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Exam 3: Measuring Business Income

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Question 41

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The periodicity assumption recognizes that

A) the company may continue indefinitely.
B) all financial statements should cover a fiscal year.
C) net income is an estimate.
D) the value of an asset may vary from month to month.

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Question 42

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In the journal provided, prepare year-end adjustments for the following situations. Omit explanations. a. Accrued interest on notes receivable is $560. b. Of the $7,200 received in advance of earning a service, one-third was still unearned by year end. c. Two years of rent, totaling $24,000, was paid in advance. By year end, four months' worth had expired. d. Services totaling $685 had been performed, but not yet billed. e. Depreciation on trucks totaled $1,700 for the year. f. Supplies available for use during the year amounted to $3,400. However, by year end, only $700 in supplies remained. g. Payroll for the five-day work week, to be paid on Friday, is $6,000. Year end falls on a Tuesday.

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Question 43

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How and why is the matching rule applied to the cost of a building?

Assets are converted to revenues as they benefit the company.

The principal difference between depreciation expense and most other types of expenses is that depreciation

Which of the following is the most difficult to assign to specific time periods?

The adjustment entry for the expiration of prepaid advertising, originally recorded as an asset,

Unearned Revenue was $2,400 at the end of May and $3,000 at the end of June. Service Revenue was $17,100 for the month of June. How much cash was received for services provided during June?

Rice Enterprises had supplies on hand costing $240 on December 31. During the same year, supplies costing $160 were purchased, and $320 in supplies were consumed during the year. What was the cost of supplies on hand on January 1 of that year?

Accounts Receivable was $750 at the end of November and $525 at the end of December. Revenue totaled $4,200 for December. How much cash was received from revenues during December?

The heading of an adjusted trial balance might contain the line "For the Month Ended May 31, 20xx."

An adjusting entry includes at least one balance sheet account and at least one income statement account.

Use this information to answer the following question. The trial balance for Sanchez Company appears as follows: If services totaling $125 had been performed but not billed, the adjusting entry to record this would include a

Which of the following situations is an example of an accrual?

Unearned Revenue was $600 at the end of February and $750 at the end of March. Service Revenue was $3,600 for the month of March. How much cash was received from revenue during March?

Which of the following assets is not subject to depreciation?

The going concern assumption is not applied to

On December 12, Roger Kent, a painter, received $1,800 in advance for performing a service that would extend into the following calendar year. By December 31, he still had three-fourths of the service remaining to perform. In the journal provided, prepare the December 12 entry, the December 31 end-of-period adjustment, as well as the entry on January 29 when the job was completed. Omit explanations.

A cash payment that reduces a liability does not result in an expense.

Which of the following transactions results in the recognition of an expense?