1. The cash basis of accounting: a. is a basis for when to record revenues and expenses....

Question:

1. The cash basis of accounting:
a. is a basis for when to record revenues and expenses.
b. is required by Generally Accepted Accounting Principles.
c. records expenses when they are incurred.
d. records revenues only when they have been earned.
2. On December 31, a company receives a $5,000 payment for services not yet rendered and a S500 electric bill for the month of December. Under the cash basis of accounting, this company would recognize:
a. $4,500 of revenue and $500 of expense.
b. $5,000 of revenue and $0 of expense.
c. $5,000 of revenue and $500 of expense.
d. $0 of revenue and $500 of expense.
3. On December 31, a company receives a $5,000 payment for services not yet rendered and a $500 electric bill for the month of December. Under the accrual basis of accounting, this company would recognize:
a. $4,500 of revenue and $500 of expense.
b. $5,000 of revenue and $0 of expense.
c. $5,000 of revenue and $500 of expense.
d. $0 of revenue and $500 of expense.
4. Which of the following situations would likely not require an adjusting entry?
a. Revenue is earned before cash is received
b. Expense is incurred before cash is paid
c. Cash is received before revenue is earned
d. Cash is paid before equipment is received
5. Which of the following accounts is most likely associated with a deferred revenue?
a. Depreciation Expense
b. Salaries Payable
c. Unearned Revenue
d. Which of the following accounts is most likely associated with an accrued expense?
a. Depreciation Expense
b. Salaries Payable
c. Unearned Revenue
d. Which of the following is false?
a. Adjusting entries are made at the end of an accounting period
b. Adjusting entries are not necessary under the cash basis of accounting
c. The cash account will always be affected by adjusting journal entries
d. Adjusting journal entries always affect at least one revenue or expense account and at least one asset or liability account
8. A company prepays rent of $500 and receives a $3,000 payment for services not yet rendered. Under the accrual basis of accounting, these two transactions will:
a. increase net income $2,500.
b. increase net income $3,000.
c. decrease net income $500.
d. have no effect on net income.
9. A company has $3,000 of supplies on hand at the beginning of the year. During the year, the company buys $7,500 of supplies. At the end of the year, supplies on hand total $4,000. What is the amount of Supplies Expense reported on the company's income statement?
a. $4,000
b. $7,500
c. $6,500
d. $10,500
10. On December 1, Smiles, Inc. prepays $2,400 for three months of rent. On December 31, Smiles prepares financial statements. After the appropriate adjusting entry for rent, Smiles' would show:
a. Prepaid Rent of $2,400.
b. Rent Expense of $800.
c. Prepaid Rent of $1,600.
d. Prepaid Rent of $800.
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