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Exam 3: The Accounting Information System

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Question 61

Multiple Choice

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Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

A) The event or item can be measured objectively in financial terms.
B) The event or item is relevant and reliable.
C) The event or item is an element.
D) All of these must be met.

E) A) and B)
F) All of the above

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Question 62

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The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

A) True
B) False

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Question 63

Multiple Choice

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Which of the following is a reason for recasting prior financial statements based on IFRS?

An unearned revenue can best be described as an amount

A journal entry to record a receipt of rent in advance will include a

Accrual basis.Sales salaries paid during 2014 were $85,000. Advances to salesmen were $1,100 on January 1, 2014, and $800 on December 31, 2014. Sales salaries accrued were $1,360 on January 1, 2014, and $1,880 on December 31, 2014. Show the computation of sales salaries on an accrual basis for 2014.

An example of an internal event would be a flood that destroyed a portion of a company's inventory.

It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

Which of the following is the first step to be taken by a company deciding to convert to IFRS?

Chen Company's account balances at December 31, 2014 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2014 were $1,650,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

The failure to properly record an adjusting entry to accrue an expense will result in an

Reversing entries are 1. normally prepared for prepaid, accrued, and estimated items. 2. necessary to achieve a proper matching of revenue and expense. 3. useful in simplifying the recording of transactions in the next accounting period.

To compute interest expense on a note for an adjusting entry, the formula is (principal × annual rate × a fraction). The numerator and denominator of the fraction are:

Accrual basis.Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

A prepaid expense can best be described as an amount

An adjusting entry should never include

Olsen Company paid or collected during 2014 the following items: The following balances have been excerpted from Olsen's balance sheets: The interest revenue on the income statement for 2014 was

Which of the following properly describes a deferral?

If ending accounts receivable exceeds the beginning accounts receivable

On June 1, 2014, Nott Corp. loaned Horn $800,000 on a 12% note, payable in five annual installments of $160,000 beginning January 2, 2015. In connection with this loan, Horn was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Horn after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2014. Horn made timely payments through November 1, 2014. On January 2, 2015, Nott received payment of the first principal installment plus all interest due. At December 31, 2014, Nott's interest receivable on the loan to Horn should be