TEST Topic 13 and 14 Acct 290 T
Questions Answered Correct Scored
A+ 2025.
In which type of business would accrual-basis accounting result in the same income measure as
cash-basis accounting?
A. Small business in which all sales amounts are collected in cash at the time of the sale and all
expenses are paid in cash immediately
B. Small manufacturing business in which routine inventory items are produced in bulk now,
stored for two or three years, and then sold to customers
C. Large manufacturing business in which orders are received now, cash advances are collected
from customers now, and delivery of manufactured products occurs many years from now
D. Medium-sized construction business in which most of the assets are long-term construction
equipment items that last for up to 15 years - Answer A. Small business in which all sales
amounts are collected in cash at the time of the sale and all expenses are paid in cash
immediately
Generally accepted accounting principles (GAAP) require that the financial statements of all
publicly traded companies be reported using accrual-basis accounting. What is a correct
description of accrual accounting?
A. Recording the amount of revenues and the amount of expenses when process cycles are
complete
B. Recording the amount of revenues and the amount of expenses when cash is received or paid
C. Recording the amount of revenues and the amount of expenses when budgets are approved
and adopted
D. Recording revenues and expenses when earned or incurred, not when cash is received or
paid - Answer Recording revenues and expenses when earned or incurred, not when cash is
received or paid
A fundamental principle in accounting is that expenses are recognized in the period in which
those costs provide benefit to the business in the form of increased revenue. What name is
given to this important principle?
A. Fiscal principle
, E. Sorting principle - Answer D. Matching principle
On May 1, Clark Company paid cash for rent. This payment of the cash was recorded as an asset,
Prepaid Rent. Which debit or credit is correctly included in the ADJUSTING journal entry
necessary on December 31 with respect to this prepaid rent? (Choose One)
CREDIT to Cash
CREDIT to Rent Expense
DEBIT to Rent Expense
DEBIT to Cash - Answer DEBIT to Rent Expense
On October 1 of Year 1, Della Company made a cash loan to another company. The interest rate
on the loan is 13%. No cash payments will be collected on the loan until September 30 of Year 2.
Which debit or credit is correctly included in the ADJUSTING journal entry necessary on Della's
books (the LENDER) on December 31 of Year 1 with respect to this loan?
CREDIT to Interest Revenue
DEBIT to Interest Revenue
CREDIT to Cash
CREDIT to Interest Expense
DEBIT to Interest Expense - Answer CREDIT to Interest Revenue
On September 1 of Year 1, Dee Company received cash for rent in advance. This rental receipt
covers the period from September 1 of Year 1 to August 31 of Year 2. This receipt of cash was
recorded as a liability, Unearned Rent. Which debit or credit is correctly included in the
ADJUSTING journal entry necessary on December 31 of Year 1 with respect to this rent received
in advance?
CREDIT to Rent Revenue
CREDIT to Rent Expense
DEBIT to Rent Expense
CREDIT to Cash
DEBIT to Rent Revenue - Answer CREDIT to Rent Revenue
Questions Answered Correct Scored
A+ 2025.
In which type of business would accrual-basis accounting result in the same income measure as
cash-basis accounting?
A. Small business in which all sales amounts are collected in cash at the time of the sale and all
expenses are paid in cash immediately
B. Small manufacturing business in which routine inventory items are produced in bulk now,
stored for two or three years, and then sold to customers
C. Large manufacturing business in which orders are received now, cash advances are collected
from customers now, and delivery of manufactured products occurs many years from now
D. Medium-sized construction business in which most of the assets are long-term construction
equipment items that last for up to 15 years - Answer A. Small business in which all sales
amounts are collected in cash at the time of the sale and all expenses are paid in cash
immediately
Generally accepted accounting principles (GAAP) require that the financial statements of all
publicly traded companies be reported using accrual-basis accounting. What is a correct
description of accrual accounting?
A. Recording the amount of revenues and the amount of expenses when process cycles are
complete
B. Recording the amount of revenues and the amount of expenses when cash is received or paid
C. Recording the amount of revenues and the amount of expenses when budgets are approved
and adopted
D. Recording revenues and expenses when earned or incurred, not when cash is received or
paid - Answer Recording revenues and expenses when earned or incurred, not when cash is
received or paid
A fundamental principle in accounting is that expenses are recognized in the period in which
those costs provide benefit to the business in the form of increased revenue. What name is
given to this important principle?
A. Fiscal principle
, E. Sorting principle - Answer D. Matching principle
On May 1, Clark Company paid cash for rent. This payment of the cash was recorded as an asset,
Prepaid Rent. Which debit or credit is correctly included in the ADJUSTING journal entry
necessary on December 31 with respect to this prepaid rent? (Choose One)
CREDIT to Cash
CREDIT to Rent Expense
DEBIT to Rent Expense
DEBIT to Cash - Answer DEBIT to Rent Expense
On October 1 of Year 1, Della Company made a cash loan to another company. The interest rate
on the loan is 13%. No cash payments will be collected on the loan until September 30 of Year 2.
Which debit or credit is correctly included in the ADJUSTING journal entry necessary on Della's
books (the LENDER) on December 31 of Year 1 with respect to this loan?
CREDIT to Interest Revenue
DEBIT to Interest Revenue
CREDIT to Cash
CREDIT to Interest Expense
DEBIT to Interest Expense - Answer CREDIT to Interest Revenue
On September 1 of Year 1, Dee Company received cash for rent in advance. This rental receipt
covers the period from September 1 of Year 1 to August 31 of Year 2. This receipt of cash was
recorded as a liability, Unearned Rent. Which debit or credit is correctly included in the
ADJUSTING journal entry necessary on December 31 of Year 1 with respect to this rent received
in advance?
CREDIT to Rent Revenue
CREDIT to Rent Expense
DEBIT to Rent Expense
CREDIT to Cash
DEBIT to Rent Revenue - Answer CREDIT to Rent Revenue
