Question 1.1.The accounting equation is the basis for analyzing, summarizing, and recording transactions in accounting. The accounting equation is: (Points : 2)

Assets =Liabilities Assets = Liabilities + Stockholders Equity Liabilities = Assets + Stockholders Equity Stockholders Equity = Liabilities + Assets

Question 2.2.On April 1, Smith, Inc. paid $3,600 for an insurance premium on a three-year insurance policy. How does this transaction affect Smart's accounts? (Points : 2)

Increase insurance expense and decrease cash by $3,600 each Increase unearned insurance and decrease cash by $3,600 each Increase prepaid insurance and decrease cash by $3,600 each Increase prepaid insurance and decrease retained earnings by $3,600 each

Question 3.3.Which of the following will increase stockholders' equity? (Points : 2)

Expenses Owner investment Accounts payable Dividends

Question 4.4.Which section of the Statement of Cash Flows is affected when cash is received in payment of an account receivable? (Points : 2)

Cash flow from investing activities Cash flow from financing activities Cash flow from operating activities There is no effect on the statement of cash flows

Question 5.5.A&M Co. provided services of $2,000,000 to clients on account. How does this transaction affect A&M's accounts? (Points : 2)

Increase accounts receivable and cash by $2,000,000 each Increase accounts receivable and unearned revenues by $2,000,000 each Increase cash and decrease accounts receivable by $2,000,000 each Increase accounts receivable and revenues by $2,000,000 each

Question 6.6.What is the purpose of accrual accounting? (Points : 2)

To avoid misleading information which arises from timing of cash receipts and payments Helps with cash transactions Helps to align the ongoing concern concept To help post to accounts receivable

Question 7.7.On the balance sheet, Accrued expenses are ordinarily reported as: (Points : 2)

Fixed assets Prepaid expenses Assets Liabilities

Question 8.8.What are the four timing differences between recognizing revenues and expenses between accrual basis and cash basis accounting? (Points : 2)

Accrued revenue, accrued expenses, deferred revenue, deferred expenses Cash, revenue, expenses and liabilities Accounts receivable, accounts payable, long term liabilities, intangible assets Revenue, expenses, assets, retained earnings

Question 9.9.What type of an account is unearned revenue? (Points : 2)

Asset Revenue Stockholders' equity Liability

Question 10.10.Jedi Co. billed a client for flying lessons given in January. The payment was received in February. Under the accrual basis of accounting, when should Jedi record the revenue? (Points : 2)

January February Some in January and some in February Jedi should not record any revenue

Question 11.11.Depreciation Expense and Accumulated Depreciation are classified, respectively, as (Points : 2)

expense and contra asset asset and contra liability revenue and asset contra asset and expense

Question 12.12.Updating accrual accounting records prior to preparing financial statements is: (Points : 2)

The adjustment process Going concern adjustments The closing process Converting to cash basis accounting

Question 13.13.Which of the following accounts would likely be included in a deferral adjusting entry? (Points : 2)

Interest revenue Unearned revenue Salaries payable Accounts receivable

Question 14.14.Unearned rent, representing rent paid for the next six months' occupancy, would be reported on the landlord's balance sheet as a (n) (Points : 2)

asset liability capital stock revenue

Question 15.15.The __________ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis. (Points : 2)

accounting equation retained earnings statement intangible asset section classified balance sheet

Question 16.16.Accumulated depreciation is __________ to get the carrying value. (Points : 2)

added to equipment subtracted from equipment added to accounts payable subtracted from accounts payable

Question 17.17.On the statement of cash flows, the cash flows from operating activities section would include (Points : 2)

receipts from the issuance of capital stock receipts from the sale of investments payments for the acquisition of investments cash receipts from sales activities

Question 18.18.Which of the following is an example of a deferred expense? (Points : 2)

Prepaid advertising Unearned revenue Accounts payable Accounts receivable

Question 19.19.For a corporation, stockholders' equity consists of (Points : 2)

assets plus liabilities current assets plus long-term assets intangible assets capital stock and retained earnings

Question 20.20.If prepaid insurance expires over time, this asset account becomes a (n) (Points : 2)

liability another asset revenue expense

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