TIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question 1) The accountant of Peyton Financial Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true? A) The total expenses will be overstated. B) The total revenue will be understated. The total expenses will be understated. D) The total revenue will be overstated. 2) Which of the following entries would be made because of the matching principle? 1,000 F) Salaries Expense Service Revenue 1,000 1,000 G) Salaries Expense Salaries Payable 1,000 1,000 H) Cash Unearned Revenue 1,0 1,000 Cash Salaries Expense 1,000 3) Justice, Inc. purchased a machine for $15,000 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight-line depreciation method, calculate the current book value of the machine. A) $3,000 B) $15,000 $12,000 D) $16,500 4) Jones Financial Services, Inc, performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received the client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed? F) Accounts Payable G) Service Revenue H) Prepaid Expense J) Unearned Revenue balance. 5) Accumulated Depreciation is a(n) A) contra asset; credit liability; credit _account and carries a normal B) revenue; debit D) expense; debit 6) The accountant of Reliable Consulting, Inc. failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true? F) The total liabilities will be overstated. G) The total assets will be understated. H) The total liabilities will be understated. J) The total assets will be overstated. 7) Modern Artists Services signed a contract with a maintenance service company to maintain a building that Modern Artists' will use as an office. The contract states that the work will begin on February 1 and end on May 31. Modern Artists' will pay the maintenance service company S8,000 at the end of May. It accrues Maintenance Expense at the end of every month. What is the balance in the Accounts Payable account for amounts owed to the maintenance service company at the end of March? A) Credit balance of $4,000 B) Debit balance of $8,000 Debit balance of $4,000 D) Credit balance of 58.000 8) An adjusting entry that debits Accounts Receivable is an example of a[n) F) deferred expense G) accrued expense H) accrued revenue J) deferred revenue 9) The accountant of Omega, Inc. failed to make an adjusting entry to record 56,000 of uneamed service revenue that has now been camed. Assume the deferred revenue was initially recorded as a liability. Which of the following statements is true? A) The total revenue will be overstated. B) The total expenses will be understated. The total revenue will be understated. D) The total expenses will be overstated. 10) - 10) Maxwell Tax Planning Service bought communications equipment for $10,200 on January 1, 2019. The equipment has an estimated useful life of five years and zero residual value. Maxwell uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month. As of June 30, 2019, the balance in the Accumulated Depreciation account for this equipment is F) $2,040 G) 5850 H) $170 D) $1,020 11) 11) The accountant for Diamond Jewelry Repair Services, Inc. forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error? A) Net income is overstated. B) Total liabilities are understated. Total assets are understated. D) Revenues are understated. 12) The matching principle is also called the F) revenue recognition principle H) time period concept G) expense recognition principle D) adjusting entry concept 13) If a company is using accrual basis accounting, when should it record revenue? A) before services are performed B) when cash is received, even though services may be performed at a later date C) when cash is received, 30 days after the completion of the services D) when services are performed, even though cash may be received at a later date 14) An adjusting entry that credits Salaries Payable is an example of a(n) F) deferred revenue G) deferred expense H) accrued revenue 1) accrued expense 15) 15) On January 1, 2017, the Accounts Receivable of Martha, Inc. had a debit balance of $150,000. During January, the company provided services for $400,000 on account. The company collected $240,000 from its customers on account in January, What was the ending balance in the Accounts Receivable account at the end of January? A) 5550,000 B) $400,000 $160,000 D) $310,000 24) Wellness, a healthy living magazine, collected 5504.000 in subscription revenue on May 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the balance in the Uneamed Revenue account as of December 312 F) $378,000 G) $294,000 H) $210,000 D $504,000 25) Anexpense that has been incurred but not yet paid is called a[n). A) deferred revenue B) accrued revenue deferred expense D) accrued expense 26) - 26) Jupiter, Inc, signed a one-year 524,000 note payable at interest on March 1, 2019. How much interest expense must be accrued on May 31, 2019? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.) F) $1,920 G) 5720 H) $240 D 5480 27) 27) Which of the following statements is true of accrual basis accounting? A) Accrual basis accounting always results in greater net income than cash basis accounting. B) Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). C) Accrual basis accounting records revenue only when cash is received. D) Accrual basis accounting records expenses only when cash has been paid for them. 28) 28) The employees of Sinclair Services, Inc. worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December 317 F) Salaries Expense G) Prepaid Expense H) Accounts Payable J) Salaries Payable 29) 29) The asset account, Office Supplies, had a beginning balance of $3,700. During the accounting period, office supplies were purchased, on account, for $2,500. Supplies Expense for the accounting period is $4,300. What is the ending balance of Office Supplies? A) 55,500 B) $6.200 C) 54,300 D) $1,900 30) 30) Murphy, Inc. prepaid $9,600 on October 1, 2018 for a one-year insurance premium. Coverage begins October 1. On January 1, 2019 (after December 31 adjustments), the Prepaid Insurance account will have a debit balance of (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.) F) $8,000 G) 59,600 H) $10,400 1) 57,200 31) 31) The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the principle. A) revenue recognition B) comparison C) matching D) accrual 32) 32) ABC Tax Planning Service started business in January 2018. The company rented an office for $5,400 per month starting from January 1, 2018. On that day. ABC prepaid the rent through June 30. The company makes adjusting entries at the end of each month. What is the balance in the Prepaid Rent account as of April 30, 2018? F) $2,700 G) $5,400 H) $10,800 J) 5900 33) 33) Which of the following accounting principles does not help to explain the timing and recognition of revenues and expenses? A) time period concept B) matching principle C) revenue recognition principle D) economic entity concept 34) 34) The matching principle states that F) all expenses should be recorded when they are incurred during the period G) a business's activities can be sliced into small time segments H) financial statements can be prepared for specific periods 1) companies should record revenue when it has been earned 35) 35) Unearned revenue is recorded when A) the business has collected cash, but not yet earned the revenue B) the business has earned, but not collected, cash for the revenue C) revenue will be both collected and earned in the future D) revenue has been collected and earned during the same accounting period 36) 36) To match expenses against revenues means to F) add expenses incurred during one period to revenues earned during that same period G) subtract expenses incurred during one period from revenues earned during that same period H) subtract expenses incurred during one period from revenues earned during the previous period D) add expenses incurred during one period to revenues earned during the previous period 37) 37) Dickens Services, Inc. performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received a check by mail on January 5. Which of the following accounts should appear on the balance sheet as of December 31 as related to the services performed? A) Unearned Revenue B) Prepaid Expense C) Accounts Receivable D) None, there is no entry in December. 38) 38) Salaries are $5,000 per week for five working days and are paid weekly at the end of the day on Fridays. The end of the month falls on a Thursday. The accountant for Sunset, Inc. made the appropriate accrual adjustment and posted it to the ledger. The balance of Salaries Payable, as shown on the adjusted trial balance, will be a (Assume that there was no beginning balance in the Salaries Payable account.) F) debit balance of $1,000 G) credit balance of $1,000 H) debit balance of $4,000 J) credit balance of $4,000 39) 39) At the time the transaction occurred, which of the following would result in an increase in net income under the accrual basis of accounting but would not result in an increase in net income under cash basis accounting? A) performance of services on account B) purchase of supplies for cash C) use of supplies purchased earlier D) receipt of cash for services that were performed earlier on account