An expense incurred in 20X6 is not paid until 20X7. Using the accrual basis of accounting, the expense should appear on:

the 20X6 income statement.

the 20X7 income statement.

neither the 20X6 nor the 20X7 income statement.

both the 20X6 and 20X7 income statements.

None of the above.

Cash for merchandise delivered to the customer in 20X6 is received in 20X7. Using the accrual basis of accounting, the revenue should appear on:

the 20X6 income statement.

the 20X7 income statement.

neither the 20X6 nor the 20X7 income statement.

both the 20X6 and 20X7 income statements.

None of the above.

On 1 August 1 20x1, Company JDW received $5,400 for legal services to be performed evenly throughout the next six months. The adjusting entry on 31 December 20x1 would include a:

credit to Unearned Service Revenue of $4,500.

debit to Unearned Service Revenue of $900.

debit to Service Revenue of $900.

credit to Service Revenue of $4,500.

None of the above.

On 1 September 20x1, company SWEN paid twelve months' insurance in advance totaling $9,000. At the 31 December 20x1, the adjusting entry would include a:

debit to Prepaid Insurance for $8,250.

debit to Prepaid Insurance for $750.

debit to Insurance Expense for $8,250.

debit to Insurance Expense for $750.

None of the above

Company ABC failed to record the adjusting entry for accrued salaries. How does this error affect net income?

The assets for the period will be understated.

The net income for the period will be understated.

The net income for the period will be overstated.

The net income for the period will not be affected.

None of the above

Company XYZ did not adjust the Unearned Revenue account for work performed in the current period. What is the effect of this error in the current year?

The assets will be understated and expenses will be understated.

The assets will be overstated and liabilities will be overstated.

The liabilities will be overstated and revenues will be understated.

The liabilities will be understated and revenues will be understated.

Under the allowance method, the entry to write off a $2,600 uncollectible account includes a:

debit to Accounts Receivable for $2,600.

credit to Uncollectible-Account Expense for $2,600.

credit to Allowance for Uncollectible Accounts for $2,600.

debit to Allowance for Uncollectible Accounts for $2,600.

None of the above

The direct write-off method of accounting for bad debts

Often fails to match bad debt losses with sales for the same period

Is subject to a significant amount of estimation error

Causes accounts receivable to appear on the balance sheet at their estimated net realizable value

Requires that losses from bad debts be recorded in the period in which sales are made

None of the above

Company XYZ obtained a $15,000, one-year, 10 percent bank loan on October 31 of the current year. Interest is payable at the end of the loan term. The adjusting entry needed on December 31 is

A debit to Interest Expense of $1,500 and a credit to Interest Payable of $1,500

A debit to Interest Payable of $1,500 and a credit to Interest Expense of 1,500

A debit to Interest Expense of $250 and a credit to Interest Payable of $250

A debit to Interest Expense of $250 and a credit to Cash of $250

None of the above

On 1 November 20X1, Prepaid Rent was debited $5,400 for three months of rent, paid in advance. The amount of the adjusting entry on 31 December 20X1 is:

$1,800

$3,600

$5,400

$0

None of the above.