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
