AC/113 AC113 AC 113 UNIT 5 EXAM

Question 1.

Question :

Cash and other assets that are expected to be converted to cash, or sold or, used up within one year or less through the normal operations of the business, are called

Student Answer:

 current assets

 intangible assets

 fixed assets

 notes receivable

Question 2.

Question :

Which type(s) of adjustments are the financial statements affected by?

Student Answer:

 Deferrals

 Accruals

 Both deferrals and accruals

 Neither deferrals nor accruals

Question 3.

Question :

Cash receipts from interest and dividends are classified as

Student Answer:

 investing activities

 operating activities

 either financing or investing activities

 financing activities

Question 4.

Question :

Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become _____ over time.

Student Answer:

 stockholders' equity

 liabilities

 expenses

 assets

Question 5.

Question :

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

Student Answer:

 Prepaid insurance

 Equipment

 Building

 Land

Question 6.

Question :

When cash is paid to suppliers on account, which section of the Statement of Cash Flows is affected?

Student Answer:

 Cash Flow from Operating Activities

 Cash Flow from Investing Activities

 Cash Flow from Financing Activities

 There is no effect on the Statement of Cash Flows

Question 7.

Question :

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

Student Answer:

 the cash flows from financing activities section

 the cash flows from investing activities section

 a separate schedule

 the cash flows from operating activities section

Question 8.

Question :

The __________ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.

Student Answer:

 accounting equation

 retained earnings statement

 intangible asset section

 classified balance sheet

Question 9.

Question :

As time passes, fixed assets, other than land, lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called:

Student Answer:

 Equipment allocation

 Depreciation

 Accumulation

 Matching

Question 10.

Question :

When preparing an adjustment under accrual accounting, what would be the proper amount of the adjusting entry if the end of the period balance in the supply account is $4,000 and the amount of supplies on hand is $1650?

Student Answer:

 3,350

 2,350

 3,050

 5,650

Question 11.

Question :

If prepaid insurance expires over time, this asset account becomes a (n)

Student Answer:

 liability

 another asset

 revenue

 expense

Question 12.

Question :

What is the purpose of accrual accounting?

Student Answer:

 To avoid misleading information which arises from timing of cash receipts and payments

 Helps with cash transactions

 Helps to align the ongoing concern concept

 To help post to accounts receivable

Question 13.

Question :

Which method of accounting is associated with the matching principle (concept)?

Student Answer:

 Cash

 Production

 Accrual

 Selling

Question 14.

Question :

___________ is an example of a deferred expense.

Student Answer:

 Unearned revenue

 Accounts payable

 Prepaid advertising

 Accounts receivable

Question 15.

Question :

The accrual basis of accounting recognizes

Student Answer:

 revenues when cash is received and expenses when cash is paid

 revenues when earned and expenses when cash is paid

 revenues when cash is received and expenses when incurred

 revenues when earned and expenses when incurred

Question 16.

Question :

Jedi Co. billed a client for flying lessons given in January. The payment was received in February. Under the accrual basis of accounting, when should Jedi record the revenue?

Student Answer:

 January

 February

 Some in January and some in February

 Jedi should not record any revenue

Question 17.

Question :

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

Student Answer:

 asset

 liability

 capital stock

 revenue

Question 18.

Question :

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

Student Answer:

 revenues

 expenses

 liabilities

 assets

Question 19.

Question :

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

Student Answer:

 Prepaid advertising

 Unearned revenue

 Accounts payable

 Accounts receivable

Question 20.

Question :

Which of the following best describes an accrual adjustment?

Student Answer:

 It records a transaction in a way that delays or defers the recognition of an expense or revenue.

 It is created when a revenue or expense has been earned or incurred but has not been recorded.

 It is initially recorded as an asset but become expense over time or through normal operations of the business.

 It is initially recorded as liabilities but become revenues over time or through normal operations of the business.