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Exam 4: Income Measurement and Accrual Accounting

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Question 41

Multiple Choice

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Which of the following transactions involves an accrued asset?

A) Wages earned by employees but not yet paid
B) Rent collected in advance from a tenant
C) Rent owed by a tenant but not yet collected
D) One year's premium on life insurance policy paid in advance

E) None of the above
F) A) and B)

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Question 42

Multiple Choice

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When is revenue from the sale of merchandise normally recognized?

A) On the date the sale is made.
B) When the customer pays for the merchandise.
C) Either on the date on which the sale occurs, or the date on which the customer pays
D) When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit

E) All of the above
F) A) and D)

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Question 43

Multiple Choice

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Match the following choices to the listed situation. -A warehouse building was acquired for cash

Costs incurred for purchases of merchandise result in an asset, Merchandise Inventory, and are eventually matched with revenue at the time the product is sold.

Balance sheet accounts are also known as which of the following?

From the list of accounts below, determine whether the account would be a nominal account or a real account. -Office Equipment

Some of the steps in the accounting cycle are listed below.Select the choice that places these steps in the correct order. 1. Close the accounts. 2. Post transactions to accounts in the ledger. 3. Journalize daily transactions. 4. Record and post adjustments. 5. Prepare financial statements. a. $2,3,4,5,1$ b. $3,2,4,5,1$ c. $3,2,4,1,5$ d. $3,2,5,4,1$

Charlie Company had $1,800 of supplies on hand at January 1.During the year, supplies with a cost of $4,000 were purchased.At December 31, the actual supplies on hand amount to $1,300.After the adjustments are recorded and posted at December 31, determine the balances in the Supplies and Supplies Expense accounts. ​ $\begin{array}{lc}\underline{\text { Supplies }}& \underline{\text { Supplies Expense}} \\\text { a. } \$ 1,800 & \$ 4,000 \\\text { b. } \$ 1,300 & \$ 4,500 \\\text { c. } \$ 5,300 & \$ 5,800 \\\text { d. } \$ 1,300 & \$ 5,800\end{array}$

For each transaction select the letter of the type of adjustment that would be required -Interest earned on notes receivable, but not yet received is recorded

Which of the following situations does not require an adjusting entry at the end of May?

Because of its objective nature, historical cost is the attribute used to measure many of the assets recognized on the balance sheet.

Which account is always carried over from the unadjusted trial balance columns of a work sheet to the balance sheet columns of the work sheet without any adjustment?

Which one of the following adjustments increases net income for the period?

Match the following choices to the listed situation. -Cash was collected from customers for rental of tents for next year

Based on its income for the month, Reel Company estimates that federal income taxes for the month of May will be $11,000.What is the effect of the adjustment on the financial statements?

One effect of recognizing depreciation is to decrease net income.

Which one of the following adjustments will increase assets?

Innovate Company borrowed on a one-year, 10%, $150,000 note on May 1, 2015 with interest and principal to be paid at maturity.How much interest should Innovate Company report on its income statement for the year ending December 31, 2016?

When revenue is earned before the receipt of cash, an adjustment that increases a receivable and decreases a liability account is recorded.

The amount in the Subscriptions Sold in Advance account should be carried over from the adjusted trial balance of the 10-column work sheet to which of the following columns?