1. What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded?
a. assets increase and liabilities increase
b. assets increase and stockholder equity increases
c. assets decrease and liabilities decrease
d. stockholders equity increases and decreases by the same amount
2. which of the following adjustments decreases net income for the period
a. recognition of depreciation on plant assets
b. recognition of interest on a note receivable
c. recognition of services that had been provided to customers but the cash has not yet been received
d. recognition of rent as earned that had been received in advance from customers
3. which one of the following adjustments decreases net income for the period?
Recognition of depreciation on plant assets
- recognition of interest on a note receivable
- c. recognition of services that had been provided to customers but the cash has not yet been received
- recognition of rent as earned that been received in advance from customers
4. Aaron Company sells merchandise to customers. Aaron should normally recognize.
a. revenue and the related expenses in the same accounting period as earned whether payment is received or not
b. revenue when the cash is collected and the expenses when aster pays its creditor for the merchandise
c. revenue and expenses after all payments are collected
d. expenses in the period the merchandise is sold and defer revenue until the customer pays for the merchandise
5. Which of the following is an example of deferred revenue?
a. sales are made to customers on credit
b. interest has been earned by a bank deposit, but it has not been recorded.
c. cash is received prior to providing the services to customers.
d. cash sales are made to customers
6. Based on its income for the month, Miracle Company estimates that federal income taxes for the month of May will be $11,000. What is the effect of the adjustment on the financial statements?
a. increase retained earnings
b. increase income taxes expense
c. increase net income
d. decrease income taxes payable