Instant download and all chapters Test Bank Horngren s Financial Managerial Accounting 4th Edition Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura https://testbankdata.com/download/test-bank-horngrens-financialmanagerial-accounting-4th-edition-tracie-l-nobles-brenda-l-mattisonella-mae-matsumura/ Horngren's Financial & Managerial Accounting, 4e (Nobles) Chapter 3 The Adjusting Process Learning Objective 3-1 1) Under accrual accounting, transactions are recorded only when cash is received or paid. 2) Recipes. Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting, no entry is made until the amount is paid. 3) In cash basis accounting, revenue is recognized when cash is received and expenses are recognized when they are paid. 4) Under accrual basis accounting, revenue is recorded only when cash is received. 5) Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received.
6) Under accrual basis accounting, an expense is recorded only when cash is paid. 7) Under cash basis accounting, an expense is recorded only when cash is paid. 8) Generally Accepted Accounting Principles (GAAP) require the use of accrual accounting. 9) If a company is using the accrual basis accounting method, when should it record its earned revenue? A) when cash is received, even though services may be rendered at a later date B) when services are rendered, even though cash may be received at a later date C) when services are completely rendered and cash is received D) when cash is received, 30 days after the completion of the services Answer: B 10) When does a company account for earned revenue if it follows cash basis accounting? A) when services are rendered, even though cash may be received at a later date B) when cash is received after the service is completely rendered C) when the services are being rendered D) when cash is received, either prior to the services being rendered or at a time after the services are rendered Answer: D 11) Which of the following accounts does cash basis accounting ignore? A) Payables
B) Revenue C) Cash D) Expenses Answer: A Diff: 2
12) A company receives payment on August 5 for services rendered, two weeks earlier, to one of its customers on account. Which of the following entries would be recorded if the company uses accrual basis accounting? A) Accounts Receivable 1,000 B) Salary Expense 1,000 C) Service Revenue 1,000 D) Supplies 1,000 Answer: A 13) Which of the following entries would be recorded if a company uses the cash basis method of accounting? A) Accounts Receivable 1,000 B) Salary Expense 1,000 Salary Payable 1,000 C) Prepaid rent 1,000 D) Rent Expense 1,000 Answer: D Diff: 2
14) Which of the following statements is true of accrual basis accounting? A) Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). B) Accrual basis accounting records expenses only when cash has been paid for them. C) Accrual basis accounting records revenue only when cash is received. D) Accrual basis accounting always results in greater net income than cash basis accounting. Answer: A 15) Which of the following would result in an increase in income under the accrual method of accounting, but would not result in an increase in income under cash basis accounting? A) purchase of supplies for cash B) performance of services on account C) use of supplies purchased earlier D) receipt of cash for services that were performed earlier on account Answer: B Diff: 2 16) Which of the following accounts would be used under the accrual method of accounting, but not under cash basis accounting? A) Cash B) Unearned Revenue C) Service Revenue D) Salary Expense Answer: B
Learning Objective 3-2 1) The revenue recognition principle is the basis for recording revenues both when to record revenue and the amount of revenue to record. 2) In accounting terms, the calendar year is always called the fiscal year. 3) Which of the following is considered a fiscal year? A) six months B) three months C) twelve months D) four months 4) Revenue is said to be earned when the business has. A) entered into an agreement with the customer about the goods or services to be delivered B) prepared a journal entry to record revenue C) received cash from the customer before goods or services are delivered D) delivered a good or service to the customer Answer: D 5) The accounting principle that ensures all expenses are recorded when they are incurred during the period and offsets those expenses against the revenues of the period, is called the principle. A) comparison B) accrual C) matching D) revenue recognition
6) Which of the following accounting terms assumes that a business's activities can be divided into small segments and financial statements can be prepared for specific periods, such as a month, quarter, or year? A) adjusting entry concept B) revenue recognition principle C) matching principle D) time period concept Answer: D 7) The matching principle is also called the. A) adjusting entry concept B) revenue recognition principle C) expense recognition principle D) time period concept 8) Which of the following accounting elements does the matching principle help to match? A) revenues and liabilities B) expenses and assets C) expenses and revenues D) expenses and liabilities 9) To match expenses against revenues means to. A) add expenses incurred during one period from revenues earned during that same period B) subtract expenses incurred during one period from revenues earned during the previous period C) add expenses incurred during one period from revenues earned during the previous period D) subtract expenses incurred during one period from revenues earned during that same period Answer: D
10) The revenue recognition principle guides accountants in. A) ensuring only revenues received in cash are recorded B) determining when to record expenses C) determining when to record revenues D) ensuring expenses are deducted from revenues 11) Which of the following assumes that financial statements of a business can be prepared for specific periods? A) matching principle B) revenue recognition principle C) time period concept D) adjusting entry principle 12) The matching principle states that. A) financial statements can be prepared for specific periods B) a business's activities can be sliced into small time segments C) all expenses should be recorded when they are incurred during the period D) companies should record revenue when it has been earned 13) The time period concept states that. A) financial statements can be prepared for specific periods B) all expenses should be recorded when they are incurred during the period C) companies should record revenue when it has been earned D) expenses incurred during a period should be matched against the revenues of the period Answer: A
14) Which of the following entries would be made as the result of the revenue recognition principle? A) Service Revenue 1,000 Service Revenue 1,000 B) Accounts Receivable 1,000 Service Revenue 1,000 C) Salaries Expense 1,000 Accounts Payable 1,000 D) Depreciation Expense 1,000 Accumulated Depreciation 1,000 Answer: B Diff: 2 15) Which of the following entries would be made because of the matching principle? A) Salaries Expense 1,000 Service Revenue 1,000 B) Salaries Expense 1,000 C) Salaries Expense 1,000 Salaries Payable 1,000 D) Unearned Revenue 1,000 Diff: 2
Learning Objective 3-3 1) Accrued revenue is the income that has been received but not earned. 2) Prepaid insurance is an asset account and hence it appears on the balance sheet. 3) Prepaid rent is an expense account and hence it appears on the income statement. 4) A contra account's normal balance (debit or credit) is the opposite of the normal balance of the related account. 5) The sum of all the depreciation expense recorded to date for a depreciable asset is called residual value. 6) The depreciation method that allocates an equal amount of depreciation each year is called the straightline method.