Strayer ACC556 CHAPTER 4 EXERCISE Latest 2019 April Question # 00600505 Course Code : ACC556 Subject: Business Due on: 04/18/2019 Posted On: 04/18/2019 12:16 PM Tutorials: 1 Rating: 4.8/5

ACC556 Financial Accounting for Managers

CHAPTER 4 EXERCISE

Question 1 An
adjusting entry to a prepaid expense is required to recognize expired expenses.

Answers:

True

False

Question 2 Management
usually wants ________ financial statements and the IRS requires all businesses
to file _________ tax returns.

Answers:

annual, annual

monthly, annual

quarterly,
monthly

monthly,
monthly

Question 3 Unearned
revenue is a prepayment that requires an adjusting entry when services are
performed.

Answers:

True

False

Question 4 Given
the data below for a firm in its first year of operation, determine net income
under the cash basis of accounting.

Cash received from
customers $48,000

Accounts receivable 12,000

Cash paid for expenses 26,000

Accounts payable (related to
expenses) 3,000

Prepaid rent for next
period 7,000

Answers:

$22,000

$31,000

$24,000

$15,000

Question 5 Which
statement is Correct ?

Answers:

As long as
a company consistently uses the cash basis of accounting, generally accepted
accounting principles allow its use.

The use of the cash basis of accounting
violates both the revenue recognition and expense recognition principles.

The cash
basis of accounting is objective because no one can be certain of the amount of
revenue until the cash is received.

As long as
management is ethical, there are no problems with using the cash basis of
accounting.

Question 6 A
flower shop makes a large sale for $1,000 on November 30. The customer is sent
a statement on December 5 and a check is received on December 10. The flower
shop follows GAAP and applies the revenue recognition principle. When is the
$1,000 considered to be recognized?

Answers:

December 5

December 10

November 30

December 1

Question 7 Depreciation
is the process of:

Answers:

valuing an
asset at its fair value.

increasing
the value of an asset over its useful life in a rational and systematic manner.

allocating the cost of an asset to expense
over its useful life in a rational and systematic manner.

writing
down an asset to its real value each accounting period.

Question 8 If
a company fails to adjust a Prepaid Rent account for rent that has expired,
what effect will this have on that month’s financial statements?

Answers:

Failure to
make an adjustment does not affect the financial statements.

Expenses
will be overstated and net income and stockholders’ equity will be under-
stated.

Assets will
be overstated and net income and stockholders’ equity will be understated.

Assets will be overstated and net income and
stockholders’ equity will be overstated.

Question 9 Why
do generally accepted accounting principles require the application of the
revenue recognition principle?

Answers:

Failure to apply the revenue recognition
principle could lead to a misstatement of revenue.

It is easy
to apply the revenue recognition principle because revenue issues are always
easy to identify and resolve.

Recording
revenue when cash is received is an objective application of the revenue
recognition principle.

Accounting
software has made the revenue recognition easy to apply.

Question 10
Accrued expenses are:

Answers:

incurred but not yet paid or recorded.

paid and
recorded in an asset account after they are used or consumed.

paid and
recorded in an asset account before they are used or consumed.

incurred
and already paid or recorded.

Question 11
If a resource has been consumed but a bill has not been received at the end of
the accounting period, then:

Answers:

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
Can financial statements be prepared directly from the adjusted trial balance?

Answers:

They
cannot. The general ledger must be used.

Yes, adjusting entries have been recorded in
the general journal and posted to the ledger accounts.

No, the
adjusted trial balance merely proves the equality of the total debit and total
credit balances in the ledger after adjustments are posted. It has no other
purpose.

They can
because that is the only reason that an adjusted trial balance is prepared.

Question 13
Which of the following would not result in unearned revenue?

Answers:

Rent
collected in advance from tenants.

Services performed on account.

Sale of
season tickets to football games.

Sale of
two-year magazine subscriptions.

Question 14
When closing entries are prepared, each income statement account is closed
directly to retained earnings.

Answers:

True

False

Question 15
Failure to prepare an adjusting entry at the end of the period to record an
accrued expense would cause:

Answers:

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 16
Which statement is concerning the
adjusted trial balance?

Answers:

An adjusted
trail balance eliminates the need for the preparation of financial statements.

The purpose of an adjusted trial balance is to
prove the equality of the total debit balances and the total credit balances in
the ledger.

An adjusted
trial balance will contain only permanent—balance sheet—accounts.

The
adjusted trial balance is prepared after the adjusting entries have been
journalized but before they have been posted.

Question 17
Match the items below by entering the appropriate code letter in the space
provided.

Question	Selected Match
Periodicity assumption	The economic life of a business can be divided into artificial time periods
Cash basis	Events recorded only in periods the company receives or pays cash
Revenue recognition principle	Revenue is recognized when the performance obligation is satisfied.
Prepaid expenses	Expenses paid before they are incurred
Expense recognition principle	Efforts are related to accomplishments
Accrued revenues	Revenues earned but not yet received
Depreciation	A cost allocation process
Post-closing trial balance	Includes only permanent—balance sheet—accounts
Accrued expenses	Expenses incurred but not yet paid

Question 18
The revenue recognition principle dictates that revenue be recognized in the
accounting period in which the performance obligation is satisfied.

Answers:

True

False