Question 1

Unearned rent,representing rent paid for the next six months' occupancy,would be reported on the landlord's balance sheet as a(n)

Accepted Answer

A)  asset.
B)  liability.
C)  capital stock.
D)  revenue.E) A) and B)
F) None of the above

Question 2

Gaston Corporation's accumulated depreciation increased by $10,000,while patents decreased by $3,200 between consecutive balance sheet dates.There were no purchases or sales of depreciable or intangible assets during the year.In addition,the income statement showed a gain of $3,500 from sale of land.Reconcile a net income of $45,000 to net cash flow from operating activities.

Accepted Answer

The answer of Gaston Corporation's accumulated depreciation increased by $10,000,while...

Question 3

Physical assets of a long-term nature are referred to as fixed assets.

Accepted Answer

A) True 
 B)False

Question 4

To determine cash payments for operating expenses for the cash flow statement using the direct method,depreciation expense is added to net income.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Accrued revenues would appear on the balance sheet as

Accepted Answer

A)  assets.
B)  liabilities.
C)  stockholders' equity.
D)  prepaid expenses.E) A) and B)
F) None of the above

Question 7

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Accepted Answer

A) True 
 B)False

Question 8

Land is an example of a current asset.

Accepted Answer

A) True 
 B)False

Question 9

X&Y Co.received $4,000 in payments from clients for services billed in a previous month.What effect does this transaction have on the accounts under the accrual basis of accounting?

Accepted Answer

A)  Total assets increase by $4,000.
B)  Assets will increase by $4,000 and revenues will increase $4,000.
C)  Total assets will be decrease by $4,000.
D)  The net effect on assets is zero.E) A) and D)
F) None of the above

Question 10

Under accrual accounting,expenses are recorded when incurred regardless of when paid.

Accepted Answer

A) True 
 B)False

Question 11

Which asset is NOT depreciated as it usually does NOT lose its ability to provide service?

Accepted Answer

A)  Prepaid insurance
B)  Equipment
C)  Building
D)  LandE) A) and B)
F) A) and C)

Question 12

Deferred revenues (unearned revenues) are items initially recorded as liabilities,but expected to become __________ over time.

Accepted Answer

A)  liabilities
B)  assets
C)  revenues
D)  expensesE) A) and D)
F) A) and C)

Question 13

Eagle Eye,Inc. ,a corporation,received an additional investment of $6,000 cash in exchange for shares of capital stock.How does this transaction affect Eagle Eye's accounts?

Accepted Answer

A)  Increase in stock expense and decrease cash by $6,000 each
B)  Increase capital stock and increase cash by $6,000 each
C)  Increase capital stock and increase revenue by $6,000 each
D)  Increase capital stock and decrease retained earnings by $6,000 eachE) None of the above
F) B) and C)

Question 14

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 D)
F) C) and D)

Question 15

Which of the following is an example of an accrued expense?

Accepted Answer

A)  Salary owed but not yet paid
B)  Fees received but not yet earned
C)  Supplies on hand
D)  A two-year premium paid on a fire insurance policyE) A) and D)
F) C) and D)

Question 16

Which of the following is an example of a deferred expense?

Accepted Answer

A)  Prepaid advertising
B)  Unearned revenue
C)  Accounts payable
D)  Accounts receivableE) All of the above
F) A) and B)

Question 17

Using accrual accounting,expenses are recorded and reported only

Accepted Answer

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.E) B) and C)
F) All of the above

Question 18

On April 1,Bear,Inc.paid $2,400 for an insurance premium on a three-year insurance policy.At the end of December,Bear's fiscal year-end,what should be the balance in the prepaid insurance account?

Accepted Answer

A)  $2,700
B)  $3,000
C)  $2,400
D)  $1,800E) C) and D)
F) B) and C)

Question 19

The accrual basis of accounting recognizes

Accepted Answer

A)  revenues when cash is received and expenses when cash is paid.
B)  revenues when earned and expenses when cash is paid.
C)  revenues when cash is received and expenses when incurred.
D)  revenues when earned and expenses when incurred.E) A) and B)
F) A) and C)

Question 20

Refer to Donald Duck Co.How much cash will be paid on Friday?

