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Prelims Flashcards

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1
Q

If equipment cost $20,000 and accumulated depreciation amounts to $6,000, the book value of the equipment is

A) $26,000
B) $6,000
C) $14,000
D) $20,000
E) none of these
A

C) $14,000

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2
Q

The balance in the Prepaid Insurance account before adjustment at the end of the year is $720, which represents twelve months’ insurance purchased on December 1. The adjusting entry required for the month of December, on December 31, the end of the fiscal year, is

A) debit Insurance Expense, $60; credit Prepaid Insurance, $60
B) debit Insurance Expense, $660; credit Prepaid Insurance, $660
C) debit Prepaid Insurance $60; credit Insurance Expense $60
D) debit Prepaid Insurance $720; credit Insurance Expense, $720
E) debit Insurance Expense $60; credit Insurance Payable $60
A) debit Insurance Expense, $60, credit Prepaid Insurance, $60

A

A) debit Insurance Expense, $60, credit Prepaid Insurance, $60

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3
Q

The entry to record expired insurance is omitted. This error causes

A) assets to be overstated
B) expenses to be overstated
C) liabilities to be overstated
D) liabilities to be understated
E) an increase in liabilities on the balance sheet
A

A) assets to be overstated

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4
Q

Assuming a normal balance, which of the following is correct concerning the balance sheet columns of the work sheet?

A) liabilities are shown as debits
B) the drawing account is shown as a debit
C) revenues are shown as credits
D) assets are shown as credits

A

B) the drawing account is shown as a debit

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5
Q

Espanola Co. purchases equipment with a cost of $25,000 and a trade-in value of $4,000. Espanola Co. estimates that the equipment will have a useful life of 7 years. Assuming Espanola Co. has depreciated the equipment for a total of 4 years using the straight line method, what is the book value of the equipment?

A) $12,000
B) $13,000
C) $8,000
D) None of the answers are listed

A

B) $13,000

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6
Q

Miller Co. has a net loss for the year, the net loss would be recorded

A) on the credit side of the balance sheet columns of the work sheet
B) on the debit side of the balance sheet columns of the work sheet
C) on the debit side of the income statement columns of the work sheet
D) none of the answers listed

A

B) on the debit side of the balance sheet columns of the work sheet

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7
Q

After preparing the worksheet, adjusting entries must be recorded in the ________ and then posted to the _________.

A) general journal, general ledger
B) trial balance, financial statements
C) general journal, financial statements
D) none of the answers listed

A

A) general journal, general ledger

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8
Q

Which of the following sequences of documents or records described the proper sequence in the accounting cycle?

A) source documents, journal, ledger, worksheet, financial statements
B) source documents, worksheet, journal, ledger, financial statements
C) source documents, journal, worksheet, financial statements
D) worksheet, source documents, financial statements, ledger, journal
E) financial statements, journal, ledger, source documents, worksheet

A

A) source documents, journal, ledger, worksheet, financial statements

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9
Q

The Income Summary account has an $8,000 credit balance prior to being closed to the owner’s Capital account. The owner’s Capital account had a $32,000 beginning balance and a $36,500 ending balance. Determine the amount of the owner’s drawing during the current period.

A) $8,500
B) $3,500
C) $2,500
D) $4,500
E) $8,000
A

B) $3,500

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10
Q

If expenses are greater than revenue, the Income Summary account will be closed by a debit to

A) cash and a credit to income summary
B) income summary and credit to cash
C) capital and a credit to income summary
D) income summary and a credit to capital
E) income summary and a credit to drawing

A

C) capital and a credit to income summary

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11
Q

Which of the following can be prepared by taking the account balances from the general ledger after closing?

A) income statement
B) post-closing trial balance
C) balance sheet
D) statement of owner's equity
E) adjusted trial balance
A

B) post-closing trial balance

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12
Q

A net loss

A) decreases cash account
B) increases the owner's capital account
C) decreases the owner's capital account
D) decreases the owner's drawing account
E) increases the owner's drawing account
A

C) decreases the owner’s capital account

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13
Q

The adjusted balances for Tomas Co. are listed below.

Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J. Tomas, Capital, $30,000
J. Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000

The entry to close expenses would involve a
A) debit to income summary, $20,000
B) credit to income summary, $20,000
C) debit to income summary, $12,000
D) debit to wages expense, $12,000, and rent expense, $8,000

A

A) debit to income summary, $20,000

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14
Q

The adjusted balances for Tomas Co. are listed below.

Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J. Tomas, Capital, $30,000
J. Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000

The entry to close the drawing account would involve a
A) credit to J. Tomas, Drawing, $10,000
B) debit to income summary, $10,000
C) credit to J. Tomas, Capital, $10,000
D) debit to income from services, $10,000

A

A) credit to J. Tomas, Drawing, $10,000

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15
Q

The Drawing account should be closed into the _________ account.

A) income summary
B) net income
C) expense
D) capital

A

D) capital

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16
Q

Kohen Co. establishes a petty cash fund of $100. During the mouth, Kohen Co. made the following payments from this petty cash fund:
Bought pencils and pens, $15.00
Paid postage on packages, $12.00
S. Kohen, the owner, withdrew $45.00 for personal use

The journal entry to reimburse the fund would be:
A) debit petty cash fund $72, credit cash $72
B) debit cash $28, credit petty cash fund $28
C) debit supplies $15, misc. expense $12, S. Kohen, Drawing $45, credit cash $72
D) debit supplies $15, misc. expense $12, S. Kohen, Drawing $45, credit petty cash fund $72

A

C) debit supplies $15, misc. expense $12, S. Kohen, Drawing $45, credit cash $72

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17
Q

Accounting method in which accounts record revenues as a company earns it and expenses as the company incurs them-not necessarily when cash changes hands

A

Accrual Basis

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18
Q

Accounting method that recognizes revenue when a company receives cash and recognizes expenses when it pays cash

A

Cash Basis

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19
Q

Criteria for determining whether to record revenue in the financial stmts of a given period. To be recognized, revenues must be earned and realized or realizable

A

Revenue Recognition

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20
Q

Recording of expenses in the same time period that we recognize the related revenues

A

Matching

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21
Q

(statement of of earnings/operations)

Report of all revenues and expenses pertaining to a specific time period

A

Income Statement

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22
Q

Complete chronological record of an org’s transactions and how each affects the balances in particular accounts

A

General Journal

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23
Q

Original records supporting any transaction

A

Source Documents

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24
Q

Book of Original Entry

A

General Journal

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25
Q

Types of Accounts

A
  1. Assets
  2. Liabilities
  3. Equity
  4. Revenue
  5. Expenses
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26
Q

A business paying $500 rent for the current month would be recorded as follows:

A

Rend Expense $500

Cash $500

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27
Q

A business making a cash sale to a customer in the amount of $750 would be recorded as follows:

A

Cash $750

Revenue $750

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28
Q

A generic term used to describe assets that the business acquires and which ultimately become expenses as they are physically consumed by the business or decrease in value through the passage of time

A

Prepaid Expenses

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29
Q

An account used to record obligations to provide some future product or service to a customer that has paid us in advance for that product or service; when you pay in advance for one year of internet access, the company you pay records the receipt of cash as unearned revenue; over time as you use the service, the unearned portion decreases and the company makes an entry to record the decreasing unearned portion and the earned revenue

A

Unearned or Deferred Revenues

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30
Q

The goal of accounting is to record only those transactions which affect the business, we ignore any transactions the owner of the business enters into personally, other than contributions to and withdrawals from the business

A

Separate Entity Principle

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31
Q

Individuals and organizations outside a company who want financial information about the company

A

External User

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32
Q

Standards that are generally accepted and universally practiced; these standards indicate how to report economic events

A

Generally Accepted Accounting Principles (GAAP)

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33
Q

The primary accounting standard-setting body in the US

A

Financial Accounting Standards Board (FASB)

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34
Q

Many countries outside the US have adopted the accounting standards issued by this

A

International Accounting Standards Board (IASB)

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35
Q

Requires that companies include in the accounting records only transaction that can be expressed in money terms

A

Monetary Unit Assumption

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36
Q

Basic Accounting Equation

A

Assets = Liabilities + Owner’s Equity

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37
Q

Expanded Equation

A

Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses

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38
Q

An account linked with another account. Its normal balance is opposite that of the other account’s balance

A

Contra account

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39
Q

Accounting system in which each transaction affects at least two accounts and has at least one debit and one credit.

A

Double-entry accounting

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40
Q

List of accounts and their balances at a point in time; total debit balances equal total credit balances.

