978-1337398169 Test Bank Chapter 3 Part 6

subject Type Homework Help
subject Pages 9
subject Words 2418
subject Textbook Corporate Financial Accounting 15th Edition
subject Authors Carl Warren, Jeff Jones
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Chapter 03 - Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 51
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
123. The net income reported on the income statement is $58,000. However, adjusting entries have not been made at the
end of the period for supplies expense of $2,200 and accrued salaries of $1,300. Net income, as corrected, is
a.
$56,700
b.
$58,000
c.
$55,800
d.
$54,500
ANSWER:
d
RATIONALE:
Net income = Reported net income – Supplies expense – Accrued salaries expense =
$58,000 – $2,200 – $1,300 = $54,500
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03-05 - LO: 03-05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 - Cash vs. Accrual
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
124. At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was
omitted. Which of the following statements is true?
a.
total assets at the end of the year will be understated.
b.
stockholders' equity at the end of the year will be understated.
c.
net income for the year will be overstated.
d.
insurance expense will be overstated
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
ACCREDITING STANDARDS:
DATE CREATED:
DATE MODIFIED:
125. At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the
following is true?
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Chapter 03 - Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 52
a.
total assets will be understated at the end of the current year
b.
the balance sheet and income statement will be misstated but the statement of stockholders' equity will be
correct for the current year
c.
net income will be overstated for the current year
d.
total liabilities and total assets will be understated
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
ACCREDITING STANDARDS:
DATE CREATED:
DATE MODIFIED:
126. The adjusting entry to adjust supplies was omitted at the end of the year. This would affect the income statement by
having
a.
expenses understated and therefore net income overstated
b.
revenues understated and therefore net income understated
c.
expenses understated and therefore net income understated
d.
expenses overstated and therefore net income understated
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
ACCREDITING STANDARDS:
DATE CREATED:
DATE MODIFIED:
127. Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear
on the unadjusted trial balance?
a.
Fees Earned
b.
Accounts Receivable
c.
Unearned Fees
d.
Depreciation Expense
ANSWER:
d
POINTS:
1
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Chapter 03 - Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 55
Operating expenses
472,045
338,390
Operating income
$202,305
$182,210
Prepare a vertical analysis of Toby Sam Enterprises' income statements. Has operating income increased or decreased as
a percentage of revenue?
a.
increased by 5%
b.
increased by 111%
c.
decreased by 5%
d.
decreased by 111%
ANSWER:
c
RATIONALE:
Operating income as a percentage of revenue for Year 1 = $182,210 / $520,600 = 35%
Operating income as a percentage of revenue for Year 2 = $202,305 / $674,350 = 30%
Change in operating income as a percentage of revenue from Year 1 to Year 2 = 30% –
35% = –5%
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03-07 - LO: 03-07
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
e.
None of these
DIFFICULTY:
Bloom's: Remembering
Moderate
QUESTION TYPE:
Matching
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03-05 - LO: 03-05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.05 - Accounting Cycle
ACCT.ACBSP.APC.07 - Adjusting Entries
ACCT.ACBSP.APC.15 - Current Assets Reporting
ACCT.ACBSP.APC.16 - Current Liabilities Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
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Copyright Cengage Learning. Powered by Cognero.
Page 56
133. Services provided that have not been recorded.
ANSWER:
d
POINTS:
1
134. Paid for one year’s insurance policy.
ANSWER:
a
POINTS:
1
135. Retainer fee received from a client for future legal representation.
ANSWER:
c
POINTS:
1
136. Annual property taxes that are paid at the end of the year.
ANSWER:
b
POINTS:
1
137. Electric bill to be paid next month.
ANSWER:
b
POINTS:
1
138. Paid for a 6-month magazine subscription.
ANSWER:
a
POINTS:
1
139. Received payment covering a 6-month magazine subscription.
ANSWER:
c
POINTS:
1
140. Provided tutoring for a student that will be invoiced next month.
ANSWER:
d
POINTS:
1
141. Received 6 months of rental payments from a tenant.
ANSWER:
c
POINTS:
1
142. Paid 6 months of rental payments to the landlord.
ANSWER:
a
POINTS:
1
143. Annual depreciation on equipment, recorded on a monthly basis.
ANSWER:
a
POINTS:
1
144. A contract to provide tutoring services beginning next month was signed.
ANSWER:
e
POINTS:
1
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Copyright Cengage Learning. Powered by Cognero.
Page 58
151. Depreciation on equipment was not recorded.
ANSWER:
a
POINTS:
1
152. A tenant paid 6 months' rent in advance when he moved in on the first day of the month. No entry was made on the
last day of the month.
ANSWER:
g
POINTS:
1
153. Explain the difference between accrual basis accounting and cash basis accounting.
ANSWER:
Accrual basis accounting reports revenues and expenses in the period in which a
service has been performed or a product has been delivered, regardless of when cash
was received. Cash basis accounting reports revenues and expenses when cash is
received or paid.
POINTS:
1
DIFFICULTY:
Easy
Bloom's: Remembering
QUESTION TYPE:
Subjective Short Answer
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
154. Indicate with a Yes or No whether or not each of the following accounts would, under normal circumstances, require
an adjusting entry.
1. Cash
2. Prepaid Expenses
3. Depreciation Expense
4. Accounts Payable
5. Accumulated Depreciation
6. Equipment
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
ACCREDITING STANDARDS:
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Chapter 03 - Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 60
reasons for this updating and give an example of each.
ANSWER:
1. Some expenses are not recorded daily. For example, the daily use of supplies
would require many entries with small amounts. Also, the amount of supplies
on hand on a day-to-day basis is normally not needed.
2. Some revenues and expenses are incurred as time passes rather than as
separate transactions. For example, rent received in advance (unearned rent)
expires and becomes revenue with the passage of time. Likewise, prepaid
insurance expires and becomes an expense with the passage of time.
3. Some revenues and expenses may be unrecorded at the end of the accounting
period. For example, a company may have provided services to customers
that it has not billed or recorded at the end of the accounting period. Likewise,
a company may not pay its employees until the next accounting period
even though the employees have earned their wages in the current period.
POINTS:
1
DIFFICULTY:
Moderate
Bloom's: Remembering
QUESTION TYPE:
Subjective Short Answer
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
158. (a) Explain the differences between accrued revenues and unearned revenues.
(b) Explain the differences between accrued expenses and prepaid expenses.
(c) Give an example of each.
ANSWER:
(a)
Accrued revenues are revenues that have been earned but not recorded in the
accounts. Unearned revenues are payments that have been received for services
or goods to be provided in the future.
(b)
Accrued expenses are expenses that have been incurred but not recorded in the
accounts. Prepaid expenses are expenses for which payment has been made and
for which economic benefits will be enjoyed in future accounting periods.
(c)
Accrued revenues - unbilled services on account
Unearned revenues - rental payments received by a landlord in advance
Accrued expenses - unpaid wages due to employees
Prepaid expenses - insurance policy purchased to cover future periods
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 - Cash vs. Accrual
ACCT.AICPA.FN.03 - Measurement

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