question

A company's fiscal year must correspond with the calendar year.

answer

False

question

The time period principle assumes that an organization's activities can be divided into specific time periods.

answer

True

question

Interim statements report a company's business activities for a 1-year period.

answer

False

question

Adjusting entries are made after the preparation of financial statements.

answer

False

question

Adjusting entries result in a better matching of revenues and expenses.

answer

True

question

The matching principle and the full closure principle are the two main accounting principles used in accrual accounting.

answer

False

question

Adjusting entries are used to record the effects of internal economic (financial) transactions and events.

answer

True

question

The matching principle requires that revenue not be assigned to the accounting period in which it is earned.

answer

False

question

The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.

answer

True

question

Under the cash basis of accounting, no adjustments are made for prepaid, unearned and accrued items.

answer

True

question

Since the revenue recognition principle requires that revenues be earned, there are no unearned revenues in accrual accounting.

answer

False

question

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

answer

True

question

The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

answer

True

question

The cash basis of accounting requires that revenues be recognized when cash payments from customers are received.

answer

True

question

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

answer

False

question

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

answer

True

question

Prior to recording adjusting entries at the end of an accounting period, some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

answer

True

question

A company paid $6,000 for a six-month insurance policy. The policy coverage began on February 1. On February 28, $100 of insurance expense must be recorded.

answer

False

question

On October 15, a company received $15,000 cash as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this contract for October.

answer

True Revenue = $15,000 x 10% = $1,500

question

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

answer

True

question

The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance and recording adjusting entries.

answer

True

question

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements and recording closing and adjusting entries.

answer

False

question

A classified balance sheet organizes assets and liabilities into important subgroups that are not found on an unclassified balance sheet.

answer

True

question

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

answer

True

question

Intangible assets are long-term resources that benefit business operations, usually lack physical form and have uncertain benefits.

answer

True

question

Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services.

answer

True

question

Current liabilities include accounts receivable, unearned revenues and salaries payable.

answer

False

question

For a corporation, the equity section is divided into two main accounts: Common Stock and Retained Earnings.

answer

True

question

Before an adjusting entry is made to recognize insurance expired, Prepaid Insurance and Insurance Expense are both overstated.

answer

False

question

Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

answer

True

question

Failure to record depreciation expense will overstate the asset and understate the expense.

answer

True

question

Profit margin can also be called return on sales.

answer

True

question

Profit margin is calculated by dividing net sales by net income.

answer

False

question

Ben and Jerry's had total assets of $149,501,000, net income of $6,242,000 and net sales of $209,203,000. Its profit margin was 2.98%.

answer

True $6,242,000/$209,203,000 = 2.98%

question

The current ratio is computed by dividing current liabilities by current assets.

answer

False

question

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

answer

False

question

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

answer

True

question

In accrual accounting, accrued revenues are recorded as liabilities.

answer

False

question

Depreciation expense is an example of an accrued expense.

answer

False

question

Earned but uncollected revenues that are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account are referred to as accrued expenses.

answer

False

question

Net income for a period will be overstated if accrued salaries are not recorded at the end of the accounting period

answer

True

question

An unadjusted trial balance is a listing of accounts and their balances prepared before adjustments are recorded.

answer

True

question

The account form of the balance sheet matches the accounting equation. That is, assets are on the left side of the statement and liabilities and equity are on the right side of the statement.

answer

True

question

In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.

answer

False

question

An expense account is normally closed by debiting Income Summary and crediting the expense account.

answer

True

question

The dividends account is normally closed by debiting it.

answer

False

question

The Income Summary account is closed to the retained earnings account.

answer

True

question

When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance.

answer

False

question

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

answer

False

question

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

answer

True

question

It is acceptable to record prepayment of expenses as debits to expense accounts.

answer

True

question

It is acceptable to credit cash received in advance to revenue accounts when cash is received.

answer

True

question

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

answer

True

question

All necessary numbers to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

answer

True

question

If all columns balance upon completion of a work sheet, you can be sure that no errors were made in preparing the work sheet.

answer

False

question

Closing entries are normally entered in the general journal and then posted to the work sheet.

