A gym offers one-year memberships for $99 and requires customers to pay the full amount of cash at the beginning of the membership period

A gym offers one-year memberships for $99 and requires customers to pay the full amount of cash at the beginning of the membership period. For the gym, this is an example of a(n):

A) Accrued expense.

B) Accrued revenue.

C) Prepaid expense.

D) Deferred revenue.

Answer: D

Making rent payments in advance is an example of a(n):

A) Accrued revenue.

B) Accrued expense.

C) Deferred revenue.

D) Prepaid expense.

Answer: D

Receiving a utility bill for costs in the current period but delaying payment until the following period is an example of a(n):

A) Accrued expense.

B) Accrued revenue.

C) Prepaid expense.

D) Deferred revenue.

Answer: A

An accrued expense occurs when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.

B) An expense is recorded at the same time as the cash payment.

C) The expense is recognized before the payment of cash.

D) Cash is paid but an expense is never recorded.

Answer: C

An accrued revenue represents:

A) Customers paying cash in advance of the good or service to be provided.

B) Revenue being recorded prior to cash collection from the customer.

C) Revenue being recorded at the same time the cash is collected from the customer.

D) Cash being collected from the customer prior to the revenue being recorded.

Answer: B

Deferred revenues refer to:

A) Customers paying cash in advance of the good or service to be provided.

B) Revenue being recorded prior to cash collection from the customer.

C) Revenue being recorded at the same time the cash is collected from the customer.

D) Cash being collected from the customer after the revenue is recorded.

Answer: A

Making insurance payments in advance is an example of:

A) A prepaid expense transaction.

B) A deferred revenue transaction.

C) An accrued expense transaction.

D) An accrued revenue transaction.

Answer: A

Prepayments occur when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.

B) Sales are delayed pending credit approval.

C) Customers are unable to pay the full amount due when goods are delivered.

D) Cash payment occurs after the expense is incurred and liability is recorded.

Answer: A

Which of the following is true about adjusting entries?

A) Entries are necessary due to the conservatism principle.

B) Entries can be done at the beginning or end of the accounting period.

C) They zero the balance of all income statement accounts.

D) They are a necessary part of accrual-basis accounting.

Answer: D

Examples of adjusting entries could include all of the following except:

A) Recording interest earned on bank account balances.

B) Recording the expiration of prepaid insurance.

C) Recording unpaid taxes.

D) Recording the purchase of office supplies.

Answer: D

Which of the following regarding adjusting entries is correct?

A) Adjusting entries are recorded for all external transactions.

B) Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.

C) Adjusting entries are needed because we use accrual-basis accounting.

D) After adjusting entries, all temporary accounts should have a balance of zero.

Answer: C

Adjusting entries are primarily needed for:

A) Cash-basis accounting.

B) Accrual-basis accounting.

C) Current value accounting.

D) Manual accounting systems.

Answer: B

Consider the following events for Sophia Incorporated:April 5 Sophia purchases volleyballs for $200 on account.

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under cash-basis accounting, what is the appropriate day to record the revenues related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: B

Which one of the following best describes the characteristics of adjusting entries?

A) Adjusting entries reduce the balance of revenue, expense, and dividend accounts to zero.

B) Adjusting entries update balances for the recognition of cash flows.

C) Adjusting entries update balances for the recognition of investments from and distributions to stockholders.

D) Adjusting entries update balances for the recognition of revenue and expenses.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under cash-basis accounting, what is the appropriate day to record the expenses related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: D

Consider the following events for Betterment Incorporated:January 1 Betterment purchases gasoline for $200 on account.

Consider the following events for Betterment Incorporated:

January 1 Betterment purchases gasoline for $200 on account.

January 7 Betterment advertises lawn mowing services for $100 per lawn.

January 9 Betterment signs up 8 customers who pay a total of $800 cash.

January 12 Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used.

January 13 Betterment pays for the gasoline purchased on January 1.

Under cash-basis accounting, what is the appropriate day to record the expenses related to the gasoline?

A) January 1.

B) January 9.

C) January 12.

D) January 13.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under accrual-basis accounting, what is the appropriate day to record the revenues from the sand volleyball camp?

A) April 5.

B) April 6.

C) April 12.

D) April 21.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under accrual-basis accounting, what is the appropriate day to record the expenses related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: C

The following information pertains to Sooner Company:May 1 Customer ordered an installation service to be done by Sooner Company on May 15.

The following information pertains to Sooner Company:

May 1 Customer ordered an installation service to be done by Sooner Company on May 15.

May 2 Customer paid cash for the installation job to be done on May 15.

May 8 The Sooner Company purchased installation supplies on account for the job.

May 15 The installation job was started and completed.

May 20 Amount owed for supplies purchased on May 8 is paid.

Assuming that Sooner Company uses accrual-basis accounting, when would the company record the expense related to the supplies?

A) May 2.

B) May 8.

C) May 15.

D) May 20.

Answer: C

For the month of September, the company sold 35 units. What is cost of goods sold under the weighted-average cost method? (Round weighted-average unit cost to 4 decimals)

A) $121.

B) $116.

C) $124.

D) $131.

Answer: $121.

FIFO is considered a balance-sheet approach for reporting inventory because it:

A) Better approximates the value of ending inventory.

B) Always results in a lower amount of inventory being reported.

C) Better approximates inventory cost necessary to generate revenue.

D) Always results in a higher amount of inventory being reported

Answer: Better approximates the value of ending inventory.