Accounting 2010 chapter 3 – Flashcards
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The accountant for Max Corp. failed to make the adjusting entry to record depreciation for the current year. The effect of this error is which of the following?
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Asset, net income, and stockholder's equity are all overstated.
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If a real estate company fails to accrue commission revenue
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assets are understated, and net income is understated
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All of the following statements are true except one. Which statement is false? A. adjusting entries are required for a business that uses the cash basis B. a fiscal year may end on some date other than December 31. C. The expense recognition principle directs accountant to identify and measure all expenses incurred and deduct them from revenues earned during the same period D. Accrual accounting produces better information than cash-basis accounting
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A. Adjusting entries are required for a business that uses the cash basis.
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The account Unearned Revenue is a(n):
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Liability
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Adjusting entries A. are needed to measure the period's net income or net loss B. do not debit or credit Cash C. update the accounts D. all of the above
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D. all of the above
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Adjusting entry that debits an expense and credits a liability is which type?
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Accrued expense
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On a trial balance, which of the following would indicate that an error has been made? A. salary expense has a debit balance B. service revenue has a debit balance C. Accumulated Deprecation has a credit balance D. All of the above indicate errors
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B. Service Revenue has a debit balance
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The entry to close Management Fee Revenue would be which of the following?
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Management Fee Revenue Retained Earnings
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Which of the following accounts is not closed? A. Dividends B. Interest Revenue C. Depreciation Expense D. Accumulated Depreciation
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D. Accumulated Depreciation
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FedEx earns service of $750,000. how does this transaction affect FedEx's current and debt ratios?
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A. Improves both ratio
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Suppose Rose Corporation borrows $10 million on a 10-year note payable. How does this transaction affect Rose's current ratio and debt ratio?
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Improves the current ratio and hurts the debt ratio
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In which month should revenue be recorded?
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In the month that goods are shipped to the customer
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An adjusting entry recorded June salary expense that will be paid in July. Which statement best describes the effect of this adjusting entry on the company's accounting equation?
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Assets are not affected, liabilities are increased, and stockholders' equity is decreased
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What is the effect on the financial statements of recording depreciation on equipment?
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Net income, assets, and stockholders' equity are all decreased
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For 2014, Wyndham Company had revenues in excess of expenses. Which statement describes Wyndham's closing entries at the end of 2014 (assume there is only one closing entry for both revenue and expenses)?
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Revenues will be debited, expenses will be credited, and retained earnings and will be credited.
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Which of the following accounts would not be included in the closing entries?
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Accumulated Depreciation
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A major purpose of preparing closing entries is to:
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Update the Retained Earnings account
