Chapter 3 Quiz

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Question #1

Which of the following accounts is listed in a post-closing trial balance?

A Salaries Payable.

B Advertising Expense.

C Dividends.

D Service Revenue.

Question #2

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. According to the Revenue Recognition Principle, on which date should the revenue be recorded?

A November 1.

B Neither.

C One-half on each date.

D November 15.

Question #3

Recording salaries owed to employees that will not be paid by the company until the following accounting period is an example of a(n):

A Unearned revenue.

B Accrued revenue.

C Accrued expense.

D Prepaid expense.

Question #4

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

A Delaying the payment of interest on an outstanding loan until next year.

B Prepaying insurance coverage for the next 12 months.

C Receiving cash in advance of a service to be provided to a customer.

D Providing services to a customer without having yet collected the cash.

Question #5

The entry to close the expense accounts includes:

A A credit to Retained Earnings.

B A debit to all expense accounts and a credit to Retained Earnings.

C A debit to all expense accounts.

D A debit to Retained Earnings.

Question #6

Under cash-basis accounting, companies typically record revenue:

A In the period in which goods and services are prepared to be sold to customers.

B In the period in which we received cash from customers for goods and services.

C In the period in which customers order goods and services.

D In the period in which we provide goods and services to customers.

Question #7

On September 9, Clearmore Services receives a request for services from a customer. The service is scheduled for September 15. On September 15, the service is provided, and the customer pays one week later on September 22. Using cash-basis accounting, on which date should Clearmore Services record service revenue?

A September 9 (date of service request).

B Evenly over the three dates.

C September 15 (date of service).

D September 22 (date of cash receipt).

Question #8

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Under accrual-basis accounting, on which date should Tonkawa record lawn maintenance expense?

A March 4 (date of request).

B Evenly over the three dates.

C March 12 (date of cash payment).

D March 8 (date of lawn maintenance service).

Question #9

Under accrual-basis accounting, companies typically report expenses:

A In the same period as the revenue they help to generate.

B In the same period in which cash is paid.

C In the same period in which a liability is paid.

E In the same period in which an asset is purchased.

Question #10

Which of the following accounts is not listed in a post-closing trial balance?

A Accounts Receivable.

B Interest Payable.

C Service Revenue.

D Equipment.

Question #11

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under cash-basis accounting?

A December 20.

B December 10.

C One-half on each date.

D Neither.

Question #12

Under cash-basis accounting, companies typically report expenses:

A In the same period in which cash is paid.

B In the same period in which an asset is purchased.

C In the same period as the revenue they help to generate.

D In the same period in which a divided is paid.

Question #13

Which of the following describes the closing process?

A Store all source documents used to record transactions throughout the period.

B Record activities that have occurred but that have not been recorded by the end of the accounting period.

C Transfer the balances of temporary accounts (revenues, expenses, and dividends) to retained earnings.

D Record external events for the period so that financial statements can be prepared.

Question #14

On September 9, Clearmore Services receives a request for services from a customer. The service is scheduled for September 15. On September 15, the service is provided, and the customer pays one week later on September 22. Using accrual-basis accounting, on which date should Clearmore Services record service revenue?

A September 9 (date of service request).

B September 22 (date of cash receipt).

C Evenly over the three dates.

D September 15 (date of service).

Question #15

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. On which date should the revenue be recorded under cash-basis accounting?

A November 15.

B November 1.

C One-half on each date.

Question #16

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Using cash-basis accounting, on which date should Tonkawa record lawn maintenance expense?

A March 4 (date of request).

B March 12 (date of cash payment).

C March 8 (date of lawn maintenance service).

D Evenly over the three dates.

Question #17

The adjusting entry to record supplies used during the period includes a:

A Credit to Service Revenue

B Credit to Cash

C Debit to Supplies.

D Debit to Supplies Expense

Question #18

The adjusting entry to record interest earned during the period includes a:

A Debit to Cash.

B Debit to Interest Expense.

C Credit to Interest Revenue.

D Credit to Cash.

Question #19

After the closing entries are posted to the accounts, all temporary accounts:

A Are open.

B Have zero balances.

Question #20

Financial statements are prepared from which of the following trial balances?

A Post-closing trial balance.

B Adjusted trial balance.

C Financial trial balance.

D Unadjusted trial balance.

Question #21

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under accrual-basis accounting?

A December 20.

B December 10.

C Neither.

D One-half on each date.

Question #22

The revenue recognition principle states that companies typically record revenue:

A In the period in which customers order goods and services.

B In the period in which goods and services are prepared to be sold to customers.

C In the period in which we received cash from customers for goods and services.

D In the period in which we provide goods and services to customers.

Question #23

Which of the following describes the information reported in the balance sheet?

A Total assets equal total liabilities plus stockholders’ equity.

B Changes in stockholders’ equity are shown through changes in common stock and retained earnings.

C Net income for the period is calculated by subtracting expenses from revenues.

D All accounts and account balances are shown and all debits equal all credits.

Question #24

The balance of retained earnings in the adjusted trial balance:

A Equals the balance of retained earnings at the beginning of the accounting period.

B Equals the balance of retained earnings after closing entries.

C Is not shown.

D Is the amount shown for retained earnings in the balance sheet.

Question #25

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

A Service was provided to a customer but not yet billed.

B Interest is incurred through the passage of time.

C Utilities have been incurred but not yet paid.

D Rent has been purchased in advance.

Question #26

Which of the following describes the information reported in the statement of cash flows?

A Net cash flows from operating, investing, and financing activities.

B Equality of total assets with total liabilities plus stockholders’ equity.

C Net income for the period calculated as revenues minus expenses.

D Changes in stockholders’ equity through changes in common stock and retained earnings.

Question #27

Which of the following is a characteristic of adjusting entries?

A Used in cash-basis accounting.

B Reduces the balances of revenue accounts to zero.

C Recorded at the beginning of the accounting period.

D Allows for proper application of the revenue recognition principle (revenues) or expenses recognition.

Question #28

Which of the following describes the information reported in the income statement?

A All accounts and account balances are shown.

B Changes in stockholders’ equity are shown through changes in common stock and retained earnings.

C Net income for the period is calculated by subtracting expenses from revenues.

D Total assets equal total liabilities plus stockholders’ equity.

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