Generally Accepted Accounting Principles and Prepaid Insurance
More Practice for the Final Exam Adjusting Entries
Key
_____ 1. Accruals occur when cash flows: A) Occur before expense recognition. B) Occur after revenue or expense recognition. C) Are uncertain. D) May be substituted for goods or services.
Answer: B
_____ 2. An example of a contra account is: A) Depreciation expense. B) Accounts receivable. C) Sales revenue. D) Accumulated depreciation. Answer: D
_____ 3. The purpose of closing entries is to transfer: A) Accounts receivable to retained earnings when an account is fully paid. B) Balances in temporary accounts to a permanent account. C) Inventory to cost of goods sold when merchandise is sold. D) Assets and liabilities when operations are discontinued.
Answer: B
_____ 4. Which of the following would not be used as an adjusting entry? A) Prepaid Rent Rent expense B) Cash Unearned revenue C) Interest expense Interest payable D) Bad debt expense Allowance for doubtful accounts
Answer: B
_____ 5. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: A) A debit to a liability. B) A debit to an asset. C) A credit to a liability. D) A credit to an asset.
Answer: A
_____ 6. Bland Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2003, and charged the $4,200 premium to Insurance expense. At its December 31, 2003, year-end, Bland Foods would record which of the following adjusting entries? A) Insurance expense 875
Key
_____ 1. Accruals occur when cash flows: A) Occur before expense recognition. B) Occur after revenue or expense recognition. C) Are uncertain. D) May be substituted for goods or services.
Answer: B
_____ 2. An example of a contra account is: A) Depreciation expense. B) Accounts receivable. C) Sales revenue. D) Accumulated depreciation. Answer: D
_____ 3. The purpose of closing entries is to transfer: A) Accounts receivable to retained earnings when an account is fully paid. B) Balances in temporary accounts to a permanent account. C) Inventory to cost of goods sold when merchandise is sold. D) Assets and liabilities when operations are discontinued.
Answer: B
_____ 4. Which of the following would not be used as an adjusting entry? A) Prepaid Rent Rent expense B) Cash Unearned revenue C) Interest expense Interest payable D) Bad debt expense Allowance for doubtful accounts
Answer: B
_____ 5. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: A) A debit to a liability. B) A debit to an asset. C) A credit to a liability. D) A credit to an asset.
Answer: A
_____ 6. Bland Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2003, and charged the $4,200 premium to Insurance expense. At its December 31, 2003, year-end, Bland Foods would record which of the following adjusting entries? A) Insurance expense 875