chapter 3 review (major review)

When are revenues recorded under the cash-basis accounting method?

• When goods and services are provided

• When the payment is received from customers

• When expenses are incurred

• When financial statements are prepared

During the year, a company pays cash for rent in advance of the rental period. This transaction is recorded with an increase to

• prepaid rent (an asset)

• Rent expense (an expense)

• Rent Payable (a liability)

• Rent Revenue (a revenue)

At the end of the year, the adjusting entry needed to record the amount of prepaid rent expired for the year includes

• Debit Prepaid Rent; Credit cash

• Debit Prepaid Rent; Credit Rent Expense

• Debit Rent Expense; credit Prepaid rent

• Debit Cash; credit prepaid rent

When a company prepays rent during the year, which of the following best explains the amount to report for Rent Expense in the income statement at the end of the year?

• Total cash paid for rent

• The amount of rent expired during the year

• The amount of rent not expired by the end of the year

• Expenses are not reported on the income statement

When a company prepays rent during the year, which of the following best explains the amount to report for Prepaid rent in the balance sheet at the end of the year?

• total cash paid for rent

• the amount of rent expired during the year

• the amount of rent not expired during the year

• prepaid rent is not reported on the balance sheet

On March 12, Anderson Electrical receives a call from a customer needing electrical repairs and schedules a service visit for March 15. On March 15, Anderson completes the electrical repairs. The customer pays for services on March 18. According to accrual-based accounting, on which date should Anderson record service revenue?

• March 12 (date of phone call)

• March 15 (date of service)

• March 18 (date of cash receipt)

• Evenly over the three dates

On April 5, Green's Catering signs a contract with Pest Control Experts for monthly pest control services at their facility. Green's pays for the first extermination service on April 12, and Pest Control Experts completes the service on April 20. On which date should Green's Catering record the extermination expense using accrual-basis accounting?

• April 5 (date of the contract)

• April 12 (date of cash payment)

• April 20 (date of extermination service)

• Evenly over the three dates

5. Which of the following is NOT a characteristic of adjusting entries?

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

• Allow for proper recognition of revenues and expenses

• Are part of accrual-basis accounting

• Are recorded at the end of the accounting period

Which of the following are temporary accounts (multiple correct answers)

• revenues

• liabilities

• expenses

• dividends

• retained earnings

On August 1, 2025, a company receives cash of $9,000 from a customer for services to be provided evenly over the next three months (not including August). Deferred revenue is recorded at that time. Which of the following adjusting entries is needed on September 30, 2025?

• Debit Deferred Revenue for $3,000; Credit Cash for $3,000.

• Debit Deferred Revenue for $3,000; Credit Service Revenue for $3,000

• Debit Deferred Revenue for $9,000; Credit Service Revenue for $9,000.

• Debit Service Revenue for $3,000; Credit Deferred Revenue for $6,000