A

Trial balance

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41
Q

Liability created when customers pay in advance of products or services to be provided later; earned when the products or services are later delivered.

A

Unearned revenue

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42
Q

Lists of accounts used by a company; included an identification number for each account.

A

Chart of accounts

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43
Q

An entry that affects three or more accounts

A

Compound journal entry

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44
Q

Record in which transactions are entered before they are posted to ledger accounts; also book or original entry.

A

Journal

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45
Q

Process of transferring journal entry information to a ledger; computerized systems automate this process

A

Posting

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46
Q

A column in journals and ledgers in which individual ledger account numbers are entered when entries are posted to those ledger accounts.

A

Posting reference (PR) column

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47
Q

During the month of February, Victor Services had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash balance?

A

$2,900.

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48
Q

Larry Bar opened a frame shop and completed these transactions:

  1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000.
  2. Purchased $70 of office supplies on credit.
  3. Paid $1,200 cash for the receptionist’s salary.
  4. Sold a custom frame service and collected a $1,500 cash on the sale.
  5. Completed framing services and billed the client $200.

What was the balance of the cash account after these transactions were posted?

A

$40,300.

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49
Q

Joe Jackson opened Jackson’s Repairs, Inc. on March 1 of the current year. During March, the following transactions occurred and were recorded in the company’s books:

  1. Jackson invested $25,000 cash in the business.
  2. Jackson contributed $100,000 of equipment to the corporation.
  3. The company paid $2,000 cash to rent office space for the month.
  4. The company received $16,000 cash for repair services provided during March.
  5. The company paid $6,200 for salaries for the month.
  6. The company provided $3,000 of services to customers on account.
  7. The company paid cash of $500 for monthly utilities.
  8. The company received $3,100 cash in advance of providing repair services to a customer.

Based on this information, net income for March would be:

A

10,300

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50
Q

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:

A

Overstate net income by $28,000.

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51
Q

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

A

Debit Insurance Expense, $360; credit Prepaid Insurance, $360.

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52
Q

Unearned revenue is reported in the financial statements as:

A

A liability on the balance sheet.

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53
Q

On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. The adjusting entry on December 31 would be:

A

A debit to Unearned Fees and a credit to Fees Earned for $1,000.

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54
Q

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

A

Debit Salaries Expense $400 and credit Salaries Payable $400.

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55
Q

On January 1, Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. What amount of tuition revenue should the college recognize on February 28?

A

300,000

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56
Q

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

A

It will understate expenses and overstate net income by $9,000.

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57
Q

If Regent Tax Services’ office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

A

825

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58
Q

Financial statements are typically prepared in the following order:

A

Income statement, statement of retained earnings, balance sheet

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59
Q

The closing process is necessary in order to:

A

Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.

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60
Q

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are

A

Accrued expenses.

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61
Q

When expenses exceed revenues,

a. a net income will result.
b. a net loss occurs.
c. stockholders’ equity increases.
d. a liability is created.

A

b. a net loss occurs.

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62
Q

Revenues are increases in stockholders’ equity and result from

a. selling goods.
b. rendering services.
c. both selling goods and rendering services.
d. neither selling goods nor rendering services.

A

c. both selling goods and rendering services.

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63
Q

Which of the following transactions results in an increase in expenses?

a. Cash payment on accounts payable
b. Receive a bill for the usage of utilities
c. Repayment of principal of bank loan
d. Purchase of machinery on credit

A

b. Receive a bill for the usage of utilities

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64
Q

Which of the following transactions will not result in an increase in revenues?

a. Sale of goods on credit
b. Sale of services for cash
c. Accumulation of interest in bank account
d. Sale of stock to investors for cash

A

d. Sale of stock to investors for cash

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65
Q

The matching rule is applied

a. because it is required by the Internal Revenue Code.
b. by expensing certain items immediately and in their entirety.
c. to help make the bookkeeper’s job easier.
d. to help produce an accurate measurement of a company’s performance.

A

d. to help produce an accurate measurement of a company’s performance.

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66
Q

An adjusting entry would not include which of the following accounts?

a. Accounts Payable
b. Unearned Revenue
c. Accounts Receivable
d. Cash

A

d. Cash

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67
Q

Accumulated depreciation is classified as a(n)

a. contra-expense account.
b. expense account.
c. contra-asset account.
d. liability account.

A

c. contra-asset account.

68
Q

Machinery might be depreciated over 10 years because

a. it will lose most of its market value in 10 years.
b. it will be paid for in 10 years.
c. it will help to generate revenue for the company over 10 years.
d. income tax provisions require depreciation over 10 years.

A

c. it will help to generate revenue for the company over 10 years.

69
Q

What is the adjustment entry for that portion of revenue received in advance which has now been earned?

a. Unearned Revenue - Debit; Cash - Credit.
b. Unearned Revenue - Debit; Revenue from Services - Credit.
c. Revenue from Services - Debit; Unearned Revenue - Credit.
d. Cash - Debit; Unearned Revenue - Credit.

A

b. Unearned Revenue - Debit; Revenue from Services - Credit.

70
Q

Which of the following accounts would be found on the credit side of the adjusted trial balance?

a. Service Revenue
b. Office Supplies
c. Dividends
d. Rent Expense

A

a. Service Revenue

71
Q

Which of the following is not a permanent account?

a. Cash
b. Common Stock
c. Insurance Expense
d. Accounts Payable

A

c. Insurance Expense

72
Q

Income from operations is arrived after considering all except

a. administrative salaries.
b. interest income.
c. the cost of sales.
d. sales returns and allowances.

A

b. interest income.

73
Q

Define matching principle.

A

Recording revenue and expenses in correct period.

74
Q

When are adjusting entries done? Why is it necessary to adjust the accounts?

A

At the end of the month. To ensure our financial statements will be as accurate as possible. Otherwise, they will be incorrect.

75
Q

Is the cash account involved in the adjusting process? Why or why not?

A

No, because we’re not on the cash basis.

76
Q

The adjusting entry to record depreciation of equipment is

A

debit Depreciation Expense; credit Accumulated Depreciation.

77
Q

The type of account and normal balance of Accumulated Depreciation are

A

contra asset, credit

78
Q

refers to the cost of an asset minus its accumulated depreciation?

A

Book value

79
Q

If the amount of net income for the current period is less than the amount of the owner’s withdrawals, there will be a(n)

A

decrease in the owner’s Capital account.

80
Q

If an accountant fails to make an adjusting entry at the end of a fiscal period to record expired insurance, the omission will cause

A

total expenses to be understated.

81
Q

The $4,500 balance in Prepaid Insurance represents the premium paid in advance for a three-month liability insurance policy. Assuming that 2 months of premium has now expired, the adjustment would be recorded in the work sheet as a:

A

debit to Insurance Expense, $3,000

82
Q

Assume that Sophia Co. pays its employees $250 per day and that pay day falls on Friday. Sophia Co. employees work Monday through Friday. Assume the last day of the fiscal period falls on Wednesday, the adjustment for accrued wages would be recorded in the work sheet as a:

A

debit to wages expense, $750.

83
Q

The adjusting entry to record the amount of prepaid insurance used or expired would involve a

A

debit to Insurance Expense.

credit to prepaid insurance

84
Q

If L. Green’s total revenue for the year was $38,000 and total expenses were $30,000, the third closing entry would be

A

debit Income Summary; credit L. Green, Capital.

85
Q

The Income Summary account has an $8,000 credit balance prior to being closed to the owner’s Capital account. The owner’s Capital account had a $32,000 beginning balance and a $36,500 ending balance. Determine the amount of the owner’s drawing during the current period.

A

3500

86
Q

The first step in the closing process is to close the _____________ account(s) into the ___________ account(s).

A

revenue, income summary

87
Q

The second step in the closing process is to close the _____________ account(s) into the ___________ account(s).

A

expense, income summary

88
Q

Which of the following transactions results in the recognition of an expense?

a. ) Expiration of the usefulness of equipment during the accounting period
b. ) Payment on an account payable
c. ) Declaration and payment of dividends
d. ) Payment on the principle portion of a loan

A

a.) Expiration of the usefulness of equipment during the accounting period

89
Q

When a credit sale takes place…

a. ) A revenue account will increase
b. ) Liabilities will increase
c. ) One asset account will increase and another will decrease
d. ) Assets will be unaffected

A

a.) A revenue account will increase

90
Q

Which of the following transactions results in an increase in revenues?

a. ) Receipt of accounts receivable
b. ) Purchase of inventory
c. ) Receipt of principal from a bank loan
d. ) Delivery of a service in exchange for future payment

A

d.) Delivery of a service in exchange for future payment

91
Q

A customer’s promise to pay for goods or services…

a. ) Increases the company’s liabilities
b. ) Decreases the company’s Cash account
c. ) Creates a liability for the company
d. ) Increases the assets of the company

A

d.) Increases the assets of the company

92
Q

The going concern assumptions helps solve the…

a. ) Matchin issue
d. ) Accounting period issue
c. ) Revenue recognition issue
d. ) Continuity issue

A

d.) Continuity issue

93
Q

Which of the following is NOT one of the conditions for recognition of an expense?

a. ) A price has been established or can be determined
b. ) There is an agreement to purchase goods or services
c. ) The goods will be delivered or the services will be provided within the accounting cycle
d. ) The goods or services are used to produce revenue

A

c.) The goods will be delivered or the services will be provided within the accounting cycle

94
Q

Which of the following is an example of an accrual?

a. ) Purchase of equipment
b. ) Prepaid insurance
c. ) Salaries earned but not yet paid
d. ) All of these choices

A

c.) Salaries earned but not yet paid

95
Q

Depreciation is
A) shown on the balance sheet as a liability.
B) added to the cost of equipment on the balance sheet.
C) an expense that is incurred during an accounting period.
D) a decrease in the fair market value of an asset.
E) a method of saving cash to replace plant assets.

A

C

96
Q

Accumulated Depreciation-Equipment, is shown as
A) an expense on the income statement.
B) a liability on the balance sheet.
C) a contra account on the balance sheet.
D) a deduction from profit on the statement of owner’s equity.
E) an addition to equipment on the balance sheet.

A

C

97
Q

Accrued salaries are
A) salaries that were earned by employees and have been paid.
B) salaries that have been paid.
C) salaries that have been earned by employees but not paid.
D) salaries that have been neither earned by employees nor paid.
E) salaries that have been paid but not earned by employees.

A

C

98
Q 
Which types of adjusting entries are natural opposites?
A) Prepaids and accruals
B) Expenses and revenues
C) Prepaids and depreciation
D) Profit and Loss
A

a

99
Q 
If a ₱2,500 adjustment for depreciation is omitted, which of the following financial statement errors will occur?
A) assets will be understated
B) expenses will be overstated
C) owner's equity will be overstated.
D) profit will be understated
A

C

100
Q 
The amount of accrued but unpaid expenses at the end of the period is both an expense and
A) a deferral
B) a liability
C) an asset
D) an income
A

B

101
Q 
Accrued revenues
A) decrease assets
B) decrease liabilities
C) increase assets
D) increase liabilities
A

C

102
Q 
Accrued expenses
A) decrease assets
B) decrease liabilities
C) increase assets
D) increase liabilities
A

D

103
Q 
An item that represents services received by the firm for which it will pay for in the future is called
A) an accrued expense.
B) an accrued revenue.
C) an unearned revenue.
D) a prepaid expense.
A

A

104
Q 
An item that represents services provided by a firm for which it will receive a payment in the future is called
A) a prepaid expense.
B) an accrued expense.
C) an accrued revenue.
D) an unearned revenue.
A

C

105
Q

On December 9, A issues a 60-day promissory note to B. The December 31 adjusting entry for A is
(1pts)

Interest Expense - Debit; Cash - Credit

Interest Receivable - Debit; Interest Income - Credit

Interest Expense - Debit; Interest Payable - Credit

Interest Payable - Debit; Cash - Credit

A

C

106
Q

The adjustment entry for the expiration of prepaid advertising, originally recorded as an asset,

(1pts)

a. Advertising Expense - Debit; Cash - Credit
b. Prepaid Advertising - Debit; Advertising Expense - Credit
c. Advertising Expense - Debit; Prepaid Advertising - Credit
d. Prepaid Advertising - Debit; Cash - Credit

A

c

107
Q

Which of the following accounts probably would not appear in a trial balance but probably would appear in an adjusted trial balance?

(1pts)

a. Unearned Revenue
b. Accumulated Depreciation-Equipment
c. Cash
d. Depreciation Expense-Equipment

A

d

108
Q

Which of the following accounts would not need to be adjusted at year end?

(1pts)

a. Prepaid Advertising
b. Land
c. Office Supplies
d. Unearned Revenue

A

b

109
Q

A company’s five-day weekly payroll of $890 is paid on Fridays. Assume that the last day of the month falls on Wednesday. Which of the following is the required adjusting entry for the month end?

a. Debit Salaries Expense $356 and credit Salaries Payable $356.
b. Debit Salaries Payable $534 and credit Salaries Expense $534.
c. Debit Unpaid Salaries $534 and credit Salaries Payable $534.
d. Debit Salaries Expense $534 and credit Salaries Payable $534.

A

d

110
Q

What is the adjustment entry for that portion of revenue received in advance which has now been earned?

a. Unearned Revenue - Debit; Cash - Credit
b. Revenue from Services - Debit; Unearned Revenue - Credit
c. Cash - Debit; Unearned Revenue - Credit
d. Unearned Revenue - Debit; Revenue from Services - Credit

A

d

111
Q

Wages Payable was $350 at the end of October and $280 at the end of November. Wages Expense for November was $2,000. How much cash was paid for wages during November?

(1pts)

a. $1,370
b. $2,070
c. $1,930
d. $2,630

A

b

112
Q

The Store Supplies account had a $360 debit balance at the end of the accounting period before adjustment for supplies used, and an inventory of $80 of unused supplies was on hand. Which of the following is the required adjusting entry?

(1pts)

a. Debit Store Supplies $280 and credit Store Supplies Expense $280.
b. Debit Store Supplies Expense $80 and credit Store Supplies $80.
c. Debit Store Supplies Expense $280 and credit Store Supplies $280.
d. Debit Store Supplies $80 and credit Store Supplies Expense $80.

A

c

113
Q

As the usefulness of a fixed asset such as a building expires,

(1pts)

a. an amount is transferred from one asset account to another.
b. a related expense account is reduced.
c. a liability is created.
d. the cost of the asset is allocated to an expense account.

A

d

114
Q

Which of the following transactions results in the recognition of an expense?

(1pts)

a. Payment on the principal portion of a loan
b. Payment on an account payable
c. Withdrawal of cash by the owner
d. Expiration of the usefulness of equipment during the accounting period

A

d

115
Q

If an adjusting entry were not made at the end of an accounting period to remove the earned revenue from the Unearned Revenue account,

a. assets would be understated.
b. liabilities would be overstated.
c. liabilities would be understated.
d. owner’s equity would be overstated

A

b

116
Q

Failure to adjust for accrued wages at year end will result in an
(1pts)

a. understatement of assets.
b. overstatement of net income.
c. understatement of owner’s equity.
d. overstatement of liabilities.

A

b

117
Q

A company recorded office supplies in an asset account when the supplies were purchased. Failure to take inventory and make an adjusting entry will result in an

(1pts)

a. understatement of liabilities.
b. understatement of assets.
c. understatement of owner’s equity.
d. overstatement of owner’s equity.

A

d

118
Q

Failure to record depreciation at year end will result in an

(1pts)

a. understatement of net income.
b. overstatement of total liabilities.
c. understatement of total liabilities.
d. overstatement of total assets.

A

d

119
Q

At the beginning of the year, Tektron Company had total assets of $600,000 and total liabilities of $300,000. If the total assets increased $100,000 and the total liabilities decreased $70,000, what is the amount of stockholders’ equity at the end of the year?

A

$470,000

120
Q

Sheldon has the following year-end account balances: Accounts Receivable, $5,000; Supplies, $12,000; Equipment, $18,000; Accounts Payable, $17,000; Stockholders’ Equity, $43,000. The Cash account balance was not available at year-end. Given the account balances listed, the balance in the Cash account should be

A

$25,000

121
Q

LR Corporation is a cash-basis business. LR signed a six-month, 12% note payable of $10,000 on October 1st, 2017. By recording the interest expense related to the note only when it is paid on April 1st, 2018, LR will understate expenses by _____________ on its year-end financial statements on December 31st, 2017.

a. $300
b. $600
c. $0
d. $11,200

A

a. $300

10000x12%x3/12

122
Q

Depreciation is a process of

a. asset devaluation
b. cost accumulation
c. cost allocation
d. asset valuation

A

c. cost allocation

123
Q

Equipment with a cost of $300,000 has an estimated salvage value of $20,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used for 2,700 hours?

a. $75,000
b. $70,000
c. $75,600
d. $72,500

A

c. $75,600

300000-20000)*(2700/10000

124
Q

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause…

A

Revenues to be understated

125
Q

The Village Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $3,000 on hand. The adjusting entry that should be made by the company on June 30 is…

A

Debit Laundry Supplies Expense, $3,500; Credit Laundry Supplies $3,500

126
Q

Failure to prepare an adjusting entry at the end of period to record an accrued revenue would cause

A

An understatement of assets and an understatement of revenues

127
Q

At December 31,2007, before any year-end adjustments, Janis Company’s prepaid Insurance had a balance of $1,900. It was determined that $1,400 of the prepaid insurance had expired. The adjusted balance for Prepaid Insurance for the year would be…

A

$500

128
Q 
Garber Company lends Newell Company $20,000 on April 1, accepting a four-month, 6% interest note. Garber Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?
a. Note Receivable 20,000
Cash 20,000
b. Interest Receivable 100
Interest Revenue 100
c. Cash 100
Interest Revenue 100
d. Interest Receivable 300
Interest Revenue 300
A

b. Interest Receivable 100

Interest Revenue 100

129
Q

A company purchased factory equipment on April 1, 2007, for $48,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2007, is

a. $4,800
b. $4,200
c. $3,150
d. $3,600

A

c. $3,150

130
Q

Moss County Bank agrees to lend the Allenson Brick Company $200,000 on January 1. Allenson Brick Company signs a $200,000, 6%, 9-month note.

  1. The entry made by Allenson Brick Company on January 1 to record the proceeds and issuance of the note is
    a. Interest Expense 9,000
    Cash. 191,000
    Notes Payable 200,000
    b. Cash 200,000
    Notes Payable 200,000
    c. Cash 200,000
    Interest Expense 9,000
    Notes Payable 209,000
    d. Cash 200,000
    Interest Expense 9,000
    Notes Payable 200,000
    Interest Payable 9,000
A

b. Cash 200,000

Notes Payable 200,000

131
Q

Moss County Bank agrees to lend the Allenson Brick Company $200,000 on January 1. Allenson Brick Company signs a $200,000, 6%, 9-month note.

  1. What is the adjusting entry required if Allenson Brick Company prepares financial statements on June 30?
    a. Interest Expense 6,000
    Interest Payable 6,000
    b. Interest Expense 6,000
    Cash 6,000
    c. Interest Payable 6,000
    Cash 6,000
    d. Interest Payable 6,000
    Interest Expense 6,000
A

a. Interest Expense 6,000

Interest Payable 6,000

132
Q

West County Bank agrees to lend the Block Builders Company $100,000 on January 1. Block Builders Company signs a $100,000, 6%, 6-month note.

  1. What is the adjusting entry required if Block Builders Company prepares financial statements on March 30?
    a. Interest Expense 3,000
    Interest Payable 3,000
    b. Interest Expense 3,000
    Cash 3,000
    c. Interest Expense 1,500
    Interest Payable 1,500
    d. Interest Payable 1,500
    Interest Expense 1,500
A

c. Interest Expense 1,500

Interest Payable 1,500

133
Q

The revenue recognition principle dictates that revenue is recognized in the period in which the cash is received.

A

F

134
Q

The expense recognition principle requires that expenses be recognized in the same period that they are paid.

A

F

135
Q

Which one of these statements about the accrual-basis of accounting is false?

A. Companies record events that change a company’s financial statements in the periods in which the events occur.
B. Companies recognize revenue in the period in which the performance obligation is satisfied.
C. This basis is in accord with generally accepted accounting principles.
D. Companies record revenue only when they receive cash, and record expense only when they pay out cash.

A

D

136
Q

Book value is equal to cost minus accumulated depreciation.

A

T

137
Q

If the adjusting entry is not made for unearned revenues the result will be to

A. overstate assets and understate liabilities.
B. overstate liabilities and understate revenues.
C. understate net income and overstate retained earnings.
D. understate retained earnings and overstate revenues.

A

B

138
Q

T/F

An Adjusted Trial Balance is prepared after the books of a company are closed at the end of the accounting period.

A

F

139
Q

T/F

At the end of the accounting period, all balance sheet accounts are closed out.

A

F

140
Q

T/F

The accounting cycle requires that closing entries be prepared on a monthly basis.

A

F

141
Q

All of the following are required steps in the accounting cycle except

A. journalizing and posting closing entries.
B. preparing an adjusted trial balance.
C. preparing a post-closing trial balance.
D. preparing a worksheet.

A

D

142
Q

The final step in the accounting cycle is to prepare

A. closing entries.
B. financial statements.
C. a post-closing trial balance.
D. adjusting entries.

A

C

143
Q

A net loss will appear in which column of the worksheet?

A. Adjustments - Debit
B. Adjusted Trial Balance - Credit
C. Income Statement - Debit
D. Balance Sheet - Debit

A

D

144
Q

Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be

A

Supplies Expense $3,700

Supplies $3,700

145
Q

On September 1 the Petite-Sizes Store paid $12,000 to the Mega-Mall Co. for 3 months rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be

A

Rent Expense $4,000

Prepaid Rent $4,000

146
Q

On July 1, Mesa Verde, Inc. purchased a 3-year insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry would be

A

Insurance Expense $2,100

Prepaid Insurance $2,100

147
Q

At December 31, 2013, before any year-end adjustments, Macarty Company’s Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

A

1500

148
Q

On August 1 the Darius Co. purchased a photocopy machine for $8,000. The estimated annual depreciation on the machine is $1,680. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be

A

Depreciation Expense $700

Accumulated Depreciation $700

149
Q

Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rental Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entry to make on December 31 would be

A

Unearned Rent Revenue $7,500

Rent Revenue $7,500

150
Q

On August 1, Luang Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be

A

Interest Expense $1,750

Interest Payable $1,750

151
Q

Employees at the Waco Waffle House were paid on Friday, December 27 for the five days ending on December 27. The next payday is Friday, January 3. Employees work 5 days a week. The weekly payroll amounts to $3,800. The appropriate adjusting journal entry on December 31 would be to credit Salaries and Wages Payable for

A

1520

152
Q

A company lends $15,000 at 8% interest for 3 months on June 1. If adjusting entries are recorded on June 30, how much will be credited to Interest Revenue?

A

100

153
Q

During 2014, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity

A. increased $40,000.
B. decreased $140,000.
C. decreased $40,000.
D. increased $140,000.

A

A

154
Q

If total liabilities increase by $5,000 then

A. assets decrease by $5,000.
B. stockholders’ equity increase by $5,000.
C. assets increase by $5,000, or stockholders’ equity decrease by $5,000.
D. assets and stockholders’ equity each increase by $2,500.

A

C

155
Q

Which statement about an account is true?

A. In its simplest form, an account consists of two parts.
B. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.
C. There are separate accounts for specific assets and liabilities but only one account for stockholders’ equity items.
D. The right side of an account is the debit side.

A

B

156
Q

Which is not part of the recording process?

A. Analyzing transactions
B. Preparing a trial balance
C. Entering transactions in a journal
D. Posting transactions

A

B

157
Q

T/F

Transactions are recorded in chronological order in the journal.

A

T

158
Q

Which of these statements about a journal is false?

A. It contains only revenue and expense accounts.
B. It provides a chronological record of transactions.
C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared.
D. It discloses the complete effect of a transaction in one place.

A

A

159
Q

Which of the following is not a part of a complete journal entry?

A. The balance of each account affected by the transaction
B. The accounts and amounts to be debited and credited
C. The date of the transaction
D. A brief explanation of the transaction

A

A

160
Q

T/F

The entire group of accounts maintained by a company is referred to collectively as the journal.

A

F

161
Q

What is the appropriate order for a company’s chart of accounts?

A. Assets, liabilities, revenues, expenses, stockholders’ equity
B. Assets, revenues, expenses, liabilities, stockholders’ equity
C. Assets, liabilities, stockholders’ equity, expenses, revenue
D. Assets, liabilities, stockholders’ equity, revenues, expenses

A

D

162
Q

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates

A. no errors have been made.
B. no errors can be discovered.
C. that all accounts reflect correct balances.
D. the mathematical equality of the accounting equation.

A

D

163
Q

Accounts are listed on the trial balance in

A. chronological order.
B. the order that they appear in the ledger.
C. alphabetical order.
D. the order in which they are posted.

A

B

164
Q

A trial balance

A. is a list of accounts with their balances at a given time.
B. proves the mathematical accuracy of journalized transactions.
C. will not balance if a correct journal entry is posted twice.
D. proves that all transactions have been recorded.

A

A

165
Q

A trial balance will not balance if

A. a correct journal entry is posted twice.
B. the purchase of supplies on account is debited to Supplies and credited to Cash.
C. a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.
D. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

A

C

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