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Test 2 - Chapters 3/4 A

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Grade 12 Accounting Midterm Prep
Claudia Voin
Quiz by Claudia Voin, updated more than 1 year ago
Claudia Voin
Created by Claudia Voin about 9 years ago
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Resource summary

Question 1

Question
The time period assumption states that
Answer
  • a transaction can only affect one period of time
  • estimates should not be made if a transaction affects more than one time period
  • adjustments to the enterprise's accounts can only be made in the time period when the business terminates operations
  • the economic life of a business can be divided into artificial time period periods

Question 2

Question
In general, the shorter the time period, the difficulty of making the proper adjustments to accounts
Answer
  • is increased
  • is decreased
  • is unaffected
  • depends on if there is a profit or a loss

Question 3

Question
The fiscal year of a business is usually determined by
Answer
  • the Canada Customs and Revenue Agency
  • the Tax Act
  • the business
  • provincial securities and exchange commissions

Question 4

Question
Moishe's Tune-Up Shop follows the revenue recognition principle. Moishe services a car on July 31. The customer picks up the vehicle August 1st and mails the payment on August 5th. Moishe receives the cheque in the mail on August 6th. When should Moishe show the revenue was earned?
Answer
  • July 31
  • August 1
  • August 5
  • August 6

Question 5

Question
A company spends $10 million for an office building. Over what period should the cost be written off?
Answer
  • when the $10 million is expended in cash
  • all in the first year
  • over the useful life of the building
  • after $10 million in revenue is earned

Question 6

Question
The matching principle states that expenses should be matched with revenues. Another way of stating the principle is to say that
Answer
  • assets should be matched with liabilities
  • efforts should be matched with accomplishments
  • owner withdrawals should be matched with owner contribuions
  • cash payments should match cash receipts

Question 7

Question
A small company may be able to justify using the cash basis of accounting if they have
Answer
  • sales under $1 000 000
  • no accountants on staff
  • few receivables and payables
  • all sales and purchases accounts

Question 8

Question
Adjusting entries are
Answer
  • not necessary if the accounting system is operating properly
  • usually required before financial statements are prepared
  • made whenever management desires to change an account balance
  • made to balance sheet accounts only

Question 9

Question
Which one of the following is not a justification for adjusting entries?
Answer
  • adjusting entries are necessary to ensure that revenue recognition principles are followed
  • adjusting entries are necessary to ensure that the matching principle is followed
  • adjusting entries are necessary to enable financial statements to be in conformity with IFRS
  • adjusting entries are necessary to bring the ledger accounts in line with budget

Question 10

Question
An adjusting entry
Answer
  • affects two balance sheet accounts
  • affects two income statement accounts
  • affects a balance sheet account and an income statement account
  • is always a compound entry

Question 11

Question
If a resource has been consumed but a bill has not been received at the end of the accounting period, then
Answer
  • an expense should be recorded when the bill is received
  • an expense should be recorded when the cash is paid out
  • an adjusting entry should be made recognizing the expense
  • it is optional whether to record the expense before the bill is received

Question 12

Question
An asset-expense relationship exists with
Answer
  • liability accounts
  • revenue accounts
  • prepaid expense adjusting entries
  • accrued expense adjusting entries

Question 13

Question
A law firm received $2 000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause
Answer
  • expenses to be overstated
  • net income to be overstated
  • liabilities to be understated
  • revenues to be understated

Question 14

Question
Accrued revenues are
Answer
  • received and recorded as liabilities before they are earned
  • earned and recorded as liabilities before they are received
  • earned but not yet received or recorded
  • earned and already received and recorded

Question 15

Question
Prepaid expenses are
Answer
  • paid and recorded in an asset account before they are used or consumed
  • paid and recorded in an asset account after they are used or consumed
  • incurred but not yet paid or recorded
  • incurred and already paid and recorded

Question 16

Question
Accrued expenses are
Answer
  • paid and recorded in an asset account before they are used or consumed
  • paid and recorded in an asset account after they are used or consumed
  • incurred but not yet paid or recorded
  • incurred and already paid and recorded

Question 17

Question
Unearned revenues are
Answer
  • received and recorded as liabilities before they are earned
  • earned and recorded as liabilities before they are received
  • earned but not yet received or recorded
  • earned and already received and recorded

Question 18

Question
A liability-revenue relationship exists with
Answer
  • prepaid expense adjusting entries
  • accrued expense adjusting entries
  • unearned revenue adjusting entries
  • accrued revenue adjusting entries

Question 19

Question
Which of the following reflect the balances of prepayment accounts prior to adjustment?
Answer
  • Balance sheet accounts are understated and income statement accounts are understated
  • Balance sheet accounts are overstated and income statement accounts are overstated
  • Balance sheet accounts are understated and income statement accounts are overstated
  • Balance sheet accounts are overstated and income statement accounts are understated

Question 20

Question
Amortization of a capital asset is the process of
Answer
  • valuing a capital asset at its fair market value
  • increasing the cost of a capital asset over the periods the asset benefits
  • allocating the cost of a capital asset to an expense over the periods the asset benefits
  • writing down a capital asset to its real value each account period

Question 21

Question
An accumulated amortization account
Answer
  • is a contra-liability
  • increased on the debit side
  • is offset against total assets on the balance sheet
  • has a normal credit balance

Question 22

Question
The difference between the cost of a capital asset and its related accumulated amortization is referred to as the
Answer
  • market value
  • blue book value
  • net book value
  • amortized difference

Question 23

Question
If a business pays rent in advance and debit a prepaid rent account, the company receiving the rent payment will credit
Answer
  • cash
  • prepaid rent
  • unearned rent revenue
  • accrued rent revenue

Question 24

Question
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause
Answer
  • net income to be understated
  • an overstatement of assets and an overstatement of liabilities
  • an understatement of expenses and an understatement of liabilities
  • an overstatement of expenses and an overstatement of liabilities

Question 25

Question
Failure to prepare a an adjusting entry at the end of the period to record an accrued revenue would cause
Answer
  • net income to be overstated
  • an understatement of assets and an understatement of revenues
  • an understatement of revenues and an understatement of liabilities
  • an understatement of revenues and an overstatement of liabilities

Question 26

Question
Closing entries are made
Answer
  • in order to terminate the business as an operating entity
  • so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts
  • in order to transfer net income/loss and owner's drawings to the capital account
  • so that financial statements can be prepared

Question 27

Question
The owner's capital account
Answer
  • is a permanent account
  • appears on the cash flow statement
  • appears on the income statement
  • is a temporary account

Question 28

Question
The purpose of a post-closing trial balance is to
Answer
  • prove that no mistakes were made
  • prove the equality of the balance sheet account balances that are carried forward into the next accounting period
  • prove the equality of the income statement account balances that are carried forward into the next accounting period
  • list all the balance sheet accounts in alpha order for easy reference

Question 29

Question
After closing entries are posted, the balance in the owner's capital account in the ledger is equal to
Answer
  • the beginning owner's capital reported on the statement of OE
  • the amount of the owner's capital reported on the balance sheet
  • zero
  • the net income for the period

Question 30

Question
Reversing entries are required for
Answer
  • prepayment adjustments
  • accrual adjustments
  • estimate adjustments
  • prepayment and accrual adjustments
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