QUESTION 2

a. If the adjustment to record an accrued expense was not made, liabilities would be understated. (True/False)

b. Adjusting unearned rent to record rental income earned woiuld require a credit to a deferred revenue account. (True/False)

c. If the entry to adjust accounts receivable for cash collected was not made, revenue would be understated. (True/False)

d. Accounting records indicate that the repair shop in the Magna Appliance case followed GAAP. (True/False)

e. Failure to record $4 in accrued revenue and $2 in taxes owed would understate capital by $2 million. (True/False)

f. Analysis of the financial statements in the Magna Appliance case indicate that Magna's balance sheet had not been adjusted. (True/False)

g. Cash basis accounting recognizes expenses when paid. (True/False)

h. Cash basis accounting systems tend to measure profitability and financial position better than accrual accounting systems do. (True/False)

i. If deferred expenses are overstated then net income will be understated. (True/False)

j. If accrued revenue is overstated then assets will be overstated too. (False/True)

k. Overstating deferred revenue also overstates net income and equity. (True/False)

l. In Problem 3-2A, the adjusted balance in Unearned fees would be $10,000, (True/False)