Question 1

Which of the following best describes the primary difference between accrual accounting and cash-basis accounting?

Accepted Answer

Accrual accounting records revenues when earned and expenses when incurred, regardless of when cash is exchanged.

Question 2

According to the revenue recognition principle, when should a company recognize revenue?

Accepted Answer

When goods or services have been delivered and the company expects to receive payment.

Question 3

Alladin Travel, Inc. prepays three months’ rent ($3,000) on June 1. What is the adjusting entry required on June 30?

Accepted Answer

Debit Rent Expense $$1,000; Credit Prepaid Rent 1$$,000

Question 4

Which of the following is NOT a characteristic of a contra asset account?

Accepted Answer

It has a normal credit balance.

Question 5

If Alladin Travel, Inc. purchased equipment for $24,000 with a useful life of 5 years, what is the monthly depreciation expense using the straight-line method?

Accepted Answer

$400

Question 6

Which of the following transactions would require an accrual adjusting entry at the end of the period?

Accepted Answer

Earning revenue that has not yet been collected.

Question 7

A company has $$36,800 in cash, 2$$,000 in accounts receivable, $$400 in supplies, and 1$$,000 in prepaid rent. What is the total amount of current assets?

Accepted Answer

$40,200

Question 8

Which of the following best describes the purpose of closing entries in the accounting cycle?

Accepted Answer

To transfer the balances of temporary accounts to retained earnings and reset them to zero.

Question 9

If a company’s current assets are $$50,000 and current liabilities are 25$$,000, what is the current ratio?

Accepted Answer

$2.0

Question 10

Which of the following is an example of a deferral adjusting entry?

Accepted Answer

Recording depreciation expense for the period.

Question 11

Alladin Travel, Inc. paid $$700 for cleaning supplies on June 2. At June 30, 400 of $$supplies remain. What is the correct adjusting entry?

Accepted Answer

Debit Supplies Expense $$300; Credit Supplies 300$$

Question 12

Which of the following accounts would NOT appear on a post-closing trial balance?

Accepted Answer

Service Revenue

Question 13

A company has total assets of $$100,000 and total liabilities of 40$$,000. What is the debt ratio?

Accepted Answer

$$0.4$$

Question 14

Which of the following best describes the book value of a plant asset?

Accepted Answer

The cost of the asset minus accumulated depreciation.

Question 15

If a company receives $400 in advance for services to be performed next month, what is the correct journal entry at the time of receipt?

Accepted Answer

Debit Cash $$400; Credit Unearned Service Revenue 400$$

Question 16

Which of the following is a current liability?

Accepted Answer

Accounts Payable

Question 17

A company’s adjusted trial balance shows Service Revenue of $$7,500 and total expenses of 5$$,500. What is the net income?

Accepted Answer

$2,000

Question 18

Which of the following best describes a bar chart in data visualization?

Accepted Answer

It displays categorical data in a relative format.

Question 19

If a company accrues salary expense of $900 at the end of June, which of the following is the correct adjusting entry?

Accepted Answer

Debit Salary Expense $$900; Credit Salary Payable 900$$

Question 20

Which of the following transactions would NOT affect a company’s current ratio?

Accepted Answer

Collecting an account receivable.

Accrual Accounting and Income: Chapter 3 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards