KNOWLEDGE CHECK-UP 1. At the end of an accounting period, financial statements need to be adjusted for the following reasons: a. The accrual basis of accounting is a requirement of GAAP b. The cash basis of accounting is not an acceptable method for use in financial reporting c. The timeliness principle, the revenue recognition prin- ciple and the matching principle d. All of the above. 2. Prepaid expenses refer to: a. Assets that are paid for in cash b. Expenses that are incurred immediately when the item is purchased c. Costs paid for in advance of receiving their benefits d. Adjusting entries that debit cash and credit expense when recognized 3. Depreciation is: a. The cost of storing inventory and supplies b. The process of calculating expenses to match the cost of plant and equipment assets over their expected use- ful lives c. Calculated by dividing the asset cost by 10 years d. Items that are paid for in advance of receiving their benefits 4. It is determined that One Eleven Music Studios has $500 worth of supplies left at the end of March out of the $2,200 purchased in March. The entry to record the month-end adjustment is: a. Debit Supplies Expense $500 and credit Supplies $500 b. Debit Purchases $2,200 and credit Supplies Expense $2,200 c. Debit Supplies Expense $1,700 and credit Supplies $1,700 d. None of the above. 5. Straight-line depreciation is calculated as: a. The estimated value of an asset at the end of its use- ful life divided by the number of years the asset has been in use b. The cost of an asset divided by its estimated useful life c. The estimated value of an asset divided by its esti- mated useful life d. All of the above. 6. Interest of $15 has been accrued on One Eleven's $3,000, 6% six-month note payable. Select the appropriate journal entry: a. Debit Interest Asset $15, credit Interest Expense $15 b. Debit Interest Payable $180, credit interest expense $180 c. Debit Interest Expense $15, credit Interest Payable $15 d. Debit Interest Income $180, credit Interest Payable $180 7. The revenue recognition principle requires that One Eleven Music Studio report $5,000 on the March Income Statement for student tuition revenue that was collected March 1 and earned over the month. Select the appropri- ate journal entry: a. Debit Unearned Revenue $5,000, credit Revenue $5,000 b. Debit Income $5,000, credit Cash $5,000 c. Debit Accounts Receivable $5,000, credit Revenue $5,000 d. Debit Cash $5,000, credit Revenue $5,000 223

1. At the end of an accounting period, financial statements need to be adjusted for the following reasons. a. The accrual basis of accounting is a requirement of GAAP b. The cash basis of accounting is not an acceptable method for use in financial reporting c. The timeliness principle, the revenue recognition prin ciple and the matching principle d. All of the above. 2. Prepaid expenses refer to: a. Assets that are paid for in cash b. Expenses that are incurred immediately when the irem is purchased c. Costs paid for in advance of receiving their benefits d. Adjusting entries that debit cash and credit expense when recognized 3. Depreciation is: a. The cost of storing inventory and supplies b. The process of calculating expenses to match the cost of plant and equipment assers over their expected useful lives c. Calculated by dividing the asset cost by 10 years d. Items that are paid for in advance of receiving their benefits 4. It is determined that One Eleven Music Studios has $500 worth of supplies left at the end of March out of the $2,200 purchased in March. The entry to record the monthend adjustment is: a. Debit Supplies Expense $500 and credit Supplies $500 b. Debit Purchases $2,200 and credit Supplies Expense $2,200 c. Debit Supplies Expense $1,700 and credit Supplies $1,700 d. None of the above. 5. Straight-line depreciation is calculared as: a. The estimated value of an asser at the end of its useful life divided by the number of years the assec has been in use b. The cost of an asset divided by its estimated useful life c. The estimated value of an asset divided by its esti mated uschul life d. All of the above. 6. Interest of $15 has been accrued on One Eleven's $3,000, 6% six-month note payable. Select the appropriate journal entry: a. Debit Interest Asset \$15, credit Interest Expense $15 b. Debit interest Payable \$180, credit interest expense $180 c. Debit interest Expense $15, credit Interest Payable $15 d. Debit interest Income $180, credit Interest Payable $180 7. The revenue recognition principle requires that One Eleven Music Studio report $5,000 on the March Income Statement for student turtion revenue that was collected March 1 and earned over the month Select the approptate joumal entry: a. Debit Unearned Revenue $5,000, credli Revenue $5,000 b. Debit Income $5,000, credit Cash $5,000 c. Debit Accounts Recelvable $5,000, credit Revenue 55,000 d. Debic Cash $5,000, credic Revenue $,000