ACCT 2101 Spring 2008 Quiz Chapter 3 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Acme Car Wash has a contract with a taxi company to clean their vehicles. At the beginning of each month Acme bills the taxi company for all taxis washed the previous month. An adjusting entry is needed at the end of each month because a. Acme needs to defer this expense d. Acme needs to accrue this revenue b. Acme needs to defer this revenue e. Acme will overstate their assets without the adjustment c. Acme needs to accrue this expense 2. Xtraa Corporation uses the accrual method of accounting. Xtraa Corporation received $18,000 as advance rent for 6 months starting November 1, 2007. On December 31, 2007, the end of it’s accounting period, Xtraa Corporation inadvertently omit-ted to record the adjusting entry related to the advance rent received. As a result of this omission: a. Assets would be overstated by $6,000 d. Equity would be understated by $6,000
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Generally Accepted Accounting Principles, Equipment rent expense, Acme Car Wash, Xtraa Corporation, ment Depreciation Expense