Question : Learning Objective 3-2 1) Adjusting entries for accruals will never affect : 1253199

Learning Objective 3-2

1) Adjusting entries for accruals will never affect ________.

A) shareholders’ equity

B) expenses

C) liabilities

D) cash

2) Lumbers, Inc. lends $3,000 at 12% to an employee on September 1, 2012. The employee agrees to pay the interest and principal in two years. Which of the following will be reported on Lumbers’ year ended December 31, 2012 financial statements?

A) The balance sheet will report Interest receivable of $120.

B) The income statement will report Interest revenue of $0.

C) The statement of cash flows will report Cash received for interest of $120.

D) The income statement will report Interest income of $360.

3) Other receivables represents the amount ________.

A) customers owe for goods or services previously delivered

B) collected in advance of performing the services

C) lent to others

D) borrowed from others

4) If a company has Other receivables on its balance sheet it most likely will show ________ on its income statement.

A) Interest revenue

B) Interest expense

C) Interest receivable

D) Interest payable

5) How much interest will accrue over three months on a $10,000, 9% loan?

A) $300

B) $225

C) $900

D) $2,700

6) How much interest will accrue over ten months on a $50,000, 6% loan?

A) $3,000

B) $3,600

C) $300

D) $2,500

7) Slumbers, Inc. borrows $3,000 at 12% from a bank on September 1, 2012 and agrees to pay the interest and principal in two years. Which of the following will be reported on the year ended December 31, 2012 financial statements?

A) The balance sheet will report Interest payable of $120.

B) The income statement will report Interest expense of $0.

C) The statement of cash flows will report Cash paid for interest of $120.

D) The income statement will report Interest expense of $360.

8) Slumbers, Inc. borrows $3,000 at 12% from a bank on September 1, 2012 and agrees to pay the interest and principal in two years. What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31, 2012?

A) Assets will increase by $3,000.

B) Liabilities will decrease by $120.

C) Shareholders’ equity will decrease by $120.

D) Cash will decrease by $120.

9) On May 1, 2012, Mink, Inc. borrowed $10,000 by issuing a 12%, 3-month note and another $10,000 by issuing a 12%, 6-month note. Interest expense for the month ended May 31, 2012 equals ________.

A) $(400) on the income statement

B) $(200) on the income statement

C) $(300) on the income statement

D) $(2,400) on the income statement

10) On May 1, 2012, Mink, Inc. borrowed $10,000 by issuing a 12%, 3-month note and another $10,000 by issuing a 12%, 6-month note. Interest expense for the month ended May 31, 2012 will be ________.

A) greater on the 3-month note than the 6-month note

B) greater on the 6-month note than the 3-month note

C) $200 for both notes combined

D) $0 for both notes because no interest was paid