I.

True, False

Revenue should be recorded when it has been earned, not True

when the related cash has been collected
The accrual basis of accounting results in a less accurate False
measurement of net income for the period than does the cash
basis of accounting
Adjusting entry for prepaid expenses which has been False
incurred would result in a decrease in the current asset
account
Under the perpetual inventory system, the Inventory account True
is updated regularly after each sale or purchase transaction
Goods in transit shipped FOB destination should be included True
in the seller's ending inventory
In the current business environment, periodic invenroty False
system is used more often than the perpetual inventory
system
When a company determine to write-off an account False
receivable. the write-off entry would result in an expense at
the time of write-off
Bad debts are considered as an expense of selling on credit. True

II. Multiple Choice

III. Adjusting entries

1. If the adjusting entry for prepaid revenue is not recorded (it should be
recorded), the revenue part in the Income Statement at the end of the
accounting period would be – UNDERSTATED
2.
If the adjusting entry for Unearned Revenue is not recorded (it should be
recorded), the current assets part in the Balance Sheet at the end of the
accounting period would be- DO NOT AFFECT
3.
On June 29, the company completed negotiations and signed a contract to
provide monthly services to a new client at an annual rate of $6,645
There is no adjusting entry as no revenue is earned by the end of the
current fiscal year ending on June 30.

IV. Inventory
1. Which of the following goods would not be included in merchandise
inventory for a company?- Goods in transit shipped FOB shipping point.
2. Given equal circumstances, which inventory method probably would be the
most time consuming- Specific identification.
3. Goods held on consignment are included in the consignor's ending inventory

V. COGS

VI. Depreciation
Under the allowance method, when a specific account is written off total assets
will be unchanged