True/False
Indicate whether the sentence or statement is true
or false.
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1.
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Accrued expenses represent expense items that have been paid for and used in the
current period.
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2.
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Income that has been earned but not yet received is called accrued
income.
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3.
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Unearned Subscription Income is a liability account.
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4.
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Under
the accrual basis of accounting, revenue is recognized and recorded in the period when it is earned
regardless of when cash related to the transaction is received.
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5.
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When
the accrual basis of accounting is used, expenses are recognized only in the period during which they
are paid.
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6.
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A
debit to Interest Receivable and a credit to Interest Income are needed to record interest that has
been earned but not yet received.
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7.
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The
adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated
Depreciation--Equipment and a credit to Depreciation Expense--Equipment.
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8.
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Items
of revenue that are rreceived in advance represent a liability that may be termed unearned
revenue.
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9.
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Unearned revenue can be recorded initially as a liability or initially as a
revenue.
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10.
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Prepaid expenses can be recorded initially as an asset or initially as a
liabilityl.
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11.
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An
accrual is a prerecorded amount that needs to be allocated between periods.
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12.
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A
deferral is an unrecorded amount that has never been entered into the books
before.
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13.
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All accruals should be reversed.
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14.
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Never reverse a deferral.
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15.
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The
adjustments that were estimates should be reversed.
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16.
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If a
pre-recorded amount was initially entered in a temporary account it should be reversed.
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17.
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If a
pre-recorded amount was initially recorded as an asset or a liability it should be
reversed.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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18.
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On
November 1, 20X5, a firm accepted a 4-month, 10 percent note for $600 from a customer with an overdue
balance. The accrued interest recorded for this note for the year ended December 31, 20X5,
is
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19.
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With
the accrual basis of accounting, it is appropriate to recognize revenue from a credit
sale a. | on the date of
the sale. | b. | on the date the account is collected in
full. | c. | each time a payment on an account balance is
received. | d. | either on the date of the sale or when the amount of the sale
is collected. | | |
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20.
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Accrued income is income that has been a. | received but not
earned. | c. | earned and
received. | b. | earned but not received. | d. | budgeted for the fiscal period. | | | | |
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21.
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The
adjusting entry to record accrued interest on a note payable requires a. | a debit to
Interest Income and a credit to Notes Payable. | b. | a debit to
Interest Payable and a credit to Interest Expense. | c. | a debit to
Interest Expense and a credit to Cash. | d. | a debit to Interest Expense and a credit to Interest
Payable. | | |
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Numeric Response
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The
unearned advertising revenue of the Advertising Agency at the biginning of the fiscal year is
$38,850. Revenues received during the year totaled $390,500. The unearned advertising
revenue at the end of the year was $43,120.
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22.
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Assuming the Advertising Agency initially records advertising fees as a
revenue, what would be the proper amount for the Unearned Advertisng account in the
adjusting entry?
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23.
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Assuming the Advertising Agency initially records advertising fees as a
liability, what would be the proper amount for the Unearned Advertisng account in the
adjusting entry?
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Matching
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There
are balances in each of the following accounts after adjustments have been made at the
end of the fiscal year. Identify each as a. | asset | c. | revenue | b. | liability | d. | expense | | | | |
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24.
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prepaid advertising
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25.
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rent
recevable
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26.
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salary expense
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27.
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rent
income
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28.
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prepaid insurance
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29.
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insurance expense
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30.
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taxes
payable
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31.
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supplies
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32.
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fees
receivable
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33.
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supplies expense
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34.
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unearned subscriptions
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35.
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fees
earned
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