Q: What is the formula for straight-line depreciation?

$$ (\text{Original Cost} - \text{Salvage Value}) / \text{Useful Life} $$

Question 1

Which of the following best describes the correct sequence of steps in the recording process for financial accounting?

Accepted Answer

1. Analyze transaction, 2. Enter transaction in journal, 3. Transfer journal information to ledger accounts

Question 2

A company receives $12,000 cash in advance for services to be performed over the next 4 months. According to accrual-basis accounting, how much revenue should be recognized at the end of the first month?

Accepted Answer

$3,000

Question 3

Which of the following journal entries correctly records the purchase of equipment for $5,000 by signing a 3-month, 12% note payable?

Accepted Answer

Debit Equipment $$5,000; Credit Notes Payable 5$$,000

Question 4

Which of the following is NOT a purpose of the general journal in the recording process?

Accepted Answer

To summarize account balances for financial statements

Question 5

If a company defers an expense, what is the immediate effect on the financial statements?

Accepted Answer

An asset is created

Question 6

Which of the following best describes the revenue recognition principle?

Accepted Answer

Revenue is recognized when the performance obligation is satisfied

Question 7

A company pays $3,000 for three months’ rent in advance. What is the adjusting entry at the end of the first month?

Accepted Answer

Debit Rent Expense $$1,000; Credit Prepaid Rent 1$$,000

Question 8

Which of the following accounts is a contra asset account?

Accepted Answer

Accumulated Depreciation

Question 9

What is the formula for straight-line depreciation?

Accepted Answer

$$ (	ext{Original Cost} - 	ext{Salvage Value}) / 	ext{Useful Life} $$

Question 10

Which of the following is true regarding adjusting entries?

Accepted Answer

They always affect at least one income statement account and one balance sheet account

Question 11

A landscaping company receives $10,000 cash in advance for a 3-month contract. At the end of the first month, what is the correct adjusting entry?

Accepted Answer

Debit Unearned Revenue $$3,333; Credit Landscaping Revenue Earned 3$$,333

Question 12

Which of the following best describes the effect of accruing an expense?

Accepted Answer

It creates a liability

Question 13

Which of the following is NOT a characteristic of cash-basis accounting?

Accepted Answer

It is in accordance with GAAP

Question 14

If a company accrues revenue, what is the immediate effect on the financial statements?

Accepted Answer

An asset is created

Question 15

Which of the following is the correct journal entry for a company that pays $$8,000 cash and agrees to pay 6$$,000 on account for a delivery truck costing $14,000?

Accepted Answer

Debit Delivery Truck $$14,000; Credit Cash 8$$,000; Credit Accounts Payable $6,000

Question 16

Which of the following accounts would NOT appear on a post-closing trial balance?

Accepted Answer

Dividends

Question 17

Which of the following best describes the matching principle (expense recognition principle)?

Accepted Answer

Expenses are matched with revenues in the period when the company makes efforts to generate those revenues

Question 18

A company is involved in litigation and expects to lose $500,000. What is the correct journal entry to accrue this loss?

Accepted Answer

Debit Loss on Litigation $$500,000; Credit Accrued Litigation Loss 500$$,000

Question 19

Which of the following is the correct formula for calculating the net book value of a depreciable asset?

Accepted Answer

$$ 	ext{Net Book Value} = 	ext{Original Cost} - 	ext{Accumulated Depreciation} $$

Financial Accounting: The Recording Process and Accrual-Basis Accounting

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