True/False Indicate whether the statement is true or
false.
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1.
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Prepaid expenses may be recorded initially as expenses or as assets.
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2.
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Auxglaxie, Inc., signs a 90-day, 9% note for $4,000.00. The entry would be
recorded in the cash payments journal.
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3.
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Companies reverse accrued salary entries so that they do not have to remember
that the payroll liability accounts reflect an expense from the previous accounting period.
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4.
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The interest rate that banks charge their most creditworthy customers is called
the prime rate.
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5.
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Corporations pay estimated federal income taxes quarterly. Any unpaid federal
income tax is recorded as a prepaid expense.
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6.
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Perez Company signs a 180-day, 10% note for $8,000.00. The source document for
this transaction is a receipt.
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7.
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If supplies are initially recorded as assets, the adjusting entry to record the
use of supplies is a debit to Supplies and a credit to Supplies Expense.
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8.
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Accrued salary expense occurs when employees earn a salary in the current fiscal
period that is not paid until the next fiscal period.
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9.
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Showing in accounting records all information needed to prepare the financial
statements of a business is an application of the accounting concept Adequate Disclosure.
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10.
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Recording accrued payroll is an application of the accounting concept Matching
Expenses with Revenue.
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Multiple Choice Identify the choice that best completes the
statement or answers the question.
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1.
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When a note is paid at maturity, the credit is to Cash. The debit(s) are to
____.
A. | Notes Payable for the maturity value of the note | B. | Notes Payable for
the principal of the note and Interest Payable for the interest due on the note | C. | Notes Payable for
the principal of the note and Interest Expense for the interest due on the note | D. | Notes Payable for
the maturity value of the note and Interest Expense for the interest due on the
note |
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2.
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An entry that is the exact opposite of an adjusting entry is known as a(n)
____.
A. | closing entry | C. | opening entry | B. | general journal entry | D. | reversing entry |
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3.
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The day a note is due is called the ____.
A. | date of a note | C. | maturity date of a note | B. | interest date of a
note | D. | principal date of a
note |
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4.
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An amount paid for the use of money for a period of time is called ____.
A. | bank charges | C. | principal | B. | interest | D. | security |
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5.
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The original amount of the note is called the ____.
A. | interest of a note | C. | original value of a note | B. | maturity value of a
note | D. | principal of a
note |
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6.
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In order to recognize salary expense as a liability in the period in which
employees provided their services, the company records accrued salary expense as a(n) ____.
A. | adjusting entry | C. | reversing entry | B. | closing entry | D. | work sheet
entry |
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7.
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The percentage of the principal that is paid for use of the money is called the
____.
A. | bank rate of a note | C. | prepaid interest on a note | B. | interest rate of a
note | D. | principal rate of a
note |
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8.
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Adjusting entries are recorded so that the supplies used during a fiscal period
are reported as expenses and the supplies not used are reported as assets. This is an application of
which accounting concept?
A. | adequate disclosure | B. | historical cost | C. | matching expenses
with revenue | D. | revenue recognition |
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9.
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Notes payable due within the next year are classified as ____.
A. | current assets | C. | long-term assets | B. | current liabilities | D. | long-term
liabilities |
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10.
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To determine if a reversing entry is needed, accountants apply which of the
following rules?
A. | If an adjusting entry creates a balance in an asset or liability account, the
adjusting entry needs to be reversed. | B. | If a closing entry creates a balance in an
asset or liability account, the closing entry needs to be reversed. | C. | If an adjusting
entry creates a balance in an expense or revenue account, the adjusting entry needs to be
reversed. | D. | If a closing entry creates a balance in an expense or revenue account, the closing
entry needs to be reversed. |
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11.
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Covedale Distributors signed a 90-day, 10% note for $2,000.00. The interest due
at maturity is ____.
A. | $222.00 | C. | $100.00 | B. | $200.00 | D. | $50.00 |
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12.
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The day a note is issued is called the ____.
A. | date of a note | C. | maturity date of a note | B. | interest date of a
note | D. | principal date of a
note |
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13.
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Assume prepaid items are initially recorded as expenses. The reversing entry for
prepaid interest includes a ____.
A. | debit to Interest Expense and a credit to Income Summary | B. | debit to Prepaid
Interest and a credit to Income Summary | C. | debit to Prepaid Interest and a credit to
Interest Expense | D. | debit to Interest Expense and a credit to Prepaid
Interest |
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14.
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A company pays 3 months rent on November 1. On January 1, the third month of the
rent payment is a/an ____.
A. | accrued expense | C. | operating expense | B. | prepaid expense | D. | open expense |
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15.
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The amount paid for the use of money for a period of time is ____.
A. | interest | C. | principal | B. | bank charges | D. | credit card fee
expenses |
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