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70) The following events pertain to Jasper Corporation:
May
1
Jasper purchased office supplies of $3,000 on account.
May
5
The office supplies were shipped to Jasper.
May
8
Jasper used these office supplies for a one-time event.
May
9
Jasper paid $3,000 cash for the office supplies purchased on May 1.
Using cash-basis accounting, on which date should Jasper record supplies expense?
A) May 1.
B) May 5.
C) May 8.
D) May 9.
71) A company provided $1,500 of services to customers during the month of May. The
customers paid in June. What would the impact of these transactions be during May on (1) the
balance of cash, (2) cash-basis net income, and (3) accrual basis net income?
A) (1) No effect, (2) No effect, (3) Increase.
B) (1) No effect, (2) No effect, (3) No effect.
C) (1) Increase, (2) Increase, (3) Increase.
D) (1) Increase, (2) Increase, (3) No effect.
72) A company purchased $400 of office supplies on account during May. All the supplies were
used in May, and the account was paid during June. What would the impact of these transactions
be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net
income?
A) (1) No effect, (2) No effect, (3) Decrease.
B) (1) Decrease, (2) Decrease, (3) No effect.
C) (1) Decrease, (2) Decrease, (3) Decrease.
D) (1) Decrease, (2) No effect, (3) No effect.
73) A company paid $900 to workers during May. Of this amount, $600 was for work performed
in April, while the other $300 was for work performed during May. What would the impact of
this transaction be during May on (1) the balance of cash, (2) cash-basis net income, and (3)
accrual-basis net income?
A) (1) No effect, (2) No effect, (3) Decrease.
B) (1) Decrease, (2) Decrease, (3) No effect.
C) (1) Decrease, (2) Decrease, (3) Decrease.
D) (1) Decrease, (2) No effect, (3) No effect.
74) Pawn Shops Unlimited recorded the following four transactions during April. Which of these
transactions would have the same income statement impact in April regardless of whether the
company used accrual-basis or cash-basis accounting?
A) Received $600 from customers for services to be provided in May.
B) Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.
C) Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun
newspaper.
D) Received $300 from customers for services performed in March.
75) Pawn Shops Unlimited recorded the following four transactions during April. Which of these
transactions would have the same income statement impact in April regardless of whether the
company used accrual-basis or cash-basis accounting?
A) Purchased $500 of office supplies on account (supplies were used in May and paid for in
May).
B) Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.
C) Paid $700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun
newspaper.
D) Received $300 from customers for services performed in March.
76) The following events pertain to Bills Company:
December
28, 2021
Bills was contacted by a customer for possible accounting and
tax services.
December
30, 2021
Bills signed a formal agreement with the customer to provide
accounting and tax services in 2022.
January
4, 2022
The customer paid $1,000 in advance for the services to be
provided by Bills Company.
January
11, 2022
Bills provided accounting and tax services to the customer.
Using cash-basis accounting, on which date should Bills Company record revenue for the
accounting and tax services?
A) December 30, 2021.
B) December 31, 2021.
C) January 4, 2022.
D) January 11, 2022.
77) When a company provides services on account, which of the following would be recorded
using cash-basis accounting?
A) Debit to Cash.
B) Debit to Service Revenue.
C) Credit to Deferred Revenue.
D) No entry would be recorded.
78) The following events pertain to Bills Company:
December
28, 2021
Bills was contacted by a customer for possible accounting and
tax services.
December
30, 2021
Bills signed a formal agreement with the customer to provide
accounting and tax services in 2022.
January
4, 2022
The customer paid $1,000 in advance for the services to be
provided by Bills Company.
January
11, 2022
Bills provided accounting and tax services to the customer.
Using accrual-basis accounting, on which date should Bills Company record revenue for the
accounting and tax services?
A) December 30, 2021.
B) December 31, 2021.
C) January 4, 2022.
D) January 11, 2022.
79) Consider the following transactions:
The company uses supplies purchased in the previous period, $1,500.
The company pays cash for rent in advance, $6,000.
The company repays a loan to the bank, $10,000 (ignore any interest cost).
The amount of accrual-basis expense is ________ while the amount of cash-basis expense is
________.
A) $6,000; $11,500
B) $6,000; $16,000
C) $1,500; $16,000
D) $1,500; $6,000
80) A company has the following three events in December:
December 1 - Pay last month's rent (November), $500.
December 15 - Pay rent for the current month (December), $500.
December 31 - Pay rent for the following year, $6,000.
How much would be recorded as Rent Expense for the month of December using accrual-basis
accounting?
A) $6,500.
B) $7,000.
C) $1,000.
D) $500.
81) A company has the following transactions:
Pay employees' salaries for the current period.
Pay rent in advance.
Pay dividends to stockholders in the current period.
Receive (but do not pay) a utility bill.
Use supplies previously purchased.
How many of these transactions result in an expense being reported in the current period using
accrual-basis accounting?
