1) ABC Company had the following transactions during the month.

What would be the total amount of

expenses for the month if ABC Company uses the accrual basis method?

a. On the first of the month, paid $1,200 for insurance for the next 12 months.
b. Received $6,000 for services to be performed equally over the next 12 months.
c. Paid $600 for the current month's rent.
d. Paid $200 cash for office supplies.
e. Paid $850 in Salaries Expense.
f. Received $1,000 in cash for service revenue earned this month

A) $1,550
B) $2,650
C) $1,750
D) $2,850
Answer:

2) Which of the following is considered a fiscal year?

A) six months
B) three months
C) twelve months
D) four months
Answer: C

3) Which of the following accounting terms assumes that a business's activities can be divided into small
segments and that financial statements can be prepared for specific periods, such as a month, quarter, or
year?
A) adjusting entry concept
B) economic entity concept
C) matching principle
D) time period concept

4) Which of the following assumes that the 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

5) Which of the following entries would be made because of the matching principle?

A)
Salaries Expense 1,000
Salaries Payable 1,000

B)
Cash 1,000
 Accounts Payable 1,000

C)
Unearned Revenue 1,000
Service Revenue 1,000

D)
Cash 1,000
Unearned Revenue 1,000
6) Unearned Revenue is classified as a(n) ________ account.
A) liability
B) asset
C) revenue
D) equity

7) Improvements, a home improvement magazine, collected $960,000 in subscription revenue on June 30.
Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the
July issue. The company uses the accrual method of accounting. What is the amount of Subscription
Revenue that has been earned by the end of December? (Round any intermediate calculations to two
decimal places, and your final answer to the nearest whole number.)
A) $400,000
B) $560,000
C) $960,000
D) $480,000

8) In a(n) ________ adjustment, the cash payment occurs before an expense is incurred or the cash receipt
occurs before the revenue is earned.
A) depreciation
B) accrued
C) deferred
D) general
Answer: C

9) In a(n) ________ adjustment, the expense occurs before a cash payment is made.
A) depreciation
B) accrued
C) deferred
D) general

10)Zach Company received $1,000 cash in advance for services to be completed within the next six
months. The journal entry would be:

A)
Unearned Revenue 1,000
Service Revenue 1,000

B)
Service Revenue 1,000
Unearned Revenue 1,000

C)
Cash 1,000
Unearned Revenue 1,000

D)
Unearned Revenue 1,000
Cash 1,000

11) The liability created when a business collects cash from its customers before completing a service or
delivering a product is called ________.
A) accrued revenue
B) accrued expense
C) deferred revenue
D) deferred expense99) Morris Company has $600 in salaries that have been earned by employees on
December 31 but will not be paid until the following January 1. Assuming the company uses the accrual
basis, what would be the adjusting entry on December 31?

A)
Salaries Payable 600
Salaries Expense 600

B)
Salaries Payable 600
Cash 600

C)
Salaries Expense 600
Cash 600

D)
Salaries Expense 600
Salaries Payable 600
12) Morris Company has $600 in salaries that have been earned by employees on December 31 but will
not be paid until the following January 1. Assuming the company uses the accrual basis, what would be
the journal entry on January 1?

A)
Salaries Payable 600
Salaries Expense 600

B)
Salaries Payable 600
Cash 600

C)
Salaries Expense 600
Cash 600

D)
Salaries Expense 600
Salaries Payable 600

13) What is the term used for the difference between the Equipment account and the Accumulated
Depreciation-Equipment account?
A) contra asset
B) market value
C) historical cost
D) book value

14) ABC Tax Planning Service started business in January 2024. The company rented an office for $1,800
per month starting from January 1, 2024. On that day, ABC 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, 2024?
A) $3,600
B) $300
C) $1,800
D) $900
15) At the beginning of year 1, Zach Company purchased a piece of equipment for $4,800 with a three-
year life and no residual value. Using the straight-line method, what is the adjusting entry for
depreciation expense at the end of year 1?
A)
Depreciation Expense — Equipment 4,800
Accumulated Depreciation — Equipment 4,800

B)
Accumulated Depreciation — Equipment 4,800
Depreciation Expense — Equipment 4,800

C)
Depreciation Expense — Equipment 1,600
Accumulated Depreciation — Equipment 1,600

D)
Accumulated Depreciation — Equipment 1,600
Depreciation Expense — Equipment 1,600

16) For accounting purposes, depreciation refers to the process of ________.

A) allocating the cost of a plant asset to expense over its useful life
B) recording the decline in the market value of an asset to its book value
C) estimating an asset's current market value
D) determining the selling price of an asset

17) The Accumulated Depreciation account is ________.

A) a record of the sum of all the depreciation expense recorded to date for a depreciable asset
B) the price quoted to the buyer of a used asset
C) a liability account
D) the expense account used to allocate the depreciable cost of an asset