Horngren's Financial & Managerial Accounting, 4e (Nobles) Chapter 3 The Adjusting Process

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Horngren's Financial & Managerial Accounting, 4e (Nobles) Chapter 3 The Adjusting Process Learning Objective 3-1 1) Under accrual accounting, transactions are recorded only when cash is receiv... ed or paid. Answer: FALSE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 2) Recipes. Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting, no entry is made until the amount is paid. Answer: FALSE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 3) In cash basis accounting, revenue is recognized when cash is received and expenses are recognized when they are paid. Answer: TRUE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 4) Under accrual basis accounting, revenue is recorded only when cash is received. Answer: FALSE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 5) Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is received. Answer: FALSE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 6) Under accrual basis accounting, an expense is recorded only when cash is paid. Answer: FALSE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 7) Under cash basis accounting, an expense is recorded only when cash is paid. Answer: TRUE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 8) Generally Accepted Accounting Principles (GAAP) require the use of accrual accounting. Answer: TRUE Diff: 1 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 9) If a company is using the accrual basis accounting method, when should it record its earned revenue? A) when cash is received, even though services may be rendered at a later date B) when services are rendered, even though cash may be received at a later date C) when services are completely rendered and cash is received D) when cash is received, 30 days after the completion of the services Answer: B Diff: 1 LO: 3-1 AACSB: Application AICPA Functional: Measurement 10) When does a company account for earned revenue if it follows cash basis accounting? A) when services are rendered, even though cash may be received at a later date B) when cash is received after the service is completely rendered C) when the services are being rendered D) when cash is received, either prior to the services being rendered or at a time after the services are rendered Answer: D Diff: 1 LO: 3-1 AACSB: Application AICPA Functional: Measurement 11) Which of the following accounts does cash basis accounting ignore? A) Payables B) Revenue C) Cash D) Expenses Answer: A Diff: 2 LO: 3-1 AACSB: Concept AICPA Functional: Measurement 12) A company receives payment on August 5 for services rendered, two weeks earlier, to one of its customers on account. Which of the following entries would be recorded if the company uses accrual basis accounting? A) Cash 1,000 Accounts Receivable 1,000 B) Salary Expense 1,000 Cash 1,000 C) Cash 1,000 Service Revenue 1,000 D) Supplies 1,000 Cash 1,000 Answer: A Diff: 1 LO: 3-1 AACSB: Application AICPA Functional: Measurement [Show More]

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