Question

Question 5 Which of the following will result in the largest expense recorded for the year?

Select one:

A. $4,000 is paid in January for an asset with a useful life of five years.

B. $1,800 is paid in January for a two-year fire insurance policy.

C. $1,000 cash dividends are declared and paid.

D. $850 is paid to an attorney for legal services rendered during the current year.

Question 6 An asset purchased on January 1, 2015 for $60,000 that has an estimated life of 10 years will have a book value on December 31, 2020 of:

Select one:

A. $60,000.

B. $24,000.

C. $36,000.

D. $42,000.

Question 7 The United Shipping Co. borrowed $25,000 at 12% interest on March 1, 2018. The note is to be repaid, with interest, in six months. If United Shipping makes monthly adjusting entries, which of the following is included as part of the March 31 adjusting entry?

Select one:

A. Credit Interest Payable $250.

B. Credit Interest Expense $250.

C. Debit Prepaid Interest $250.

D. Debit Interest Receivable $250.

Question 8 As of January 31, Princess Company owes $500 to Butler Co. for equipment rented during January. If no adjustment is made for this item at January 31, how will Princess's financial statements be affected?

Select one:

A. Cash will be overstated at January 31.

B. Net income for January will be understated.

C. Owners' equity will be overstated.

D. The financial statements will be accurate since the $500 does not have to be paid yet.

Question 9 An engineering firm provided services on 12/31/2018. Payment is due in 30 days. An adjusting entry is required: Select one:

A. To record uncollected revenue.

B. To record unearned revenue.

C. To record accrued liability.

D. To record prepaid revenue.

Question 10 Which of the following accounting principles are applied to help achieve the goals of accrual accounting? Select one: A. Business entity concept and realization principle.

B. Realization principle and matching principle.

C. Matching principle and safety principle.

D. Cost principle and the accounting equation.

Answer 1

5
$1,800 is paid in January for a two-year fire insurance policy will result in insurance expense of $900(1800/2)
Option B is correct
6
Annual depreciation = 60000/10 = $6000
Accumulated depreciation on December 31, 2020 = 6000*6 = $36000
Book value on December 31, 2020 = 60000-36000 = $24000
Option B is correct
7
March 31 interest payable = 25000*12%/12= $250
Option A Credit Interest Payable $250 is correct
8
Owners' equity will be overstated as expenses are understated
Option C is correct
9
An adjusting entry is required to record uncollected revenue.
Option A is correct
10
Realization principle and matching principle are applied to help achieve the goals of accrual accounting
Option B is correct