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• 1) Every adjusting entry affects one balance sheet and one income
  statement account.
  True   False
• 2) The cash basis of accounting is not in accordance with generally
  accepted accounting principles.
  True   False
• 3) The time period assumption states that the economic life of a
  business entity can be divided into artificial time periods.
  True   False
• 4) Closing entries formally recognize in the ledger the transfer net
  income (or net loss) and dividends to retained earnings.
  True   False
• 5) The expense recognition principle (matching principle) requires that
  revenue is recognized (recorded) in the accounting period in which
  it is earned.
  True   False
• 6) Correcting entries are made whenever an error is discovered, and
  must be posted before closing entries.
  True   False
• 7) The relationship between a company's current assets and current
  liabilities is important in evaluating a company's liquidity - its
  ability to pay obligations expected to be due within the next year.
  True   False
• 8) The revenue recognition principle dictates that
  efforts (expenses) be matched with accomplishments (revenues).
  True   False
• 9) Adjusting entries are required:
  

  quarterly
  annually
  every time the financial statements are prepared
• 10) Depreciation expense for a period is computed by taking the
  
  
  

  original cost of an asset – accumulated depreciation
  depreciable cost ÷ depreciation rate
  cost of the asset ÷ useful life
  market value of the asset ÷ useful life
• 11) As prepaid expenses expire with the passage of time, the correct
  adjusting entry will be a
  
  
  

  debit to an asset account and a credit to an expense account
  debit to an expense account and a credit to an asset account
  debit to an asset account and a credit to an asset account
  debit to an expense account and a credit to an expense account
• 12) Becki Jean Corporation issued a one-year, 6%, $200,000 note on April
  30, 2011. Interest expense for the year ended December 31, 2011 was
  
  
  

  $12,000
  $9,000
  $8,000
  $7,000