The accountant for Trumbull Corp. failed to make the adjusting entry to record depreciation for the current year. The effect of this error is which of the following?
Assets, net income, and stockholders' equity are all overstated.
B. Assets and expenses are understated; net income is understated.
C. Net income is overstated and liabilities are understated.
D. Assets are overstated; stockholders' equity and net income are understated.
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Interest earned on a note receivable at December 31 equals $375. What adjusting entry is required to accrue this interest?
A. Interest Expense 375Cash 375
B. Interest Payable 375Interest Expense 375
C. Interest Receivable 375Interest Revenue 375
D. Interest Expense 375Interest Payable 375
All of the following statements are true except one. Which statement is false?
Accrual accounting produces better information than cash-basis accounting.
B. Adjusting entries are required for a business that uses the cash basis.
C. The expense recognition principle directs accountants to identify and measure all expenses incurred and deduct them from revenue earned during the same period.
D. A fiscal year may end on some date other than December 31.
Adjusting entries:
A. are needed to measure the period's net income or net loss.
B. do not debit or credit Cash.
C. update the accounts
D. all of the listed choices.
An adjusting entry that debits an expense and credits a liability is which type?
A. Depreciation expense
B. Prepaid expense
C. Accrued expense
D. Cash expense
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