A) 1.
B) 2.
C) 3.
D) 4.
82) A company has the following transactions:
Pay employees' salaries for the current period.
Pay rent in advance.
Pay dividends to stockholders in the current period.
Receive (but do not pay) a utility bill.
Use supplies previously purchased.
How many of these transactions result in an expense being reported in the current period using
cash-basis accounting?
A) 1.
B) 2.
C) 3.
D) 4.
83) The primary difference between accrual-basis and cash-basis accounting is:
A) The timing of when revenues and expenses are recorded.
B) Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis
accounting.
C) Accrual-basis accounting violates both the concepts of revenue recognition and expense
recognition.
D) Adjusting entries are only a necessary part of cash-basis accounting.
84) When the amount of interest receivable decreases during an accounting period:
A) Accrual-basis revenues exceed cash collections from borrowers.
B) Accrual-basis net income exceeds cash-basis net income.
C) Accrual-basis revenues are less than cash collections from borrowers.
D) Accrual-basis expenses are less than cash payments to borrowers.
85) When the balance of the Deferred Revenue account decreases during an accounting period:
A) Accrual-basis revenues exceed cash collections from customers.
B) Accrual-basis expenses exceed cash collections from customers.
C) Accrual-basis revenues are less than cash collections from customers.
D) Accrual-basis net income is less than cash-basis net income.
86) Which transaction would not be recorded under cash-basis accounting?
A) Providing services to customers for cash.
B) Paying one year of rent in advance.
C) Paying salaries to employees.
D) Purchasing supplies on account.
87) Which of the following statements are correct?
For accrual-basis accounting:
(1) record revenues when providing goods and services to customers.
(2) record expenses when cash is paid.
For cash-basis accounting:
(3) record revenue when cash is received.
(4) record expenses when benefit is received.
A) (1) and (4).
B) (2) and (3).
C) (1) and (3).
D) (2) and (4).
88) On July 1, 2021, Rents-A-Lot Inc. paid $72,000 for 36 months of advance rent on its
warehouse. What would be the amount of rent expense in the 2022 financial statements for
Rents-A-Lot under both cash-basis and accrual-basis accounting?
A) Cash-basis = $24,000; Accrual-basis = $24,000.
B) Cash-basis = $72,000; Accrual-basis = $12,000.
C) Cash-basis = $0; Accrual-basis = $24,000.
D) Cash-basis = $0; Accrual-basis = $12,000.
89) The following information pertains to Sooner Company:
May
1
Customer ordered an installation service to be done by Sooner Company on
May 15.
May
2
Customer paid cash for the installation job to be done on May 15.
May
8
The Sooner Company purchased installation supplies on account for the job.
May
15
The installation job was started and completed.
May
20
Amount owed for supplies purchased on May 8 is paid.
Assuming that Sooner Company uses cash-basis accounting, when would the company record
the expense related to the supplies?
A) May 2.
B) May 8.
C) May 15.
D) May 20.
90) The following information pertains to Sooner Company:
May
1
Customer ordered an installation service to be done by Sooner Company on
May 15.
May
2
Customer paid cash for the installation job to be done on May 15.
May
8
The Sooner Company purchased installation supplies on account for the job.
May
15
The installation job was started and completed.
May
20
Amount owed for supplies purchased on May 8 is paid.
Assuming that Sooner Company uses accrual-basis accounting, when would the company record
the expense related to the supplies?
A) May 2.
B) May 8.
C) May 15.
D) May 20.
91) Consider the following events for Betterment Incorporated:
January
1
Betterment purchases gasoline for $200 on account.
January
7
Betterment advertises lawn mowing services for $100 per lawn.
January
9
Betterment signs up 8 customers who pay a total of $800 cash.
January
12
Betterment mows the lawns of the 8 customers and all gasoline
purchased on January 1 is used.
January
13
Betterment pays for the gasoline purchased on January 1.
Under accrual-basis accounting, what is the appropriate day to record the revenues related to
lawn services?
A) January 1.
B) January 7.
C) January 9.
D) January 12.
33
92) Consider the following events for Betterment Incorporated:
January
1
Betterment purchases gasoline for $200 on account.
January
7
Betterment advertises lawn mowing services for $100 per lawn.
January
9
Betterment signs up 8 customers who pay a total of $800 cash.
January
12
Betterment mows the lawns of the 8 customers and all gasoline
purchased on January 1 is used.
January
13
Betterment pays for the gasoline purchased on January 1.
Under accrual-basis accounting, what is the appropriate day to record the expenses related to the
gasoline?
A) January 1.
B) January 7.
C) January 12.
D) January 13.
34
93) Consider the following events for Betterment Incorporated:
January
1
Betterment purchases gasoline for $200 on account.
January
7
Betterment advertises lawn mowing services for $100 per lawn.
January
9
Betterment signs up 8 customers who pay a total of $800 cash.
