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ACCT 284 Chapter 4

1. An expense has not been paid and has not yet been recognized in the accounts by a
routine entry. To properly adhere to the Matching Principle, which of the following is
required:

a. Capital Stock entry


b. Deferral entry
c. Accrual entry
d. Inventory entry

2. Warren, Inc. has wages that have been earned but not paid at the end of the accounting
period. The entry to properly accrue Wages Expense includes:

a. Wages Payable, debit; Wages Income, credit


b. Wages Income, debit; Wages Payable, credit
c. Wages Payable, debit; Wages Expense, credit
d. Wages Expense, debit; Wages Payable, credit

3. Warren, Inc. neglects to make the required adjusting entry for wages at the end of the
accounting period. Which of the following statements reflect the impact of this
oversight?

a. Salary Expense for the year is overstated.


b. Liabilities at the end of the year are understated.
c. Assets at the end of the year are understated.
d. Owner's equity at the end of the year is understated.

4. Accrued Expenses usually appear on the Balance Sheet as:

a. Cash c. Assets
b. Liabilities d. Capital Stock

5. Accrued Revenue is recorded when:

a. Services have already been earned and recorded.


b. Services have already been paid for in cash and are expected to be earned in the
upcoming accounting period.
c. Services have already been paid for in cash.
d. Services have been earned but have not yet been recorded.

6. Accrued Revenue usually appears on the Balance Sheet as:

a. Cash c. Assets
b. Liabilities d. Capital Stock

Supplemental Instruction
ACCT 284 Chapter 4

7. At December 31, 2002, interest expense of $960 is owed on a two-year bank note that
will not be paid until July 2003, what is the appropriate accrual at the end of 2002?

a. Interest Expense .................. 960


Cash ..........................…….. 960
b. Interest Payable .................. 960
Interest Expense ................. 960
c. Cash ..............................…. 960
Interest Expense ..............… 960
d. Interest Expense .................. 960
Interest Payable ..............… 960

8. Sandra's Styling Salon, a Sole Proprietorship, pays weekly salaries of $8,000 each
Friday for a five-day week ending on that day. The accrual required for a fiscal period
ending on a Tuesday includes a debit to Salaries Expense and a credit to Salaries
Payable for:

a. $1,600 c. $3,000
b. $2,000 d. $3,200

9. Rental Services, Inc. earned $2,000 of Rental Revenue in December 2001, but does not
expect payment until January 2002. What is the appropriate accrual entry at December
31, 2001?

a. Debit Rent Receivable; credit Cash.


b. Debit Rent Receivable; credit Rent Revenue.
c. Debit Rent Revenue; credit Rent Receivable
d. Debit Cash; credit Rent Revenue

10. Rental Services, Inc. reviews its records at the end of December 2001 in anticipation of
the end of its calendar year. This process reveals that:
 $2,000 of Accounts Receivable outstanding at the beginning of December has
been collected and recorded.
 The December utility bill has not yet been paid. A phone call to the provider
reveals that the invoice will total $1,200 and will be mailed on January 4, 2002.
 Billing of $25,000 has been issued for the month.
 Services of $5,000 to Construction Experts were completed on December 30,
2001, but billing will not be rendered until January 3, 2002.

Rental Services makes all appropriate accrual entries resulting from the above
information. Revenues and expenses for the month of December, 2001 total:
a. Revenues: $25,000; Expenses: $ -0-
b. Revenues: $30,000; Expenses: $ 1,200
c. Revenues: $25,000; Expenses: $ 1,200
d. Revenues: $30,000; Expenses: $ -0-

Supplemental Instruction
ACCT 284 Chapter 4

11. A company pays its employees every Friday. The amount paid every week is $120 per
day. September 30, 2000, is a Tuesday. The amount of salary accrued on September
30, 2000, is:

a. $0
b. $240
c. $360
d. $600

12. A company pays its employees every Friday. The amount paid every week is $600.
September 30, 2000, is a Tuesday. Assume that salaries for September were accrued on
September 30. The amount of salaries expense recognized on October 3, 2000 is:
a. $0
b. $240
c. $360
d. $600

13. A company pays its employees every Friday. The amount paid every week is $600.
September 30, 2000, is a Tuesday. Which of the following statements is true about the
entry prepared on September 30, 2000?

a. Salaries payable must be debited by $240


b. Salaries Payable must be credited by $240
c. Salaries Payable must be debited by $360
d. Salaries Payable must be credited by $360

14. Accrued expenses occur when:

a. Cash is paid before an expense is recognized


b. Cash is paid after an expense is recognized
c. An expense is recognized at the same time as the cash payment
d. A liability is decreased when the expense is recognized

15. Scott's Lawn Service borrowed $10,000 from 3rd National Bank on November 1, 2001.
The loan is for a term of three years and carries a 10% rate of interest. Interest is due
at the maturity of the loan. To properly accrue interest expense in 2001, Scott should:

a. Do nothing as the loan is not due until November 2004.


b. Recognize Interest Expense for 2 of the loan's 36-month term.
c. Recognize Interest Expense for 12 of the loan's 36-month term.
d. Recognize Interest Expense for 10 of the loan's 36-month term.

Supplemental Instruction

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