Chapter 3 review

On May 3, Stuck up Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7. On May 7, Stuck up installs the new water heater. the customer pays for services on May 10. According to the accrual-basis accounting, on which date should Stuck up Plumbing record service revenue?

• May 3

• May 7

• May 10

• Evenly over the three dates

On January 17, Larrys Pizza signs a contract with Bob Bugs Be Gone for exterminating services. Larry's pays for the extermination on January 29th, and Bob's Bugs Be Gone provides services on February 7. Which of the following is true?

• Bobs Bugs Be Gone would recognize revenue on January 17

• Larrys Pizza would recognize the expense on January 29

• Larrys Pizza would recognize the expense on February 7

• Bobs Bugs Be Gone would recognize revenue when Larry's paid them (January 29th)

Which of the following is not a characteristic of adjusting entries

• Reduce the balance of revenue, expense, and dividend accounts to zero

• Allow for proper recognition of revenues and expenses

• Are part of accrual-based accounting

• Are recorded at the end of the accounting period

On November 1, 2024, a company receives cash of $6,000 from a customer for services to be provided evenly over the next 6 months. Which of the following adjusting entries is needed on December 31, 2024

• Debit Deferred Revenue for $2,000; Credit Cash for $2,000

• Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000

• Debit Deferred Revenue for $6,000; Credit Service Revenue for $6,000

• Debit Service Revenue for $2,000; Credit Deferred Revenue for $4,000

A Company owes employee salaries of $5,000 on December 31 for work completed in the current year, but the company doesn't plan to pay those salaries until the following year. What adjusting entry, if any, is needed on December 31?

• Debit Salaries Payable for $5,000; Credit Salaries Expense for $5,000

• Debit Salaries Payable for $5,000; Credit Cash for $5,000

• Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000

• No adjusting entry is needed:)

Marriot Hotels purchases one year of fire insurance coverage on December 1 for $24,000. On December 31, Marriot would record the following year-end adjusting entries:

• A

• B

• C

• D

Which of the following describes the information reported in the statement of stockholders' equity?

• Net income for the period calculated as revenues minus expenses

• Total assets equal total liabilities plus stockholders equity

• Change in Stockholders' equity through changes in common stock and retained earnings

• Net cash flow from operating, investing, and financing activities

Which of the following describes the purpose of closing entries?

• Adjust the balances of asset and liability accounts for unrecorded activity during the period

• Transfer balances of temporary accounts (revenues, expenses, and dividends) to retained earnings

• Reduce the balances of temporary accounts to zero and prepare them for measuring activity in the next period

• Both b and c

Which of the following is not listed in the post-closing trial balance?

• Prepaid Rent

• Accounts Payable

• Salaries Expense

• Retained earnings

In a classified balance sheet, liabilities and assets are separated into two categories based on:

• The amount of obligation to be satisfied- large vs small

• To whom the obligation is owed- those inside versus those outside of the company

• The nature of the obligation- determinable amount versus estimated amount

• The length of time until the obligation is expected to be satisfied- less than one year versus more than one year