Question 1

Management usually desires ______ financial statements and the Canada Revenue Agency requires all businesses to file ______ tax returns.

Accepted Answer

A)   annual, annual
B)   monthly, annual
C)   quarterly, monthly
D)   monthly, monthly

Question 2

Adjusting entries are needed

Accepted Answer

A)   every time cash is received.
B)   every time financial statements are prepared.
C)   every time expenses are incurred or revenue is performed.
D)   never if you are reporting on an annual basis.

Question 3

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is prepared from the unadjusted trial balance?

Accepted Answer

A)   Income Statement
B)   Statement of Owner's Equity
C)   Balance Sheet
D)   None of the above

Question 5

What is the "maximum" time frame for preparing adjusting entries under both ASPE and IFRS?

Accepted Answer

A)   ASPE prepares adjusting entries monthly, IFRS prepares adjusting entries monthly.
B)   IFRS prepares adjusting entries quarterly, ASPE prepares adjusting entries quarterly.
C)   ASPE prepares adjusting entries annually, IFRS prepares adjusting entries quarterly.
D)   IFRS prepares adjusting entries annually, ASPE prepares adjusting entries quarterly.

Question 6

A company is required to prepare adjusting entries for its financial statements because

Accepted Answer

A)   Canada Revenue Agency requires adjusting entries.
B)   the cash balance would not be properly reflected.
C)   long-term assets must be expensed when purchased.
D)   transactions may relate to more than one accounting period.

Question 7

Unearned revenue, a cash payment which has been received in advance, is recorded as an asset of the business.

Accepted Answer

A) True 
 B)False

Question 8

Adjusting entries are

Accepted Answer

A)   not necessary if the accounting system is operating properly.
B)   usually required before financial statements are prepared.
C)   made when the cash basis of accounting is used.
D)   made to income statements accounts only.

Question 9

The straight-line method of depreciation will allocate a portion of the cost of the asset to each year of useful life of the asset.

Accepted Answer

A) True 
 B)False

Question 10

There is always a direct relationship between revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 11

An interim period of a company can be any time period of less than one year.

Accepted Answer

A) True 
 B)False

Question 12

The annual depreciation expense can be calculated by dividing the cost of the asset by the useful life of the asset (in years).

Accepted Answer

A) True 
 B)False

Question 13

An adjusting entry will always debit an asset to increase the asset.

Accepted Answer

A) True 
 B)False

Question 14

Adjusting entries are required

Accepted Answer

A)   because some costs expire with the passage of time and have not yet been journalized.
B)   when the company's profits are below the budget.
C)   when expenses are recorded in the period in which they are earned.
D)   when revenues are recorded in the period in which they are earned.

Question 15

When using accrual basis accounting, financial statement preparers must

Accepted Answer

A)   provide a supplementary note detailing that accrual accounting has been used.
B)   state within a note that cash basis accounting is not acceptable under GAAP.
C)   provide no supplementary note because the underlying assumption is that accrual basis of accounting is used on all financial statements.
D)   none of the above.

Question 16

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Accepted Answer

A)   debit Unearned Revenue and credit Cash.
B)   debit Unearned Revenue and credit Service Revenue.
C)   debit Unearned Revenue and credit Prepaid Expense.
D)   debit Unearned Revenue and credit Accounts Receivable.

Question 17

A dress shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and payment from the customer is received on December 10. The dress shop follows GAAP and recognizes revenue accordingly. When is the $1,000 considered to be earned?

Accepted Answer

A)   December 5
B)   December 10
C)   November 30
D)   December 1

Question 18

Adjusting entries are NOT necessary if the trial balance debit and credit columns balances are equal.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is NOT considered an interim reporting period for a calendar year end of December 31, 2017?

Accepted Answer

A)   March 31, 2017
B)   June 30, 2017
C)   September 30, 2017
D)   all of the above are interim reporting periods

Question 20

Because accounting often requires estimates to be made to assess the effect of a transaction, the shorter the time period, the easier it becomes to determine the proper adjustments.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting the Accounts

A dress shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and payment from the customer is received on December 10. The dress shop follows GAAP and recognizes revenue accordingly. When is the $1,000 considered to be earned?

Correct AnswerverifiedShow Answer

Adjusting entries are needed

Correct AnswerverifiedShow Answer

There is always a direct relationship between revenues and expenses.

Correct AnswerverifiedShow Answer

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Correct AnswerverifiedShow Answer

What is the "maximum" time frame for preparing adjusting entries under both ASPE and IFRS?

Correct AnswerverifiedShow Answer

Adjusting entries are NOT necessary if the trial balance debit and credit columns balances are equal.

Correct AnswerverifiedShow Answer

Because accounting often requires estimates to be made to assess the effect of a transaction, the shorter the time period, the easier it becomes to determine the proper adjustments.

Correct AnswerverifiedShow Answer

An adjusting entry will always debit an asset to increase the asset.

Correct AnswerverifiedShow Answer

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Correct AnswerverifiedShow Answer

The straight-line method of depreciation will allocate a portion of the cost of the asset to each year of useful life of the asset.

Correct AnswerverifiedShow Answer

Which of the following statements is prepared from the unadjusted trial balance?

Correct AnswerverifiedShow Answer

An interim period of a company can be any time period of less than one year.

Correct AnswerverifiedShow Answer

Adjusting entries are

Correct AnswerverifiedShow Answer

Unearned revenue, a cash payment which has been received in advance, is recorded as an asset of the business.

Correct AnswerverifiedShow Answer

Which of the following is NOT considered an interim reporting period for a calendar year end of December 31, 2017?

Correct AnswerverifiedShow Answer

The annual depreciation expense can be calculated by dividing the cost of the asset by the useful life of the asset (in years).

Correct AnswerverifiedShow Answer

When using accrual basis accounting, financial statement preparers must

Correct AnswerverifiedShow Answer

Adjusting entries are required

Correct AnswerverifiedShow Answer

A company is required to prepare adjusting entries for its financial statements because

Correct AnswerverifiedShow Answer

Management usually desires ______ financial statements and the Canada Revenue Agency requires all businesses to file ______ tax returns.

Correct AnswerverifiedShow Answer

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Management usually desires financial statements and the Canada Revenue Agency requires all businesses to file tax returns.

Correct Answer
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