answer

False

question

Adjusting entries are normally entered in the general journal prior to being posted to the work sheet.

answer

False

question

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet Debit column.

answer

False

question

Since it is an important financial statement, the trial balance must be prepared according to specified accounting procedures.

answer

False

question

Which of the following identifies the proper order of the accounting cycle? A. Analyze, Journalize, Unadjusted Trial Balance B. Analyze, Post, Unadjusted Trial Balance C. Journalize, Post, Adjusted Trial Balance D. Unadjusted Trial Balance, Adjusted Trial Balance, Close E. Adjusted Trial Balance, Adjustments, Financial Statements

answer

C

question

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters or years is the: A. Operating cycle of a business B. Time period principle C. Going-concern principle D. Matching principle E. Accrual basis of accounting

answer

B

question

Interim financial statements refer to financial reports: A. That cover less than one year, usually spanning one, three or six-month periods B. That are prepared before any adjustments have been recorded C. That show the assets above the liabilities and the liabilities above the equity D. Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid E. Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues

answer

A

question

The 12-month period that ends when a company's activities are at their lowest point is called the: A. Fiscal year B. Calendar year C. Natural business year D. Accounting period E. Interim period

answer

C

question

The length of time covered by a set of periodic financial statements is referred to as the: A. Fiscal cycle B. Natural business year C. Accounting period D. Business cycle E. Operating cycle

answer

C

question

Western Company has an annual reporting period that runs from July 1st through June 30th. Based on this information which of the following is a true statement? A. Western probably has little seasonal variation in their sales B. Western has violated the time period principle C. Western must prepare financial statements as of December 31 each year D. Western has adopted a fiscal year E. Western does not have an accountant

answer

D

question

The accounting principle that requires revenue to be reported when earned is the: A. Matching principle B. Revenue recognition principle C. Time period principle D. Accrual reporting principle E. Going-concern principle

answer

B

question

Adjusting entries: A. Affect only income statement accounts B. Affect only balance sheet accounts C. Affect both income statement and balance sheet accounts D. Affect only cash flow statement accounts E. Affect only equity accounts

answer

C

question

The main purpose of adjusting entries is to: A. Record external transactions and events B. Record internal transactions and events C. Recognize assets purchased during the period D. Recognize debts paid during the period E. Correct errors

answer

B

question

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: A. Recognition principle B. Cost principle C. Cash basis of accounting D. Matching principle E. Time period principle

answer

D

question

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called: A. Accrual basis accounting B. Operating cycle accounting C. Cash basis accounting D. Revenue recognition accounting E. Current basis accounting

answer

C

question

Which of the following accounts would not be impacted by adjusting journal entries? A. Accounts Receivable B. Consulting Fee Earned C. Unearned Consulting Fees D. Cash E. Wages Payable

answer

D

question

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: A. Cash basis accounting B. The matching principle C. The time period principle D. Accrual basis accounting E. Revenue basis accounting

answer

D

question

Prepaid expenses, depreciation, accrued expenses, unearned revenues and accrued revenues are all examples of: A. Items that require contra accounts B. Items that require adjusting entries C. Asset and equity D. Asset accounts E. Income statement accounts

answer

B

question

The accrual basis of accounting: A. Is generally accepted for external reporting since it is more useful for most business decisions B. Is flawed because it gives complete information about cash flows C. Recognizes revenues when received in cash D. Recognizes expenses when paid in cash E. Eliminates the need for adjusting entries at the end of each period

answer

A

question

Which of the following statements is incorrect? A. Prepaid expenses, depreciation and unearned revenues involve previously recorded assets and liabilities B. Accrued expenses and accrued revenues involve assets and liabilities that were not previously been recorded C. Adjusting entries can be used to record both accrued expenses and accrued revenues D. Prepaid expenses, depreciation and unearned revenues often require adjusting entries to record the effects of the passage of time E. Adjusting entries affect the cash account

answer

E

question

The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the: A. Accounting period B. Operating cycle C. Accounting cycle D. Closing cycle E. Natural business year

