21. Wages are an expense to the employer when earned rather than when paid.
22. Immaterial items may be accounted for in the most convenient manner, without regard to other theoretical concepts.
23. All assets should be depreciated.
24. Materiality is a matter of professional judgment.
25. An expenditure that benefits the year in which it is made should be deducted from revenue in the same year.
26. An expenditure that benefits year one but is paid for in year two should not be capitalized until year two.
27. Companies that engage in fraud will often capitalize an asset rather than an expense account.
Multiple Choice Questions
28. If Hot Bagel Co. estimates depreciation on an automobile to be $578 for the year they should make the following adjusting entry:
A. Debit Accumulated Depreciation $578 and credit Depreciation Expense $578.
B. Debit Depreciation Expense $578 and credit Automobile $578.
C. Credit Accumulated Depreciation $578 and debit Depreciation Expense $578.
D. Debit Automobile $578 and credit Depreciation Expense $578.
29. Accumulated Depreciation is
A. An asset account
B. A revenue account
C. A contra-asset account
D. An expense account.
30. Adjusting entries are prepared
A. Before financial statements and after a trial balance has been prepared.
B. After a trial balance has been prepared and after financial statements are prepared
C. After posting but before a trial balance is prepared.
D. Anytime an accountant sees fit to prepare the entries.