Question 1
Generally Accepted Accounting Principles (GAAP) allow companies to issue financial statements, using either the cash basis or the accrual basis of accounting, depending on their needs.
Question 1 options:
True
False
Question 2
Adjusting entries are done to make sure that expenses and revenues are recorded in the proper accounting period.
Question 2 options:
True
False
Question 3
A single journal entry must debit only one account and credit only one account for the same amount so that the entry is in balance.
Question 3 options:
True
False
Question 4
The current ratio is cash divided by current liabilities.
Question 4 options:
True
False
Question 5
Materiality is subjective. One company may consider $1,000 material and another company may not.
Question 5 options:
True
False
Multiple Choice
Select the best answer for each of the following questions.
Question 6
Revenues are recorded when _______________.
Question 6 options:
goods or services are delivered to the customer
the check has cleared and the money is available for use
a contract is signed
a check is received from a customer
Question 7
Which of the following is NOT a liability?
Question 7 options:
accumulated depreciation
accounts payable
long-term debt
unearned revenue
Question 8
Management failing to reveal a default on a loan agreement will have violated what principle?
Question 8 options:
matching principle
ethics principle
full-disclosure principle
cost principle
Question 9
Expenses are recorded in the same period that related revenue is recorded, according to the _______________.
Question 9 options:
matching principle
revenue-recognition principle
accounting equation
cost principle
Question 10
The percentage-of-completion method recognizes revenue _______________.
Question 10 options:
at 10% per month
at the end of the entire project for a multi-year contract
based on an estimate of the portion of work complete
when the contracted work has begun
Question 11
An asset cost $14,400 and is expected to last 8 years, at which time it will be sold for a scrap value of $2,400. Using straight-line depreciation, the monthly depreciation journal entry would be _______________.
Question 11 options:
debit accumulated depreciation and credit depreciation expense for $150
debit depreciation expense and credit accumulated depreciation for $150
debit accumulated depreciation and credit depreciation expense for $125
debit depreciation expense and credit accumulated depreciation for $125
Question 12
When money is collected from a customer previously billed, we _______________.
Question 12 options:
credit cash and debit accounts receivable
debit cash and credit accounts receivable
credit accounts payable and debit cash
credit cash and debit accounts payable
Question 13
Which event will have the effect of increasing retained earnings?
Question 13 options:
revenue is recognized
an expense is paid
a customer pays us for a bill we sent last month
a dividend is declared
Question 14
The income summary account is used to _______________.
Question 14 options:
record a history of income items
set aside earned money available to owners
zero out expense and revenue accounts at the end of the period
calculate net income
Question 15
The dividends payable account belongs on which statement?
Question 15 options:
Income statement
Statement of retained earnings
Statement of cash flows
Balance sheet