QUIZ 3

Question 1

Adjusting entries are required

Answer 1

every time financial statements are prepared

Question 2

The procedure that most nearly attains the objective of matching revenues and expenses to
specific accounting periods

Answer 2

Accrual basis of accounting

Question 3

Following periodic inventory system, the account debited when providing adjusting entry to record
unsold goods at the end of the period is

Answer 3

Merchandise Inventory

Question 4

Accrued interest income is presented as what in the SFP

Answer 4

Current asset in the Statement of Financial Position

Question 5

Failure to adjust for the accrued expense at the end of the period would result in

Answer 5

Overstated profit and understated liabilities

Question 6

Under the asset method of recording prepayments of expense items, the portion of the prepaid rent
that have expired will be credited to

Answer 6

Prepaid Rent Expense

Question 7

An adjustment for unearned income includes

Answer 7

a debit to an unearned income account and a credit to an income account

Question 8

The following are contra-accounts EXCEPTA. Allowance for Doubtful Accounts
B. Accumulated Depreciation
C. Depreciation
D. Purchase Returns and Allowances

Answer 8

Depreciation

Question 9

The following data are considered in the computation of the depreciation of property and equipment
EXCEPT:
A. Appraised value
B. Original cost
C. Estimated useful life
D. Estimated scrap value

Answer 9

Appraised value

Question 10

At the end of accounting period, FDN Trading debited Doubtful Accounts Expense and credited
Allowance for Doubtful Accounts. The purpose of this entry is to:
A. Decrease the Allowance for Doubtful Accounts
B. Decrease the Doubtful Accounts Expense
C. Determine the net carrying amount of Accounts Receivable
D. Determine the provision for estimated uncollectible accounts

Answer 10

Determine the provision for estimated uncollectible accounts

Question 11

Adjusting entries are made to update certain accounts so that they reflect correct balances as of
the designated time.

Answer 11

TRUE

Question 12

Before adjustments for the ending merchandise inventory, cost of sales is overstated, and assets
are understated.

Answer 12

TRUE

Question 13

Accrued revenues are amounts that have been received but not yet entered in the accounting
records

Answer 13

FALSE
Accrued revenues are income earned but not yet collected

Question 14

An expense – liability relationship exists with accrued expense adjusting entries.

Answer 14

TRUE

Question 15

Adjusting entry for either accrued or prepaid expenses will increase the total expense

Answer 15

TRUE

Question 16

Failure to adjust a prepayment recorded under the asset method causes total assets and total
expenses to be overstated

Answer 16

FALSE
Total expenses will be understated.

Question 17

The balance of unearned revenue after adjustments will be zero if all advance payments were
collected during the period.

Answer 17

FALSE
The balance of unearned revenue after adjustments will be zero if all advance payments were
earned during the period

Question 18

Depreciation is the gradual decrease in value, not the cost, of a non-current asset

Answer 18

TRUE

Question 19

The primary accounting principle supporting the use of the allowance for doubtful accounts is the
cost principle

Answer 19

FALSE
The primary accounting principles supporting the use of the allowance for doubtful are matching
and conservatism

Question 20

The adjusting entry for doubtful accounts will increase the total expenses and decrease the total
assets of the company.

Answer 20

TRUE

Question 21

When a portion of the unearned income has already been earned, the adjusting entry will include a credit to unearned income account.

Answer 21

False

Question 22

Under the allowance method, the net realizable value of accounts receivable is obtained by deducting the Doubtful Accounts Expense from the balance of accounts receivable.

Answer 22

False

Question 23

An understatement of ending inventory will cause:

Answer 23

An understatement of assets and an overstatement of equity on the Statement of Financial Position.

Question 24

FDN Trading rented a small portion of its store to a small business owner amounting to P5,000 but remains to be unpaid to FDN Trading as of the end of the accounting period. What entry must FDN Trading make

Answer 24

Debit Accrued Rent Revenue and credit Unearned Rent Revenue

Question 25

Failure to account for the residual value of a depreciable asset will

Answer 25

overstate total asset.

Question 26

Failure to account for the residual value of a depreciable asset will

Answer 26

Overstate expenses