ch4

Financial Accounting

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Unformatted text preview: ch4 Student: ___________________________________________________________________________ 1. The trial balance is similar to the balance sheet in that it is a listing of assets, liabilities, and stockholders' equity and is provided to external decision makers. True False 2. The trial balance is a listing of account balances that are found in the general ledger. True False 3. An objective of preparing the trial balance is to test the equality of debits and credits. True False 4. Prepaid expenses are reported as assets at the time of the initial cash flow and when they are consumed in the future, both expenses and liabilities increase. True False 5. Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense. True False 6. Cash collected from customers in advance of providing the goods or services creates a liability which is reduced when the goods or services are later provided. True False 7. Accrued revenues are revenues that have been earned, but the customer has not yet paid for the goods or services. True False 8. An accrued expense has been both incurred and paid for using cash. True False 9. A deferred expense such as prepaid insurance is created when cash is paid in advance of the expense incurrence and is reduced when the expense is actually incurred. True False 10. The adjusting entry to record an accrued expense increases liabilities. True False 11. The adjusting entry to adjust the unearned revenue account for revenues earned results in an increase in assets and a decrease in liabilities. True False 12. The adjusting entry to adjust the prepaid rent account for rent expired during the period results in an increase in expenses and a decrease in stockholders' equity. True False 13. The adjusting entry to record accrued revenues results in an increase in assets and stockholders' equity. True False 14. The adjusting entry to record an accrued expense results in a decrease in both assets and stockholders' equity. True False 15. Rent of $4,000 collected in advance was recorded as unearned rent revenue. At the end of the accounting period, half the rent was earned. The related adjusting entry should be a credit to rent revenue for $2,000 and a debit to unearned rent revenue for $2,000. True False 16. Depreciation expense is an estimated allocation of the cost of long-term assets and is recorded in a contra-asset called accumulated depreciation. True False 17. Accounts which retain their balance from one period to the next are referred to as permanent accounts and include balance sheet accounts. True False 18. Accounts which start a new accounting period with zero balances are referred to as temporary accounts and include both balance sheet and income statement accounts. True False 19. Earnings per share are calculated by dividing net income minus preferred dividends by the average number of shares of common stock outstanding....
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