Response to the following multiple choice questions:
QUESTION 1. When does a company account for revenue if it uses cash basis accounting?
When services are performed, even though cash may be received at a later date
Before services are performed
When the services are being performed
When cash is received, either prior to, at the time of, or after the services are performed
QUESTION 2. On January 1, 2017, the Accounts Receivable of Martha Company had a debit balance of $190,000. During January, the company provided services for $400,000 on account. The company collected $240,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at theend of January?
$160,000
$590,000
$350,000
$400,000
QUESTION 3. On September 1, 2018, Real Estate Professionals Company paid $5,000 in advance for an eight-month rental space covering the period of September 1, 2018 through April 30, 2019. The deferred expense was initially recorded as an asset. The company makes adjusting entries once a year at year-end. The adjusting entry on December 31, 2018 would include a __________.
debit of $5,000 to Cash
credit of $5,000 to Prepaid Rent
debit of $2,500 to Rent Expense
credit of $2,500 to Rent Expense
QUESTION 4. If a company is using accrual basis accounting, when should it record revenue?
When cash is received, even though services may be performed at a later date
When services are performed, even though cash may be received at a later date
Before services are performed
When cash is received, 30 days after the completion of the services
QUESTION 5. Mercury Company sells tickets in advance for its weekly productions and records the proceeds as Unearned Revenue. At the end of each month, the company makes an adjusting entry to account for the tickets used during the month (ticket revenue.) On March 1, the Unearned Revenue account had a credit balance of $5,000. During March, Mercury sold 500 tickets at $40 each, and 450 tickets were used during the month. What is the balance in Unearned Revenue at the end of March?
Credit balance of $7,000
Debit balance of $5,000
Credit balance of $5,000
Debit balance of $7,000
QUESTION 6. Jupiter Company signed a one-year $36,000 note payable at 8% interest on March 1, 2019. How much interest expense must be accrued on May 31, 2019? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)
$2,880
$1,080
$720
$360
QUESTION 7. Hudson Landscaping Service bought equipment for $10,800 on January 1, 2019. It has an estimated useful life of five years and zero residual value. Hudson uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2019, the book value of this equipment shown on its balance sheet will be __________.
$9,720
$10,800
$11,880
$10,980
QUESTION 8. A company receives payment from one of its customers on August 5 for services performed on July 21. Which of the following entries would be recorded if the company uses accrual basis accounting?
Cash 1,000
Accounts Receivable 1,000
Accounts Payable 1,000
Cash 1,000
Cash 1,000
Service Revenue 1,000
Service Revenue 1,000
Cash 1,000
QUESTION 9. ABC Tax Planning Service started business in January 2018. The company rented an office for $1,800 per month starting from January 1, 2018. On that day, AB C prepaid the rent through June 30. The company makes adjusting entries at the end of each month. What is the balance in the Prepaid Rent account as of April 30,
2018?
$3,600
$300
$1,800
$900
QUESTION 10. Anthony Delivery Service has a weekly payroll of $34,000. December 31 falls on Tuesday and Anthony will pay its employees the following Monday (January 6) for the previous full week. Assume that Anthony has a five-day workweek and has an unadjusted balance in Salaries Expense of $925,000 at December 31. What is the December 31 balance of Salaries Expense after adjusting entries are recorded and posted?
$925,000
$959,000
$945,400
$938,600
QUESTION 11. A business purchased equipment for $145,000 on January 1, 2019. The equipment will be depreciated over the five years of its estimated useful life using the straightline depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on the equipment for the year 2019? (Assume the residual value of the acquired equipment to be zero.)
Debit $145,000 to Equipment, and credit $145,000 to Cash.
Debit $145,000 to Depreciation Expense-Equipment, and credit $145,000 to Accumulated Depreciation-Equipment.
Debit $29,000 to Depreciation Expense-Equipment, and credit $29,000 to Accumulated Depreciation-Equipment.
Debit $29,000 to Depreciation Expense, and credit $29,000 to Equipment.
QUESTION 12. Justice Company purchased a machine for $15,000 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight-line depreciation method, calculate the current book value of the machine.
$12,000
$3,000
$16,500
$15,000
QUESTION 13. The adjusted trial balance shows __________.
account balances after adjustments
revenue and expense accounts only
account balances before adjustments
balance sheet accounts only
QUESTION 14. Which of the following is a contra account?
Depreciation expense
Accumulated depreciation
Unearned revenue
Book value
QUESTION 15. Which of the following accounting elements does the matching principle help to match?
Revenues and liabilities
Expenses and assets
Expenses and revenues
Expenses and liabilities
QUESTION 16. The allocation of a plant asset's cost to expense over its useful life is called __________.
residual value
book value
accrued revenue
depreciation
QUESTION 17. Which of the following is considered a fiscal year?
Six months
Three months
Twelve months
Four months
QUESTION 18. Accumulated depreciation is a(n) __________ account and carries a normal __________ balance.
revenue; debit
expense; debit
contra asset; credit
liability; credit
QUESTION 19. The sum of all the depreciation expense recorded to date for a depreciable asset is called __________.
book value
residual value
depreciation expense
accumulated depreciation
QUESTION 20. The accountant of Reliable Consulting Company failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is TRUE?
The total liabilities will be overstated.
The total liabilities will be understated.
The total assets will be overstated.
The total assets will be understated.