Chapter 4 Self Test

Question 1

Which of the following statements is incorrect concerning the worksheet?
The worksheet is essentially a working tool of the accountant.
The worksheet is distributed to management and other interested parties.
The worksheet cannot be used as a basis for posting to ledger accounts.
Financial statements can be prepared directly from the worksheet before journalizing and posting the adjusting entries.

Answer 1

The worksheet is distributed to management and other interested parties.

Question 2

In a worksheet, net income is entered in the following columns:
income statement (Dr) and balance sheet (Dr).
income statement (Cr) and balance sheet (Dr).
income statement (Dr) and balance sheet (Cr).
income statement (Cr) and balance sheet (Cr).

Answer 2

income statement (Dr) and balance sheet (Cr).

Question 3

In the unadjusted trial balance of its worksheet for the year ended December 31, 2012, Taitum Company reported Equipment of $120,000. The year-end adjusting entries require an adjustment of $15,000 for depreciation expense for the equipment. After adjustment, the following adjusted amount should be reported:
A debit of $105,000 for Equipment in the balance sheet column.
A credit of $15,000 for Depreciation Expense—Equipment in the income statement column.
A debit of $120,000 for Equipment in the balance sheet column.
A debit of $15,000 for Accumulated Depreciation—Equipment in the balance sheet column.

Answer 3

A debit of $120,000 for Equipment in the balance sheet column.

Question 4

An account that will have a zero balance after closing entries have been journalized and posted is:
Service Revenue.
Supplies.
Prepaid Insurance.
Accumulated Depreciation—Equipment.

Answer 4

Service Revenue.

Question 5

When a net loss has occurred, Income Summary is:
debited and Owner’s Capital is credited.
credited and Owner’s Capital is debited.
debited and Owner’s Drawings is credited.
credited and Owner’s Drawings is debited

Answer 5

credited and Owner’s Capital is debited

Question 6

The closing process involves separate entries to close (1) expenses, (2) drawings, (3) revenues, and (4) income summary. The correct sequencing of the entries is:

(4) , (3), (2), (1)
(1) , (2), (3), (4)
(3) , (1), (4), (2)
(3) , (2), (1), (4)

Answer 6

(3), (1), (4), (2)

Question 7

Which types of accounts will appear in the post-closing trial balance?
Permanent (real) accounts.
Temporary (nominal) accounts.
Accounts shown in the income statement columns of a worksheet.
None of the above.

Answer 7

Permanent (real) accounts.

Question 8

All of the following are required steps in the accounting cycle except:
journalizing and posting closing entries.
preparing financial statements.
journalizing the transactions.
preparing a worksheet.

Answer 8

preparing a worksheet.

Question 9

The proper order of the following steps in the accounting cycle is:
prepare unadjusted trial balance, journalize transactions, post to ledger accounts, journalize and post adjusting entries.
journalize transactions, prepare unadjusted trial balance, post to ledger accounts, journalize and post adjusting entries.
journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.
prepare unadjusted trial balance, journalize and post adjusting entries, journalize transactions, post to ledger accounts.

Answer 9

journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.

Question 10

When Alexander Company purchased supplies worth $500, it incorrectly recorded a credit to Supplies for $5,000 and a debit to Cash for $5,000. Before correcting this error:
Cash is overstated and Supplies is overstated.
Cash is understated and Supplies is understated.
Cash is understated and Supplies is overstated.
Cash is overstated and Supplies is understated.

Answer 10

Cash is overstated and Supplies is understated.

Question 11

Cash of $100 received at the time the service was provided was journalized and posted as a debit to Cash $100 and a credit to Accounts Receivable $100. Assuming the incorrect entry is not reversed, the correcting entry is:
debit Service Revenue $100 and credit Accounts Receivable $100.
debit Accounts Receivable $100 and credit Service Revenue $100.
debit Cash $100 and credit Service Revenue $100.
debit Accounts Receivable $100 and credit Cash $100.

Answer 11

debit Accounts Receivable $100 and credit Service Revenue $100.

Question 12

The correct order of presentation in a classified balance sheet for the following current assets is:
accounts receivable, cash, prepaid insurance, inventory.
cash, inventory, accounts receivable, prepaid insurance.
cash, accounts receivable, inventory, prepaid insurance.
inventory, cash, accounts receivable, prepaid insurance.

Answer 12

cash, accounts receivable, inventory, prepaid insurance.

Question 13

A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as:
property, plant, and equipment.
land expense.
a long-term investment.
an intangible asset.

Answer 13

a long-term investment.

Question 14

In a classified balance sheet, assets are usually classified using the following categories:
current assets; long-term assets; property, plant, and equipment; and intangible assets.
current assets; long-term investments; property, plant, and equipment; and tangible assets.
current assets; long-term investments; tangible assets; and intangible assets.
current assets; long-term investments; property, plant, and equipment; and intangible assets.

Answer 14

current assets; long-term investments; property, plant, and equipment; and intangible assets.

Question 15

Current assets are listed:
by expected conversion to cash.
by importance.
by longevity.
alphabetically.

Answer 15

by expected conversion to cash.