Chapter 4 Quiz Question 1 The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied. Question 2 An adjusting entry to a prepaid expense is required to recognize expired expenses. Question 3 Unearned revenue is a prepayment that requires an adjusting entry when services are performed. · Question 4 When closing entries are prepared, each income statement account is closed directly to retained earnings. · Question 5 The accounting cycle begins with the journalizing of the transactions · Question 6 Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns. · Question 7 A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? · Question 8 Which statement is correct? · Question 9 Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. � � � Cash received from customers � � � � $48,000 � � � Accounts receivable � � � � � � � � 12,000 � � � Cash paid for expenses � � � � � � � 26,000 � � � Accounts payable (related to expenses) � � 3,000 � � � Prepaid rent for next period � � � � � � 7,000 · Question 10 Accrued expenses are: · Question 11 If a resource has been consumed but a bill has not been received at the end of the accounting period, then: · Question 12 Depreciation is the process of: · Question 13 If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month’s financial statements? · Question 14 Why do generally accepted accounting principles require the application of the revenue recognition principle? · Question 15 Which of the following would not result in unearned revenue? · Question 16 Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: · Question 17 At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? · Question 18 Can financial statements be prepared directly from the adjusted trial balance? · Question 19 Which statement is correct concerning the adjusted trial balance? · Question 20 Match the items below by entering the appropriate code letter in the space provided.
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