problem: Which of the following statements about accrual basis accounting is true?
a) Accrual basis accounting is used only by small hospitality businesses.
b) Accrual basis accounting is reflected on the statement of cash flows.
c) Accrual basis accounting generally requires that several adjusting entries be recorded at the end of the accounting period.
d) Accrual basis accounting allows a business to show greater profits than cash basis accounting.
problem: A meeting planner made a deposit with a hotel to reserve exhibit space and the hotel has hosted the meeting. Now that the meeting has taken place, accountants should make an adjustment:
a) To record liabilities and expenses not previously recorded.
b) To record assets and revenues not previously provided.
c) In which previously recorded liabilities become revenue.
d) In which previously recorded assets become expenses.
problem: Which of the following is an ex of an accounting adjustment in which previously recorded assets become expenses?
a) Prepaid Insurance decreases and Insurance Expense decreases.
b) Prepaid Rent decreases and Rent Expense increases.
c) Utilities Payable increases and Utilities Expense increases.
d) Depreciation Expense increases and Accumulated Depreciation, Building increases.
problem: Which of the following adjustments is an ex of an accrual adjustment?
a) A liability/expense adjustment involving utility expenses
b) An asset/expense adjustment involving depreciation
c) A liability/revenue adjustment involving unearned revenues
d) An asset/expense adjustment involving insurance
problem: Accounts that record accumulated depreciation are shown on the:
a) Balance sheet as deductions from assets.
b) Income statement as deductions from liabilities.
c) Statement of cash flows as revenue.
d) Income statement as increases to expenses.
problem: James Bell plans to stay at the Michaels Motel for one month, and he prepays his room charges. Bell arrives and begins his stay on January 21. To account for Bell's prepayment, at the end of January (the end of the accounting period) the motel accountant should:
a) Debit Unearned Room Revenue and credit Room Revenue.
b) Credit Room Revenue and debit Cash.
c) Credit Accounts Receivable and debit Cash.
d) Debit Unearned Room Revenue and credit Cash.
problem: Accounting adjustments to account for unpaid wages would:
a) Debit Wage Expense and credit Accrued Wages Payable.
b) Credit both Wage Expense and Cash.
c) Credit Wage Expense and debit Accrued Wages Payable.
d) Debit both Wage Expense and Accrued Wages Payable.
problem: Telephone service costs the Eggleston Motor Hotel $250 per week. The business pays its phone service bill on the fifteenth day of each month, but it prepares its financial statements at the end of each month. Which of the following types of adjustments is required to ensure the accuracy of the Eggleston Motor Hotel's financial statements?
a) A liability/expense adjustment
b) An asset/expense adjustment
c) A liability/revenue adjustment
d) An asset/revenue adjustment
problem: Jaime failed to make adjusting entries to account for the use of prepaid insurance for his hotel. This mistake affects which of the following financial statements?
a) The balance sheet
b) The income statement
c) a and b
d) The statement of cash flows
problem: If an accountant fails to make adjusting entries for utility service payments that have not yet been made:
a) Assets will be understated.
b) Gross revenue will be overstated.
c) Expenses will be understated.
d) Liabilities will be overstated.