0.7