January
12
Betterment mows the lawns of the 8 customers and all gasoline
purchased on January 1 is used.
January
13
Betterment pays for the gasoline purchased on January 1.
Under cash-basis accounting, what is the appropriate day to record the expenses related to the
gasoline?
A) January 1.
B) January 9.
C) January 12.
D) January 13.
94) Consider the following events for Sophia Incorporated:
April
5
Sophia purchases volleyballs for $200 on account.
April
6
Sophia advertises a sand volleyball camp for $20 a person.
April
12
Thirty people sign up for the camp paying a total of $600.
April
21
Sophia hosts the sand volleyball camp.
April
23
Sophia pays for the volleyballs purchased on April 5.
Under accrual-basis accounting, what is the appropriate day to record the revenues from the sand
volleyball camp?
A) April 5.
B) April 6.
C) April 12.
D) April 21.
95) Consider the following events for Sophia Incorporated:
April
5
Sophia purchases volleyballs for $200 on account.
April
6
Sophia advertises a sand volleyball camp for $20 a person.
April
12
Thirty people sign up for the camp paying a total of $600.
April
21
Sophia hosts the sand volleyball camp.
April
23
Sophia pays for the volleyballs purchased on April 5.
Under accrual-basis accounting, what is the appropriate day to record the expenses related to the
sand volleyball camp?
A) April 5.
B) April 12.
C) April 21.
D) April 23.
96) Consider the following events for Sophia Incorporated:
April
5
Sophia purchases volleyballs for $200 on account.
April
6
Sophia advertises a sand volleyball camp for $20 a person.
April
12
Thirty people sign up for the camp paying a total of $600.
April
21
Sophia hosts the sand volleyball camp.
April
23
Sophia pays for the volleyballs purchased on April 5.
Under cash-basis accounting, what is the appropriate day to record the expenses related to the
sand volleyball camp?
A) April 5.
B) April 12.
C) April 21.
D) April 23.
97) Consider the following events for Sophia Incorporated:
April
5
Sophia purchases volleyballs for $200 on account.
April
6
Sophia advertises a sand volleyball camp for $20 a person.
April
12
Thirty people sign up for the camp paying a total of $600.
April
21
Sophia hosts the sand volleyball camp.
April
23
Sophia pays for the volleyballs purchased on April 5.
Under cash-basis accounting, what is the appropriate day to record the revenues related to the
sand volleyball camp?
A) April 5.
B) April 12.
C) April 21.
D) April 23.
98) Which one of the following best describes the characteristics of adjusting entries?
A) Adjusting entries reduce the balance of revenue, expense, and dividend accounts to zero.
B) Adjusting entries update balances for the recognition of cash flows.
C) Adjusting entries update balances for the recognition of investments from and distributions to
stockholders.
D) Adjusting entries update balances for the recognition of revenue and expenses.
99) Examples of adjusting entries could include all of the following except:
A) Recording interest earned on bank account balances.
B) Recording the expiration of prepaid insurance.
C) Recording unpaid taxes.
D) Recording the purchase of office supplies.
100) Which of the following regarding adjusting entries is correct?
A) Adjusting entries are recorded for all external transactions.
B) Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the
current period.
C) Adjusting entries are needed because we use accrual-basis accounting.
D) After adjusting entries, all temporary accounts should have a balance of zero.
101) Adjusting entries are primarily needed for:
A) Cash-basis accounting.
B) Accrual-basis accounting.
C) Current value accounting.
D) Manual accounting systems.
102) Which of the following is true about adjusting entries?
A) Entries are necessary due to the conservatism principle.
B) Entries can be done at the beginning or end of the accounting period.
C) They zero the balance of all income statement accounts.
D) They are a necessary part of accrual-basis accounting.
103) Prepayments occur when:
A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.
B) Sales are delayed pending credit approval.
C) Customers are unable to pay the full amount due when goods are delivered.
D) Cash payment occurs after the expense is incurred and liability is recorded.
104) Making insurance payments in advance is an example of:
A) A prepaid expense transaction.
B) A deferred revenue transaction.
C) An accrued expense transaction.
D) An accrued revenue transaction.
105) Deferred revenues refer to:
A) Customers paying cash in advance of the good or service to be provided.
B) Revenue being recorded prior to cash collection from the customer.
C) Revenue being recorded at the same time the cash is collected from the customer.
D) Cash being collected from the customer after the revenue is recorded.
106) An accrued expense occurs when:
A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.
B) An expense is recorded at the same time as the cash payment.
C) The expense is recognized before the payment of cash.
D) Cash is paid but an expense is never recorded.
107) An accrued revenue represents:
A) Customers paying cash in advance of the good or service to be provided.
B) Revenue being recorded prior to cash collection from the customer.
C) Revenue being recorded at the same time the cash is collected from the customer.
D) Cash being collected from the customer prior to the revenue being recorded.
