Name: __________________________

ACCT 101
Quiz Chapter 4

A)
B)
C)
D)

1. The revenue recognition principle dictates that revenue should be recognized in the
accounting records:
when cash is received.
when it is earned.
at the end of the month.
in the period that income taxes are paid.

A)
B)
C)
D)

2. Which principle dictates that efforts (expenses) be recorded with accomplishments

(revenues)?
Cost principle.
Periodicity principle.
Revenue recognition principle.
Expense recognition principle.
3. La More Company had the following transactions during 2011.
Sales of $4,500 on account
Collected $2,000 for services to be performed in 2012
Paid $1,125 cash in salaries
Purchased airline tickets for $250 cash in December for a trip to take place in 2012

What is La More's 2011 net income using cash basis accounting?

A) $5,375
B) $875
C) $5,125
D) $625
($2,000 1,125 250)

A)
B)
C)
D)

4. The primary difference between prepaid and accrued expenses is that prepaid expenses
have:
been incurred and accrued expenses have not.
not been paid and accrued expenses have.
been recorded and accrued expenses have not.
not been recorded and accrued expenses have.

A)
B)
C)
D)

5. An adjusting entry:
affects two balance sheet accounts.
affects two income statement accounts.
affects a balance sheet account and an income statement account.
is always a compound entry.

A)
B)
C)
D)

6. An architecture firm earned $2,000 for architecture services provided with the fee to be
paid in the future. No entry was made at the time the service was provided. If the fee has
not been paid by the end of the accounting period and no adjusting entry is made, this
would cause:
revenues to be overstated.
net income to be overstated.
liabilities to be understated.
revenues to be understated.

A)
B)
C)
D)

7. Greese Company purchased office supplies costing $4,000 and debited Office Supplies
for the full amount. At the end of the accounting period, a physical count of office
supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be
made at the end of the period would be:
debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100.
debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900.
debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900.
debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100.

A)
B)
C)
D)

8. Raxon Company borrowed $30,000 from the bank signing a 6%, 3-month note on
September 1. Principal and interest are payable to the bank on December 1. If the
company prepares monthly financial statements, the adjusting entry that the company
should make for interest on September 30, would be:
debit Interest Expense, $1,800; credit Interest Payable, $1,800.
debit Interest Expense, $150; credit Interest Payable, $150.
debit Note Payable, $1,800; credit Cash, $1,800.
debit Cash, $450; credit Interest Payable, $450.

A)
B)
C)
D)
A)
B)
C)
D)

9. Can financial statements be prepared directly from the adjusted trial balance?
They cannot. The general ledger must be used.
Yes, adjusting entries have been recorded in the general journal and posted to the ledger
accounts.
No, the adjusted trial balance merely proves the equality of the total debit and total credit
balances in the ledger after adjustments are posted. It has no other purpose.
They can because that is the only reason that an adjusted trial balance is prepared.
10. The closing entry process consists of closing:
all asset and liability accounts.
out the Retained Earnings account.
all permanent accounts.
all temporary accounts.

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