Chapter 4 HW

Question 1

A revenue not yet recognized; collected in advance.

Answer 1

Unearned Revenue

Question 2

An expense incurred; not yet paid or recorded.

Answer 2

Accrued Expenses

Question 3

A revenue recognized; not yet collected or recorded.

Answer 3

Accrued Revenues

Question 4

An expense not yet incurred; paid in advance.

Answer 4

Prepaid Expenses

Question 5

What is the periodicity assumption?

Answer 5

The economic life of a business can be divided into artificial time periods.

Question 6

Which principle dictates that efforts (expenses) be matched with results (revenues)?

Answer 6

Expense recognition principle.

Question 7

The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the

Answer 7

revenue recognition principle.

Question 8

Which one of these statements about the accrual-basis of accounting is false?

Companies record events that change a company’s financial statements in the periods in which the events occur.

Companies recognize revenue in the period in which the performance obligation is satisfied.

This basis is in accord with generally accepted accounting principles.

Companies record revenue only when they receive cash, and record expense only when they pay out cash.

Answer 8

Companies record revenue only when they receive cash, and record expense only when they pay out cash.

Question 9

In 2017, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report

Answer 9

revenue of $10,000 in 2017.

Question 10

Which of the following is not a type of adjusting entry?

Accrued expenses
Accrued revenues
Prepaid expenses
Earned revenues

Answer 10

Earned revenues

Question 11

Adjusting entries are made to ensure that

expenses are recognized in the period in which they are incurred.

revenues are recorded in the period in which the performance obligation is satisfied.

balance sheet and income statement accounts have correct balances at the end of an accounting period.

Answer 11

all of these answer choices are correct.

Question 12

Which of the following is not a typical example of a prepaid expense?
Entry field with incorrect answer

Wages

Insurance

Supplies

Rent

Answer 12

Wages

Question 13

Cash received before services are performed are recorded as

Answer 13

liabilities

Question 14

Adjustments for prepaid expenses

Answer 14

decrease assets and increase expenses.

Question 15

Adjustments for unearned revenues

Answer 15

decrease liabilities and increase revenues.

Question 16

A retailer sells prepaid gift cards under its own brand to customers, which are popular during the Holidays. If a company sells $200 worth of gift cards to a customer before Xmas but the same are not used to purchased goods until after the New Year’s, how should the retailer record this transaction?

Answer 16

Debit cash and credit Unearned Revenue.

Question 17

Which of the following is not a typical example of an accrued expense?

Interest

Taxes

Depreciation

Wages

Answer 17

Depreciation

Question 18

Adjustments for accrued revenues

Answer 18

increase assets and increase revenues.

Question 19

On August 1, Luang Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be

Answer 19

Interest Expense $1,750
Interest Payable $1,750

30000 x 14/100 = 4200

4200 x 5/12 (August to December) = 1750

Question 20

Financial statements can be prepared directly from the

Answer 20

adjusted trial balance.

Question 21

how to calculate retained earnings

Answer 21

add net income and subtract dividends from beginning Retained Earnings

Question 22

Which account will have a zero balance after a company has journalized and posted closing entries?

Answer 22

Service Revenue.

Question 23

Which types of accounts will appear in the post-closing trial balance?

Answer 23

Permanent accounts.

Question 24

The closing entry process consists of closing

Answer 24

all temporary accounts.

Question 25

Which is the correct order of steps in the accounting cycle?

Answer 25

Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.

Question 26

Which statement is incorrect concerning the adjusted trial balance?

The adjusted trial balance lists the account balances in order of their magnitude.

An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.

The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.

The adjusted trial balance provides the primary basis for the preparation of financial statements.

Answer 26

The adjusted trial balance lists the account balances in order of their magnitude.