Question

1.

On 12/31/12, as part of the year-end adjusting journal entries, the Strickland Company accrues three day's wages of $600 ($200 per day). The proper 12/31/12 closing entries are made. No reversing entry is made on 1/1/13. Strickland pays the weekly payroll of $1,000 on 1/2/13. The balance in the Wage Expense account after the 1/2/13 journal entry will be:

Select one:

a. $0

b. $400

c. $600

d. $1,000

e. $1,200

2.

Which principle is most representative of the accrual basis of accounting?

Select one:

a. Industry Practices

b. Revenue Recognition

c. Full Disclosure

d. Going Concern

3.

Indicate the proper journal entry to record payment of a cash dividend previously declared:

Select one:

a. Debit Cash, credit Dividend Payable

b. Debit Dividends, credit Cash

c. Debit Dividends, credit Dividend Payable

d. Debit Dividend Payable, credit Cash

e. Debit Cash, credit Dividends

4.

The Pieper Corp. recorded the accrual of an expense by debiting Unearned Revenue and crediting Accounts Receivable.

Indicate the effect of the error on Assets, Liabilities, and Net Income, respectively:

Select one:

a. Understated, Understated, Overstated

b. Overstated, Understated, Overstated

c. Understated, No Error, Overstated

d. No Error, No Error, No Error

e. Understated, No Error, Understated

Answer 1

Answers

• Correct Options are in ‘bold, italics and underlined’
• On 12/31/12, as part of the year-end adjusting journal entries, the Strickland Company accrues three day's wages of $600 ($200 per day). The proper 12/31/12 closing entries are made. No reversing entry is made on 1/1/13. Strickland pays the weekly payroll of $1,000 on 1/2/13. The balance in the Wage Expense account after the 1/2/13 journal entry will be:

Select one:

a. $0

b. $400 [$ 1000 paid, out of which $ 600 was for previous year]

c. $600

d. $1,000

e. $1,200

• Which principle is most representative of the accrual basis of accounting?

Select one:

a. Industry Practices

b. Revenue Recognition [as it says that revenues are to be recognised when ‘earned’ whether cash has been received or not]

c. Full Disclosure

d. Going Concern

• Indicate the proper journal entry to record payment of a cash dividend previously declared:

Select one:

a. Debit Cash, credit Dividend Payable

b. Debit Dividends, credit Cash

c. Debit Dividends, credit Dividend Payable

d. Debit Dividend Payable, credit Cash [because dividend payable was credited when declared, and cash is paid out hence credited.]

e. Debit Cash, credit Dividends

• The Pieper Corp. recorded the accrual of an expense by debiting Unearned Revenue and crediting Accounts Receivable.

Indicate the effect of the error on Assets, Liabilities, and Net Income, respectively:

Select one:

a. Understated, Understated, Overstated [Asset understated as Accounts receivables were credited, Liabilities understated as Unearned revenue was debited, and Net Income would be overstated as ‘accrued expense’ was not even recorded.]

b. Overstated, Understated, Overstated

c. Understated, No Error, Overstated

d. No Error, No Error, No Error

e. Understated, No Error, Understated