Accepted Answer

A)  $500
B)  $1,500
C)  $2,500
D)  $1,000E) A) and B)
F) A) and D)

Exam 3: Accrual Accounting Concepts

Unearned rent,representing rent paid for the next six months' occupancy,would be reported on the landlord's balance sheet as a(n)

Correct Answer
verified

Refer to Donald Duck Co.How much cash will be paid on Friday?

Correct Answer
verified

Correct Answer
verified

To determine cash payments for operating expenses for the cash flow statement using the direct method,depreciation expense is added to net income.

Correct Answer
verified

Which of the following is an example of a deferred expense?

Correct Answer
verified

Land is an example of a current asset.

Correct Answer
verified

Under accrual accounting,expenses are recorded when incurred regardless of when paid.

Correct Answer
verified

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 Answer
verified

Physical assets of a long-term nature are referred to as fixed assets.

Correct Answer
verified

Which asset is NOT depreciated as it usually does NOT lose its ability to provide service?

Correct Answer
verified

Accrued revenues would appear on the balance sheet as

Correct Answer
verified

Eagle Eye,Inc. ,a corporation,received an additional investment of $6,000 cash in exchange for shares of capital stock.How does this transaction affect Eagle Eye's accounts?

Correct Answer
verified

X&Y Co.received $4,000 in payments from clients for services billed in a previous month.What effect does this transaction have on the accounts under the accrual basis of accounting?

Correct Answer
verified

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Correct Answer
verified

Which of the following is an example of an accrued expense?

Correct Answer
verified

Deferred revenues (unearned revenues) are items initially recorded as liabilities,but expected to become __________ over time.

Correct Answer
verified

The accrual basis of accounting recognizes

Correct Answer
verified

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

Correct Answer
verified

On April 1,Bear,Inc.paid $2,400 for an insurance premium on a three-year insurance policy.At the end of December,Bear's fiscal year-end,what should be the balance in the prepaid insurance account?

Correct Answer
verified

Using accrual accounting,expenses are recorded and reported only

Correct Answer
verified

Exam 3: Accrual Accounting Concepts

Unearned rent,representing rent paid for the next six months' occupancy,would be reported on the landlord's balance sheet as a(n)

Correct AnswerverifiedShow Answer

Refer to Donald Duck Co.How much cash will be paid on Friday?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To determine cash payments for operating expenses for the cash flow statement using the direct method,depreciation expense is added to net income.

Correct AnswerverifiedShow Answer

Which of the following is an example of a deferred expense?

Correct AnswerverifiedShow Answer

Land is an example of a current asset.

Correct AnswerverifiedShow Answer

Under accrual accounting,expenses are recorded when incurred regardless of when paid.

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

Physical assets of a long-term nature are referred to as fixed assets.

Correct AnswerverifiedShow Answer

Which asset is NOT depreciated as it usually does NOT lose its ability to provide service?

Correct AnswerverifiedShow Answer

Accrued revenues would appear on the balance sheet as

Correct AnswerverifiedShow Answer

Eagle Eye,Inc. ,a corporation,received an additional investment of $6,000 cash in exchange for shares of capital stock.How does this transaction affect Eagle Eye's accounts?

Correct AnswerverifiedShow Answer

X&Y Co.received $4,000 in payments from clients for services billed in a previous month.What effect does this transaction have on the accounts under the accrual basis of accounting?

Correct AnswerverifiedShow Answer

The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for the services or goods purchased.

Correct AnswerverifiedShow Answer

Which of the following is an example of an accrued expense?

Correct AnswerverifiedShow Answer

Deferred revenues (unearned revenues) are items initially recorded as liabilities,but expected to become __________ over time.

Correct AnswerverifiedShow Answer

The accrual basis of accounting recognizes

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

On April 1,Bear,Inc.paid $2,400 for an insurance premium on a three-year insurance policy.At the end of December,Bear's fiscal year-end,what should be the balance in the prepaid insurance account?

Correct AnswerverifiedShow Answer

Using accrual accounting,expenses are recorded and reported only

Correct AnswerverifiedShow Answer

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