Name __________________________________________ Quiz Chapter 4 ACG 201 Spring 2011 1.

The revenue recognition principle dictates that revenue should be recognized in the accounting records: A) when cash is received. B) when it is earned. C) at the end of the month. D) in the period that income taxes are paid. 2. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? A) December 5 B) December 10 C) November 30 D) December 1 3. The primary difference between prepaid and accrued expenses is that prepaid expenses have: A) been incurred and accrued expenses have not. B) not been paid and accrued expenses have. C) been recorded and accrued expenses have not. D) not been recorded and accrued expenses have. 4. 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: A) revenues to be overstated. B) net income to be overstated. C) liabilities to be understated. D) revenues to be understated. 5. The Village Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. Financial statements are prepared monthly by Village Laundry. The adjusting journal entry that should be made by the company on June 30 is:
debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500.

Page 1 of 2

6. Dorting Company purchased a computer system for $5,400 on January 1, 2010. The company expects to use the computer system for 3 years. It has no salvage value. Calculate the monthly depreciation expense on the asset: $5,400 / 3 years = $1,800 depreciation per year; $1,800 / 12 = $150 depreciation per month

7. Adjustments for accrued revenues: A) increase assets and increase revenues. B) increase assets and increase liabilities. C) decrease assets and increase revenues. D) decrease liabilities and increase revenues. 8. Closing entries: A) are prepared before the financial statements. B) reduce the number of permanent accounts. C) cause the revenue and expense accounts to have zero balances. D) summarize the activity in every account. 9. Adjusting entries are made to ensure that: A) expense are recognized in the period in which they are incurred. B) revenues are recorded in the period in which they are earned. C) balance sheet and income statement accounts have correct balances at the end of an accounting period. D) All of the above. 10. The matching principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: A) assets should be matched with liabilities. B) efforts should be matched with accomplishments. C) dividends should be matched with stockholder investments. D) cash payments should be matched with cash receipts.

Page 2 of 2