Question 1

When are sales recognized under the cash basis of accounting? When are expenses recognized?

Accepted Answer

Under the cash basis of accounting,the o...

Question 2

The liabilities that are due to be paid usually within a year or less are called:

Accepted Answer

A)  long-term liabilities.
B)  deferred liabilities.
C)  current liabilities.
D)  contingent liabilities.E) All of the above
F) A) and D)

Question 3

ASE Company sold goods,receiving $35,000 in cash and $15,000 on credit.How much revenue should it record under the accrual basis of accounting?

Accepted Answer

A)  $35,000
B)  $15,000
C)  $50,000ز
D)  $50,000E) C) and D)
F) A) and B)

Question 4

Updating accrual accounting records prior to preparing financial statements is called:

Accepted Answer

A)  the closing process.
B)  converting to cash basis accounting.
C)  the adjustment process.
D)  going concern adjustments.E) A) and C)
F) B) and C)

Question 5

Which of the following is true about quick ratio?

Accepted Answer

A)  It is computed as quick assets multiplied by current liabilities.
B)  It includes cash,inventory,and short-term investments.
C)  If it is less than 1.0,it raises liquidity concerns for creditors.
D)  It is a suitable measure to derive the profitability of the company.E) None of the above
F) A) and D)

Question 6

Which of the following is not reported as revenue on the income statement?

Accepted Answer

A)  Unearned revenue
B)  Fees revenue
C)  Commissions revenue
D)  Rent revenueE) C) and D)
F) A) and B)

Question 7

Under the cash basis of accounting,no adjustments are necessary prior to the preparation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 8

In October,cash is received in advance of rendering services.Assuming that half of the services have been performed by December 31,the year-end adjustment would:

Accepted Answer

A)  decrease Unearned Service Revenue and decrease Cash.
B)  increase Accounts Receivable and increase Service Revenue.
C)  increase Cash and increase Service Revenue.
D)  decrease Unearned Service Revenue and increase Service Revenue.E) A) and B)
F) None of the above

Question 9

The balance in the office supplies account on May 1 was $6,380,supplies purchased during June were $4,740,and the supplies on hand at May 31 were $2,360.The amount to be used for the appropriate adjusting entry is:

Accepted Answer

A)  $8,740.
B)  $4,740.
C)  $8,760.
D)  $13,480.E) A) and C)
F) All of the above

Question 10

St.Nick Corporation's Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800.There were $400 of supplies on hand at year-end.The year-end adjustment would include an increase in Toy-Making Supplies Expense for

Accepted Answer

A)  $1,000.
B)  $800.
C)  $600.
D)  $400.E) B) and C)
F) A) and B)

Question 11

Under the balance sheet classification of property,plant,and equipment,some accounts need adjustment and others do not.Which do and why? Which do not and why?

Accepted Answer

Plant and equipment both need an adjustm...

Question 12

Accumulated depreciation is to get the carrying value.

Accepted Answer

A)  added to equipment
B)  subtracted from equipment
C)  added to accounts payable
D)  subtracted from accounts payableE) A) and B)
F) A) and C)

Question 13

Three measures useful in assessing liquidity and the ability of a company to pay its current liabilities are ,the current ratio,and the quick ratio.

Accepted Answer

A)  working capital
B)  debt equity ratio
C)  net profit
D)  interest coverageE) A) and C)
F) B) and C)

Question 14

The financial statements are affected by which type(s) of adjustments?

Accepted Answer

A)  Deferrals
B)  Accruals
C)  Both deferrals and accruals
D)  Neither deferrals nor accrualsE) A) and D)
F) A) and B)

Question 15

To arrive at cash flows from operations,it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 16

Under the cash basis of accounting,expenses are recorded when paid.

Accepted Answer

A) True 
 B)False

Question 17

When cash is received in payment of an account receivable,which section of the Statement of Cash Flows is affected?

Accepted Answer

A)  Cash Flow from Operating Activities
B)  Cash Flow from Investing Activities
C)  Cash Flow from Financing Activities
D)  There is no effect on the Statement of Cash Flows.E) A) and C)
F) A) and D)

Question 18

Which one of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

A)  A gain on the sale of land
B)  A decrease in accounts payable
C)  An increase in accrued liabilities
D)  Dividends paid on common stockE) A) and C)
F) B) and C)

Question 19

Current assets are assets that are expected to be converted to cash,sold or used up within 6 months.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

A)  A decrease in inventory
B)  A decrease in accounts payable
C)  Preferred dividends declared and paid
D)  A decrease in accounts receivableE) A) and B)
F) B) and D)

Exam 3: Accrual Accounting Concepts

When cash is received in payment of an account receivable,which section of the Statement of Cash Flows is affected?

Correct AnswerverifiedShow Answer

Current assets are assets that are expected to be converted to cash,sold or used up within 6 months.

Correct AnswerverifiedShow Answer

The balance in the office supplies account on May 1 was $6,380,supplies purchased during June were $4,740,and the supplies on hand at May 31 were $2,360.The amount to be used for the appropriate adjusting entry is:

Correct AnswerverifiedShow Answer

To arrive at cash flows from operations,it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Correct AnswerverifiedShow Answer

Three measures useful in assessing liquidity and the ability of a company to pay its current liabilities are ,the current ratio,and the quick ratio.

Correct AnswerverifiedShow Answer

Updating accrual accounting records prior to preparing financial statements is called:

Correct AnswerverifiedShow Answer

When are sales recognized under the cash basis of accounting? When are expenses recognized?

Correct AnswerverifiedUnder the cash basis of accounting,the o...View AnswerShow Answer

Under the cash basis of accounting,expenses are recorded when paid.

Correct AnswerverifiedShow Answer

Which of the following is true about quick ratio?

Correct AnswerverifiedShow Answer

ASE Company sold goods,receiving $35,000 in cash and $15,000 on credit.How much revenue should it record under the accrual basis of accounting?

Correct AnswerverifiedShow Answer

Under the balance sheet classification of property,plant,and equipment,some accounts need adjustment and others do not.Which do and why? Which do not and why?

Correct AnswerverifiedPlant and equipment both need an adjustm...View AnswerShow Answer

Accumulated depreciation is to get the carrying value.

Correct AnswerverifiedShow Answer

In October,cash is received in advance of rendering services.Assuming that half of the services have been performed by December 31,the year-end adjustment would:

Correct AnswerverifiedShow Answer

Which of the following is not reported as revenue on the income statement?

Correct AnswerverifiedShow Answer

St.Nick Corporation's Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800.There were $400 of supplies on hand at year-end.The year-end adjustment would include an increase in Toy-Making Supplies Expense for

Correct AnswerverifiedShow Answer

Which one of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Correct AnswerverifiedShow Answer

The liabilities that are due to be paid usually within a year or less are called:

Correct AnswerverifiedShow Answer

The financial statements are affected by which type(s) of adjustments?

Correct AnswerverifiedShow Answer

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

Correct AnswerverifiedShow Answer

Under the cash basis of accounting,no adjustments are necessary prior to the preparation of the financial statements.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Under the cash basis of accounting,the o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Plant and equipment both need an adjustm...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified