Chapter 03 – Adjustments: Accruals and Deferrals
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Page 11
29. Depreciation Expense is reported on the balance sheet as an addition to the related asset.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–04 – LO: 03–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
30. A company pays $36,000 for twelve months’ rent on October 1, recording the prepayment as an asset. The adjusting
entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.
a.
True
b.
False
ANSWER:
True
RATIONALE:
Rent expense per month = $36,000 / 12 = $3,000
Rent expense from October 1 to December 31 = $3,000 × 3 = $9,000
Debit
Credit
Rent Expense
9,000
Prepaid Rent
9,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
31. A company receives $360 for a 12-month trade magazine subscription on August 1. The adjusting entry on December
31 is a debit to Unearned Subscription Revenue, $150, and a credit to Subscription Revenue, $150.
a.
True
b.
False
ANSWER:
True
RATIONALE:
Unearned subscription revenue per month = $360 / 12 = $30
Subscription revenue from August 1 to December 31 = $30 × 5 = $150
Chapter 03 – Adjustments: Accruals and Deferrals
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Page 14
b.
False
ANSWER:
True
RATIONALE:
Insurance expense = Balance in the prepaid insurance account, prior to any
adjustments – Amount of unexpired insurance applicable to future periods =
$6,000 – $2,000 = $4,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
37. A fixed asset’s market value is reflected on the balance sheet.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–04 – LO: 03–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
38. If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and stockholders’
equity will be understated for the period.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Remembering
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
Chapter 03 – Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 17
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–06 – LO: 03–06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
45. The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be
detected when the adjusted trial balance is prepared.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–06 – LO: 03–06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
46. The adjusted trial balance verifies that total debits equals total credits before the adjusting entries are prepared.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–06 – LO: 03–06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
Copyright Cengage Learning. Powered by Cognero.
Page 18
47. Vertical analysis compares each item in a financial statement with a total amount from the same statement.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–07 – LO: 03–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
48. When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net
income.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–07 – LO: 03–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
49. Vertical analysis is useful for analyzing financial statement changes over time.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–07 – LO: 03–07
Chapter 03 – Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 20
b.
when a service has been performed or products have been delivered to customers without regard to when cash
is received
c.
when cash is received at the time services are performed or products have been delivered to customers
d.
only if cash is received after the services are performed or products have been delivered to customers
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–01 – LO: 03–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
53. Using accrual accounting, expenses are recorded and reported only
a.
when they are incurred, whether or not cash is paid
b.
when they are incurred and paid at the same time
c.
if they are paid before they are incurred
d.
if they are paid after they are incurred
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–01 – LO: 03–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
54. The accounting principle upon which deferrals and accruals are based is
a.
matching
b.
cost
c.
price-level adjustment
d.
conservatism
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice