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Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits "Prepaid Insurance" for $24,000 and credits "Cash" for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31?


A)
Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits Prepaid Insurance for $24,000 and credits Cash for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31? A) B) C) D)
B)
Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits Prepaid Insurance for $24,000 and credits Cash for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31? A) B) C) D)
C)
Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits Prepaid Insurance for $24,000 and credits Cash for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31? A) B) C) D)
D)
Suppose that a business purchases a 6-month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits Prepaid Insurance for $24,000 and credits Cash for $24,000. As of January 31, the company has consumed one month of insurance. What adjusting entry is necessary at January 31? A) B) C) D)

E) A) and B)
F) A) and C)

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____________________ is the name given to revenue, expense, and dividend accounts because they are closed at the end of the period.

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What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?


A) Assets increase
B) Assets decrease
C) Liabilities increase
D) Equity increases

E) C) and D)
F) None of the above

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Pro Incorporated operates five days per week with a daily payroll of $5,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday) . The last day of the month is Wednesday, October 31. What is the effect of the correct adjustment at October 31?


A) Increases stockholders' equity and wages payable by $15,000
B) Increases wages payable and decreases cash by $10,000
C) Decreases stockholders' equity and increases wages payable by 15,000
D) Increases wages payable and increases wages expense by $25,000

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

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The Dividend account is a(n) :


A) temporary account
B) asset account
C) real account
D) liability account

E) B) and C)
F) A) and B)

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Which of the following concepts is important to accrual accounting?


A) Time period, because accrual accounting divides earnings into time periods.
B) Market basis, because inflation is a big factor in the environment.
C) Cash basis, because if cash is not received, revenue is not accrued.
D) Entity concept, because personal transactions must be separated from business transactions.

E) B) and C)
F) C) and D)

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The adjustment necessary to record the expense and the associated increase in the company's liabilities is classified as ____________________.

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Which one of the following steps in the accounting cycle is completed only at the end of an accounting period?


A) Business transactions are analyzed
B) Adjustments are recorded
C) Transactions are journalized
D) Journal entries are posted to the ledger

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

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Blackrock Company received a 6-month, 15% note for $100,000 from its president on November 1, 2012. The note is due on April 30, 2013. If Blackrock's accounting period ends on December 31, how much interest revenue should Blackrock recognize during 2012 and 2013? Blackrock Company received a 6-month, 15% note for $100,000 from its president on November 1, 2012. The note is due on April 30, 2013. If Blackrock's accounting period ends on December 31, how much interest revenue should Blackrock recognize during 2012 and 2013?

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To calculate the amount of interest reve...

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GMC sells cars and pays each salesperson a commission of $800 for each car sold. During the month of December, a salesperson, Tom, sold 3 new cars. GMC pays commissions on the 5th day of the month following the sale. Tom operates on the cash basis; the car dealer operates on the accrual basis. Which of the following statements is true?


A) Tom will recognize commission revenue earned in the amount of $2,400 in December.
B) GMC will recognize commission expense in the amount of $2,400 in December.
C) Tom will recognize commission expense in the amount of $2,400 in January.
D) Tom will recognize revenue in the same month that the car dealer recognizes expense.

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

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Point Corporation purchased supplies at a cost of $14,500 during the year. At January 1, supplies on hand were $1,000. At December 31, supplies on hand are $3,500. Determine the amount of supplies expense for the year.


A) $14,500
B) $12,000
C) $13,500
D) $17,000

E) All of the above
F) None of the above

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On October 1, 2012, Zane Corporation paid $18,000 rent in advance. The rent per month is $1,500. If Zane's accounting period ends on December 31, 2012, what will be reported on the financial statements?


A) Prepaid Rent of $13,500 on its balance sheet at December 31, 2012
B) Prepaid Rent of $18,000 on its balance sheet at December 31, 2012
C) Rent Expense of $18,000 on its 2012 income statement
D) Rent Revenue of $13,500 on its 2012 income statement

E) B) and D)
F) A) and D)

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Failure to record amounts earned for services provided to customers but cash not yet received results in which of the following?


A) Net income being overstated
B) No effect on total assets
C) Stockholders' equity being overstated
D) Total assets being understated

E) B) and C)
F) A) and D)

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Under accrual basis of accounting, expenses are be matched against revenue:


A) if the earnings process is not complete.
B) when cash is collected from the sale of products.
C) in the same period as the revenue that it helped to generate.
D) when payment is made for costs related to revenue.

E) A) and D)
F) C) and D)

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The accounting cycle requires three trial balances be prepared. In what order are they prepared?


A) Post-closing, unadjusted, and adjusted
B) Unadjusted, post-closing, and adjusted
C) Unadjusted, adjusted, and post-closing
D) Post-closing, adjusted, and unadjusted

E) A) and B)
F) B) and D)

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Based on its income for the month, Bates Company estimates that it will owe $23,000 of federal income taxes for the month of May. What is the effect of the adjustment on the financial statements?


A) Increase stockholders' equity
B) Increase income taxes expense
C) Increase retained earnings
D) Decrease income taxes payable

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

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Which of the following accounts will appear in a post-closing trial balance?


A) Dividends
B) Retained Earnings
C) Operating Expense
D) Fees Earned

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

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Adjustments for which of the following involves the cash account?


A) Deferred revenues
B) Accrued expenses
C) Deferred liabilities
D) None of these

E) C) and D)
F) A) and C)

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The financial statements are prepared immediately after:


A) business transactions are recorded.
B) adjustments are recorded.
C) the accounts are closed.
D) the adjusted trial balance is prepared.

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

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Income statement accounts are also known as which of the following?


A) Temporary accounts
B) Real accounts
C) Permanent accounts
D) Asset accounts

E) B) and C)
F) C) and D)

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