answer

C

question

Which of the following is the usual final step in the accounting cycle? A. Journalizing transactions B. Preparing an adjusted trial balance C. Preparing a post-closing trial balance D. Preparing the financial statements E. Preparing a work sheet

answer

C

question

Each letter below contains three of the steps found in the accounting cycle. Which presents the given steps in the proper sequence, first to last? A. Adjust, Analyze transactions, Close B. Analyze transactions, Adjust, Close C. Prepare post-closing trial balance, Prepare statements, Close D. Prepare statements, Post, Close E. Prepare adjusted trial balance, Journalize, Close

answer

B

question

A classified balance sheet: A. Measures a company's ability to pay its bills on time B. Organizes assets and liabilities into important subgroups C. Presents revenues, expenses and net income D. Reports operating, investing and financing activities E. Reports the effect of profit and dividends on retained earnings

answer

B

question

The asset section of a classified balance sheet usually includes: A. Current assets, investments, plant assets and intangible assets B. Current assets, long-term assets, revenues and intangible assets C. Current assets, investments, plant assets and equity D. Current liabilities, investments, plant assets and intangible assets E. Current assets, liabilities, plant assets and intangible assets

answer

A

question

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet? A. Under IFRS it is mandatory to present current assets first while under GAAP it is customary (but not required) to present noncurrent assets first. B. Both IFRS and GAAP require that current assets are listed first C. Under GAAP it is mandatory to present current assets first while under IFRS it is customary (but not required) to present noncurrent assets first. D. It is customary (but not required) under both IFRS and GAAP to present noncurrent assets first E. GAAP requires that current assets be presented first while IFRS requires that current assets be presented last

answer

C

question

IFRS tends to be more principles-based compared to GAAP which is viewed as more rules-based. Which of the following is a true statement about a principles-based system? A. A principles-based system eliminates the need for internal controls B. A principles-based system is significantly weaker than a rules-based system C. A principles-based system will eliminate all fraud D. A principles-based system is a way to calculate interest receivable or payable E. A principles-based system depends heavily on control procedures to reduce the potential for fraud or misconduct.

answer

E

question

Due to an oversight, a company made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would: A. Understate net income by $24,000 B. Overstate net income by $24,000 C. Have no effect on net income D. Overstate assets by $24,000 E. Understate assets by $24,000

answer

B

question

If a company forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: A. Assets overstated and equity understated B. Assets and equity both understated C. Assets overstated, net income understated and equity overstated D. Assets, net income and equity understated E. Assets, net income and equity overstated

answer

E

question

If a company failed to make the end-of-period adjustment to remove the amount earned from the Unearned Management Fees account, there would be: A. An overstatement of net income B. An overstatement of assets C. An overstatement of liabilities D. An overstatement of equity E. An understatement of liabilities

answer

C

question

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees. If the company fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be: A. An overstatement of equity B. An understatement of equity C. An understatement of assets D. An understatement of liabilities E. An overstatement of assets

answer

B

question

A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue. If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned, one effect will be: A. An overstatement of equity B. An overstatement of liabilities C. An understatement of assets D. An understatement of liabilities E. An overstatement of assets

answer

B

question

Profit margin is defined as: A. Revenues divided by net sales B. Net sales divided by assets C. Net income divided by net sales D. Net income divided by assets E. Assets divided by net sales

answer

C

question

A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: A. 2% B. 20% C. 200% D. 500% E. $8,000

answer

B $2,000/$10,000 = 20%

question

Which of the following accounts would be closed at the end of the accounting period? A. Accounts Receivable B. Unearned Consulting Fees C. Fees Earned D. Retained Earnings E. Land

answer

C

question

A company had $7,000,000 in net income for the year. Its net sales were $11,200,000 for the same period. Calculate its profit margin. A. 17.5% B. 28% C. 62.5% D. 160% E. $18.2 million

answer

C $7,000,000/$11,200,000 = 62.5%

question

The current ratio: A. Is used to measure a company's profitability B. Is used to measure the relation between assets and long-term debt C. Measures the effect of operating income on profit D. Is used to help evaluate a company's ability to pay its short-term obligations E. Is calculated by dividing current assets by equity

answer

D

question

Which of the following accounts would not be on the post closing trial balance? A. Accounts Payable B. Accounts Receivable C. Common Stock D. Dividends E. Retained Earnings

answer

D

question

On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On June 30, 2011 Apricot should record: A. A credit to an expense for $5,000 B. A debit to an expense for $5,000 C. A credit to a prepaid expense for $5,000 D. A debit to a prepaid expense for $5,000 E. A debit to Cash for $5,000

answer

D

question

On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include: A. A debit to an expense for $1,250 B. A debit to a prepaid expense for $1,250 C. A credit to an expense for $3,750 D. A debit to a prepaid expense for $3,750 E. A credit to a liability for $1,250

answer

A $5,000 x 6/24 = $1,250

question

Which of the following is true of accrued revenues: A. At the end of one accounting period often result in cash receipts from customers in the next period B. At the end of one accounting period often result in cash payments in the next period C. Are also called unearned revenues D. Are listed on the balance sheet as liabilities E. Are recorded at the end of an accounting period because cash has already been received for revenues earned

answer

A

question

An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n): A. Accrued expense B. Contra account C. Accrued revenue D. Intangible asset E. Adjunct account

answer

B

question

The total amount of depreciation recorded against an asset or group of assets during the entire time the asset or assets have been used in the day to day operations of the business: A. Is referred to as depreciation expense B. Is referred to as accumulated depreciation C. Is shown on the income statement of the final period D. Is only recorded when the asset is disposed of E. Is referred to as an accrued asset

answer

B

question

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets is called: A. Accumulated depreciation B. A contra account C. The matching principle D. Depreciation E. An accrued account

answer

D

question

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is: A. Debit Office Supplies $105 and credit Office Supplies Expense $105 B. Debit Office Supplies Expense $105 and credit Office Supplies $105 C. Debit Office Supplies Expense $254 and credit Office Supplies $254 D. Debit Office Supplies $254 and credit Office Supplies Expense $254 E. Debit Office Supplies $105 and credit Supplies Expense $254

answer

C $359 - $105 = $254 The amount which has been consumed.

question

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is: A. Debit Cash and credit Legal Fees Earned B. Debit Cash and credit Unearned Legal Fees C. Debit Unearned Legal Fees and credit Legal Fees Earned D. Debit Legal Fees Earned and credit Unearned Legal Fees E. Debit Unearned Legal Fees and credit Accounts Receivable

answer

C

question

On April 1, 2011, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2011? A. $1,350 B. $450 C. $1,012.50 D. $337.50 E. $37.50

answer

D $1,350 x 9/36 = $337.50

question

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? A. $75 B. $125 C. $175 D. $250 E. $325

answer

C $250 - $75 = $175

question

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 Prepaid Insurance, $1,800; credit Cash, $1,800 B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440 C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360 D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360 E. Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440

answer

D $1,800/5 years = $360 the amount of prepaid which has expired

question

Unearned revenue is reported on the financial statements as: A. A revenue on the balance sheet B. A liability on the balance sheet C. An unearned revenue on the income statement D. An asset on the balance sheet E. An operating activity on the statement of cash flows

answer

B

question

Which of the following assets is not depreciated? A. Store fixtures B. Computers C. Land D. Buildings E. Vehicles

answer

C

question

Which of the following does not require an adjusting entry at year-end? A. Accrued interest on notes payable B. Supplies used during the period C. Cash investments by stockholders D. Accrued wages E. Expired portion of prepaid insurance

answer

C

question

On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2011? A. $500 B. $4,000 C. $6,000 D. $14,000 E. $18,000

answer

B $18,000 x 8/36 = $4,000

question

ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2011 at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year-end on December 31, 2011 would include: A. A debit to Rent Earned for $2,400 B. A credit to Unearned Rent for $2,400 C. A debit to Cash for $6,400 D. A credit to Rent Earned for $2,400 E. A debit to Unearned Rent for $4,000

answer

D $6,400 x 3/8 = $2,400

question

On May 1, 2011, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2012. The cash receipt was recorded as unearned fees. At December 31, 2011, $500 of the fees had been earned. The adjusting entry on December 31, 2011 should include: A. A debit to Unearned Fees for $500 B. A credit to Unearned Fees for $500 C. A credit to Earned Fees for $1,000 D. A debit to Earned Fees for $1,000 E. A debit to Earned Fees for $500

answer

A

question

Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are: A. Intangible expenses B. Prepaid expenses C. Unearned expenses D. Net expenses E. Accrued expenses

answer

E

question

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is: A. Debit Unpaid Salaries and credit Salaries Payable B. Debit Salaries Payable and credit Salaries Expense C. Debit Salaries Expense and credit Cash D. Debit Salaries Expense and credit Salaries Payable E. Debit Cash and credit Salaries Expense

answer

D

question

A company pays each of its two office employees each Friday at the rate of $100 per day each 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 Unpaid Salaries $600 and credit Salaries Payable $600 B. Debit Salaries Expense $400 and credit Salaries Payable $400 C. Debit Salaries Expense $600 and credit Salaries Payable $600 D. Debit Salaries Payable $400 and credit Salaries Expense $400 E. Debit Salaries Expense $400 and credit Cash $400

answer

B 2 employees x 2 days x $100/employee/day = $400

question

On January 1, Denton Mabrey College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31? A. $300,000 B. $600,000 C. $800,000 D. $900,000 E. $1,200,000

answer

A $1,200,000/4 = $300,000

question

The difference between the cost of an asset and the accumulated depreciation for that asset is called A. Depreciation Expense B. Unearned Depreciation C. Prepaid Depreciation D. Depreciation Value E. Book Value

answer

E

question

A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011? A. $3,250 B. $3,500 C. $4,000 D. $6,500 E. $7,000

answer

A [$42,000 - $3,000/6] x 1/2 = $3,250

question

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period? A. $2,700 B. $2,900 C. $3,300 D. $3,500 E. $3,700

answer

B $600 + Supplies Purchased - $3,100 = $400

question

If a company records prepayment of expenses in an asset account, the adjusting entry would: A. Result in a debit to an expense and a credit to an asset account B. Cause an adjustment to prior expense to be overstated and assets to be understated C. Cause an accrued liability account to exist D. Result in a debit to a liability and a credit to an asset account E. Decrease cash

answer

A

question

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include: A. A debit to Cash and a credit to Salaries Payable B. A debit to Cash and a credit to Prepaid Salaries C. A debit to Salaries Payable and a credit to Cash D. A debit to Salaries Payable and a credit to Salaries Expense E. No entry would be necessary on January 5

answer

C

question

On December 31, the balance in the Prepaid Insurance account was $4,500, which is the remaining balance of a twelve-month policy purchased on October 31 in the current year. How much did this policy originally cost? A. $5,400 B. $3,750 C. $4,909 D. $4,500 E. $6,000

answer

A Two months have expired, the remaining balance covers ten more months. $4,500/10 = $450 per month

question

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a twelve-month subscription purchased on September 30 in the current year. How much did this subscription originally cost? A. $72 B. $648 C. $7,776 D. $864 E. $1,512

answer

D 3 months have expired, the remaining balance covers 9 more months. $648/9 = $72 per month

question

On December 31, the balance in the Prepaid Advertising account was $176,000, which is the remaining balance of a twelve-month advertising campaign purchased on August 31 in the current year. Assuming the cost is spread equally over each month how much did this advertising campaign cost in total? A. $286,000 B. $176,000 C. $264,000 D. $154,000 E. $22,000

answer

C 4 months have expired, the remaining balance covers 8 more months. $176,000/8 = $22,000 per month

question

Which of the following statements is incorrect? A. An income statement reports revenues earned less expenses incurred B. An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments C. Interim financial reports can be based on one-month or three-month accounting periods D. The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual accounting period E. Property, plant and equipment are referred to as plant assets

answer

B

question

A trial balance prepared after adjustments have been recorded is called a(n): A. Balance sheet B. Adjusted trial balance C. Unadjusted trial balance D. Classified balance sheet E. Unclassified balance sheet

answer

B

question

A trial balance prepared before any adjustments have been recorded is: A. An adjusted trial balance B. Used to prepare financial statements C. An unadjusted trial balance D. Correct with respect to proper balance sheet and income statement amounts E. Only prepared once a year

answer

C

question

The adjusted trial balance contains information pertaining to: A. Asset accounts only B. Balance sheet accounts only C. Income statement accounts only D. All general ledger accounts E. Revenue accounts only

answer

D

question

Financial statements are typically prepared in the following order: A. Balance sheet, statement of retained earnings, income statement B. Statement of retained earnings, balance sheet, income statement C. Income statement, balance sheet, statement of retained earnings D. Income statement, statement of retained earnings, balance sheet E. Balance sheet, income statement, statement of retained earnings

answer

D

question

A balance sheet that places the assets above the liabilities and equity is called a(n): A. Report form balance sheet B. Account form balance sheet C. Classified balance sheet D. Unadjusted balance sheet E. Unclassified balance sheet

answer

A

question

Which of the following statements regarding financial statement preparation is false? A. Financial statements can be prepared from information in the adjusted trial balance B. The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company C. It makes sense to prepare the balance sheet first because it contains information needed on the income statement D. When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger E. The income statement is prepared first.

answer

C

question

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: A. Income Summary account B. Closing account C. Balance column account D. Contra account E. Nominal account

answer

A

question

The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800 and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made? A. $8,000 B. $15,400 C. $23,400 D. $17,000 E. $32,400

answer

C $17,000 + $55,200 - $39,800 - $9,000 = $23,400

question

The Income Summary account is used: A. To adjust and update asset and liability accounts B. To close the revenue and expense accounts C. To determine the appropriate dividend amount D. In some situations to replace the income statement E. To replace the retained earnings account in some businesses

answer

B

question

Kader Co. paid a total of $35,000 in dividends during the current year. The entry needed to close the dividends account is: A. Debit Income Summary and credit Cash for $35,000 B. Debit Dividends and credit Cash for $35,000 C. Debit Income Summary and credit Dividends for $35,000 D. Debit Retained Earnings and credit Dividends for $35,000 E. Debit Dividends and credit Retained earnings for $35,000

answer

D

question

A trial balance prepared after the closing entries have been journalized and posted is the: A. Unadjusted trial balance B. Post-closing trial balance C. General ledger D. Adjusted trial balance E. Work sheet

answer

B

question

An error is indicated if the following account has a balance appearing on the post-closing trial balance: A. Office Equipment B. Accumulated Depreciation-Office Equipment C. Depreciation Expense-Office Equipment D. Common Stock E. Salaries Payable

answer

C

question

A post-closing trial balance includes: A. All ledger accounts with balances, none of which can be temporary accounts B. All ledger accounts with balances, none of which can be permanent accounts C. All ledger accounts with balances, which include some temporary and some permanent accounts D. Only revenue and expense accounts E. Only asset accounts

answer

A

question

Which of the following statements is true? A. Retained earnings must be closed each accounting period B. A post-closing trial balance should include only permanent accounts C. Information on the work sheet can be used in place of preparing financial statements D. By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts E. Closing entries are only necessary if errors have been made

answer

B

question

A post-closing trial balance is prepared A. Immediately after all closing entries have been recorded and posted B. Immediately before all closing entries have been recorded and posted C. Immediately before a business ceases to exist D. Immediately before a business starts operations E. At different times in the accounting cycle depending on the nature of the business and the complexity of the accounting records

answer

A

question

The alternative method of accounting for prepayments A. Initially records all prepaid expenses with debits to expense accounts B. Initially records all prepaid expenses with credits to expense accounts C. Requires an adjusting entry because expenses are understated D. Requires an adjusting entry if the prepaid is consumed during the period E. Requires an adjusting entry because net income is understated

answer

A

question

The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is: A. $325 debit B. $325 credit C. $425 debit D. $750 debit E. $750 credit

answer

A

question

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n): A. Adjusted trial balance B. Work sheet C. Post-closing trial balance D. Unadjusted trial balance E. General ledger

answer

B

question

Accumulated Depreciation, Accounts Receivable and Service Fees Earned would be sorted to which respective columns in completing a work sheet? A. Balance Sheet-Credit; Balance Sheet Debit; and Income Statement-Credit B. Balance Sheet-Debit; Balance Sheet and Income Statement-Credit C. Income Statement-Debit; Balance Sheet-Debit; and Income Statement-Credit D. Income Statement-Debit; Income Statement-Debit; and Balance Sheet-Credit E. Balance Sheet-Credit; Income Statement-Debit; and Income Statement-Credit

answer

A

question

Which of the following statements is incorrect? A. Working papers are useful aids in the accounting process B. On the work sheet, the effects of the accounting adjustments are shown on the account balances C. After the work sheet is completed, it can be used to help prepare the financial statements D. On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance E. A worksheet is not a substitute for financial statements

answer

D

question

A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: A. $200 less in net income B. $200 more in net income C. $200 difference between the debit and credit columns of the Unadjusted Trial Balance D. $200 of prepaid insurance E. An error in the financial statements

answer

A

question

Statements that show the effects of proposed transactions as if the transactions had already occurred are called: A. Pro forma statements B. Professional statements C. Simplified statements D. Temporary statements E. Interim statements

answer

A

question

When preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is: A. An expense amount placed in the Balance Sheet Credit column B. A revenue amount placed in the Balance Sheet Debit column C. A liability amount placed in the Income Statement Credit column D. An asset amount placed in the Balance Sheet Credit column E. A liability amount placed in the Balance Sheet Debit column

answer

C

question

If the Balance Sheet columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet Credit column, the cause could be: A. An expense amount entered in the Balance Sheet Debit column B. A revenue amount entered in the Balance Sheet Credit column C. An asset amount entered in the Income Statement Debit column D. A liability amount entered in the Income Statement Credit column E. An expense amount entered in the Balance Sheet Credit column

answer

E

question

Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance? A. Entering an asset amount in the Income Statement Debit column B. Entering a liability amount in the Income Statement Credit column C. Entering an expense amount in the Balance Sheet Debit column D. Entering a revenue amount in the Balance Sheet Debit column E. Entering a liability amount in the Balance Sheet Credit column

answer

D

question

On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. What is the amount that should be recorded as depreciation on December 31? A. $27,000 B. $24,900 C. $29,100 D. $135,000 E. $10,500

answer

B 135,000 - 10,500 = 124,500/5 = $24,900

question

On January 1, Able Company purchased equipment costing $195,000 with an estimated salvage value of $15,000, and an estimated useful life of eight years. What is the amount that should be recorded as depreciation on December 31? A. $22,900 B. $26,250 C. $22,500 D. $195,000 E. $180,000

answer

C 195,000 - 15,000 = 180,000/8 = $22,500

question

. A company had revenue of $250,000, rent expense of $10,000, utility expense of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising expense of $4,500, dividends in the amount of $18,000, and a beginning balance in retained earnings of $17,900. What is the amount in the income summary account before it is closed for the period? A. $250,000 B. $45,500 C. $204,500 D. $222,400 E. $232,100

answer

C 250,000 - 10,000 - 3,500 - 18,500 - 9,000 - 4,500 = 204,500

question

A company had revenue of $250,000, rent expense of $10,000, utility expense of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising expense of $4,500, dividends in the amount of $18,000, and a beginning balance in retained earnings of $17,900. What is the balance in retained earnings for the end of the period? A. $250,000 B. $204,400 C. $204,500 D. $222,400 E. $232,100

answer

B 250,000 - 10,000 - 3,500 - 18,500 - 9,000 - 4,500 = 204,500 + 17,900 - 18000 = 204,400

question

A company had revenue of $550,000, rent expense of $100,000, utility expense of $10,000, salary expense of $125,500, depreciation expense of $39,000, advertising expense of $40,200, dividends in the amount of $183,000, and an ending balance in retained earnings of $402,300. What is the beginning retained earnings for the period? A. $250,000 B. $235,300 C. $314,700 D. $367,000 E. $350,000

answer

E 550,000 - 314,700 = 235,300: X + 235,300 - 183,000 - 402,300 = $350,000

ACC 201 Ch. 3 Practice Questions – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards