ACC 200 CH 3-4
At March 1, I. Repo Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $950 and consumed supplies of $700. If no adjusting entry is made for supplies: A) stockholders' equity will be overstated by $700. B) expenses will be understated by $950. C) assets will be understated by $450. D) net income will be understated by $700.
A
At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true? A) Net income will be overstated for the current year. B) Total assets will be understated at the end of the current year. C) The balance sheet and income statement will be misstated but the Retained Earnings statement will be correct for the current year. D) Total expenses will be overstated at the end of the current year.
A
Expenses are recognized when: A) they contribute to the production of revenue. B) they are paid. C) they are billed by the supplier. D) the invoice is received.
A
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
On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include A) a debit to Supplies and a credit to Accounts Payable. B) a debit to Supplies Expense and a credit to Accounts Receivable. C) a debit to Supplies and a credit to Cash. D) a debit to Accounts Receivable and a credit to Supplies.
A
Why do generally accepted accounting principles require the application of the revenue recognition principle? A) Failure to apply the revenue recognition principle could lead to a misstatement of revenue. B) It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. C) Recording revenue when cash is received is an objective application of the revenue recognition principle. D) Accounting software has made the revenue recognition easy to apply
A
At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31 balance sheet should report what balance in the supplies account? A) $1,500 B) $1,600 C) $2,800 D) $2,900
Ans: B Feedback: $1,500 + $2,900 - $2,800 = $1,600
Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Cash received from customers $48,000 Accounts receivable 12,000 Cash paid for expenses 26,000 Accounts payable (related to expenses) 3,000 Prepaid rent for next period 7,000 A) $22,000 B) $31,000 C) $24,000 D) $15,000
Ans: B Feedback: $48,000 + $12,000 - $26,000 - $3,000 = $31,000
James & Younger Corporation purchased a one-year insurance policy in January 2013 for $48,000. The insurance policy is in effect from March 2013 through February 2014. If the company neglects to make the proper year-end adjustment for the expired insurance: A) net income and assets will be understated by $40,000. B) net income and assets will be overstated by $40,000. C) net income and assets will be understated by $8,000. D) net income and assets will be overstated by $8,000.
Ans: B Feedback: $48,000 × 10/12 = $40,000
During January 2014, its first month of operation, Osborn Enterprises earned net income of $1,700 and paid dividends to the owners of $500. At January 31, the balance in Retained Earnings will be A) $0. B) $1,700 credit. C) $1,200 credit. D) $500 debit.
Ans: C Feedback: $1,700 - $500 = $1,200
Employees at Biquell Corporation are paid $9,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salaries and wages expense should be recorded two days later on January 2? A) $9,000 B) $5,400 C) None, expense recognition requires the weekly salary to be accrued on December 31. D) $3,600
Ans: D Feedback: $9,000 × 2/5 = $3,600
Which of the following accounts has a normal credit balance? A) Prepaid Rent B) Notes Receivable C) Rent Revenue D) Rent Expense
C
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 account for specific assets and liabilities but only one account for stockholders' equity items. D) The left side of an account is the credit or decrease side
D
An account will have a credit balance if the A) credits exceed the debits. B) first transaction entered was a credit. C) debits exceed the credits. D) last transaction entered was a credit.
A
An accounting record that includes a list of accounts and their balances at a given time is called a A) trial balance. B) general journal. C) general ledger. D) chart of accounts.
A
An adjusting entry can include a: A) debit to an asset and a credit to a revenue. B) debit to a revenue and a credit to an asset. C) credit to an expense and a debit to a revenue. D) debit to an expense and a credit to a revenue
A
The sale of an asset on credit for what it cost A) increases assets and liabilities. B) decreases assets and liabilities. C) leaves total assets unchanged. D) decreases assets and increases liabilities.
C
Adjusting entries affect at least: A) one revenue and one expense account. B) one asset and one liability account. C) one revenue and one balance sheet account. D) one income statement account and one balance sheet account.
D
An accumulated depreciation account: A) is a contra liability account. B) increases on the debit side. C) is offset against total assets on the balance sheet. D) has a normal credit balance.
D
A T-account is A) a way of depicting the basic form of an account. B) a special account used instead of a journal. C) a special account used instead of a trial balance. D) used for accounts that have both a debit and credit balance.
A
A company that receives money in advance of performing a service A) debits Cash and credits Unearned Service Revenue. B) debits Unearned Service Revenue and credits Accounts Payable C) debits Cash and credits Prepaid Insurance. D) debits Cash and credits Accounts Receivable.
A
A person who wants to determine the balance of a particular account should refer to the A) ledger. B) source document. C) chart of accounts. D) journal.
A
One of the accounting concepts upon which adjustments for prepayments and accruals are based is: A) expense recognition. B) cost. C) monetary unit. D) economic entity
A
Typically the chart of accounts begins with A) asset accounts. B) liability accounts. C) revenue accounts. D) expense accounts.
A
Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases in the opposite manner? A) Salaries and Wages Expense and Notes Payable B) Common Stock and Unearned Rent Revenue C) Prepaid Rent and Advertising Expense D) Service Revenue and Notes Payable
A
Leyland Realty Company received a check for $15,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $15,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 31: A) debit Unearned Rent Revenue, $2,500; credit Rent Revenue, $2,500. B) debit Rent Revenue, $2,500; credit Unearned Rent Revenue, $2,500. C) debit Unearned Rent Revenue, $15,000; credit Rent Revenue, $15,000. D) debit Cash, $15,000; credit Rent Revenue, $15,000.
Ans: A Feedback: $15,000 ÷ 6 = $2,500
Wang Company had the following transactions during 2013: • Sales of $10,800 on account • Collected $4,800 for services to be performed in 2014 • Paid $3,100 cash in salaries • Purchased airline tickets for $600 in December for a trip to take place in 2014 What is Wang's 2013 net income using cash basis accounting? A) $1,100 B) $2,300 C) $12,500 D) $1,700
Ans: A Feedback: $4,800 - $3,100 - $600 = $1,100
Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31: A) debit Unearned Rent Revenue, $5,000; credit Rent Revenue, $5,000. B) debit Rent Revenue, $5,000; credit Unearned Rent Revenue, $5,000. C) debit Unearned Rent Revenue, $30,000; credit Rent Revenue, $30,000. D) debit Cash, $30,000; credit Rent Revenue, $30,000
Ans: A Feedback: $30,000 ÷ 6 = $5,000
Winrow Company showed the following balances at the end of its first year: Cash $11,000 Prepaid insurance 500 Accounts receivable 2,500 Accounts payable 2,000 Notes payable 3,000 Common stock 5,000 Dividends 500 Revenues 17,000 Expenses 12,500 What did Winrow Company show as total credits on its trial balance? A) $27,500 B) $27,000 C) $26,500 D) $28,000
Ans: B Feedback: $2,000 + $3,000 + $5,000 + $17,000 = $27,000
During February 2014, its first month of operations, the owner of Schwenn Enterprises invested cash of $40,000. Schwenn had cash sales of $8,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28? A) $6,000 credit B) $34,000 debit C) $48,000 debit D) $26,000 credi
Ans: B Feedback: $40,000 + $8,000 - $14,000 = $34,000
De Meaning Corporation issued a one-year 6% $300,000 note on April 30, 2014. Interest expense for the year ended December 31, 2014 was: A) $18,000. B) $13,500. C) $12,000. D) $10,500.
Ans: C Feedback: $300,000 × .06 × 8/12 = $12,000
Greese Company purchased office supplies costing $4,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: A) debit Supplies Expense, $1,500; credit Supplies, $1,500. B) debit Supplies, $2,500; credit Supplies Expense, $2,500. C) debit Supplies Expense, $2,500; credit Supplies, $2,500. D) debit Supplies, $1,500; credit Supplies Expense, $1,500.
Ans: C Feedback: $4,000 - $1,500 = $2,500
Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. Cash received from customers $48,000 Accounts receivable 12,000 Cash paid for expenses 26,000 Accounts payable (related to expenses) 3,000 Prepaid rent for next period 7,000 A) $22,000 B) $31,000 C) $24,000 D) $15,000
Ans: D Feedback: $48,000 - $26,000 - $7,000 = $15,000
The Vintage 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 $1,000 on hand. The adjusting entry that should be made by the company on June 30 is: A) debit Supplies Expense, $1,000; credit Supplies, $1,000. B) debit Supplies, $5,500; credit Supplies Expense, $5,500. C) debit Supplies, $1,000; credit Supplies Expense, $1,000. D) debit Supplies Expense, $5,500; credit Supplies, $5,500
Ans: D Feedback: $6,500 - $1,000 = $5,500
At January 1, 2014, Troyer Industries reported Retained Earnings of $280,000. During 2014, Troyer had a net loss of $60,000 and paid dividends to the stockholders of $40,000. At December 31, 2014, the balance in Retained Earnings is A) $280,000 debit. B) $240,000 credit. C) $220,000 debit. D) $180,000 credit.
Ans: D Feedback: $280,000 - $60,000 - $40,000 = $180,000
The purchase of an asset on credit A) increases assets and stockholders' equity. B) increases assets and liabilities. C) decreases assets and increases liabilities. D) leaves total assets unchanged
B
A ledger A) contains only asset and liability accounts. B) is a collection of the entire group of accounts maintained by a company. C) provides a chronological record of transactions. D) should show accounts in alphabetical order.
B
A trial balance will not balance if A) a correcting journal entry is posted twice. B) a $50 cash dividend is debited to dividends for $500 and credit to cash for $50. C) a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30. D) a transaction is not posted at all
B
Adjusting entries are: A) the same as correcting entries. B) needed to ensure that the expense recognition principle is followed. C) optional. D) rarely needed.
B
An account is a part of the financial information system and is described by each one of the following except. A) an account has a debit and credit side. B) an account is a source document. C) an account consists of three parts. D) an account has a title.
B
An adjusted trial balance: A) is prepared after the financial statements are completed. B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. C) is a required financial statement under generally accepted accounting principles. D) cannot be used to prepare financial statements.
B
An adjusting entry made to record accrued interest on a note receivable due next year consists of a: A) debit to Interest Expense and a credit to Interest Payable. B) debit to Interest Receivable and a credit to Interest Revenue. C) debit to Interest Expense and a credit to Notes Payable. D) debit to Interest Expense and a credit to Cash.
B
An awareness of the normal balances of accounts would help you spot which of the following as an error in recording? A) A debit balance in the Dividends account B) A credit balance in an expense account C) A credit balance in a liabilities account D) A credit balance in a revenue account
B
Assets normally show A) credit balances. B) debit balances. C) debit and credit balances. D) debit or credit balances.
B
Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause: A) net income to be overstated. B) an understatement of assets and an understatement of revenues. C) an understatement of revenues and an understatement of liabilities. D) an understatement of revenues and an overstatement of liabilities.
B
How many required steps are there in the accounting cycle? A) 11 B) 9 C) 7 D) 5
B
If total liabilities decreased by $4,000, then A) stockholders' equity must have decreased by $4,000. B) assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. C) assets and stockholders' equity each increased by $2,000. D) assets must have increased by $4,000.
B
Jill Clown earned a salary of $500 for the last week of October. She will be paid on November 1. The adjusting entry for Jill's employer October 31 is: A) No entry is required. B) Salaries and Wages Expense 500 Salaries and Wages Payable 500 C) Salaries and Wages Expense 500 Cash 500 D) Salaries and Wages Payable 500 Cash 500
B
Posting A) should be performed in account number order. B) accumulates the effects of journalized transactions in the individual accounts. C) involves transferring all debits and credits on a journal page to the trial balance. D) is accomplished by examining ledger accounts and seeing which ones need updating
B
The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: A) assets should be matched with liabilities. B) efforts should be matched with accomplishments. C) dividends should be matched with stockholder investments. D) cash payments should be matched with cash receipts.
B
The principal purpose of posting is to A) help identify errors made in the journal. B) accumulate the effects of journalized transactions in the individual accounts. C) enter transactions directly into the ledger. D) help determine if the financial statements are ready to be prepared.
B
There are usually how many closing journal entries? A) 5 B) 4 C) 3 D) 2
B
Which of the following accounts will reflect the account's beginning balance on the adjusted trial balance? A) Prepaid rent B) Retained earnings C) Prepaid insurance D) Unearned revenue
B
Which of the following describes the classification and normal balance of the Unearned Rent Revenue account? A) Asset, debit B) Liability, credit C) Revenues, credit D) Expense, debit
B
Which of the following is not part of the recording process? A) Analyzing transactions B) Preparing a trial balance C) Entering transactions in a journal D) Posting journal entries
B
Which of the following would not result in unearned revenue? A) Rent collected in advance from tenants. B) Services performed on account. C) Sale of season tickets to football games. D) Sale of two-year magazine subscriptions.
B
Which one of the following represents the expanded basic accounting equation? A) Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses B) Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues C) Assets - Liabilities - Dividends = Common Stock + Revenues - Expenses D) Assets = Revenues + Expenses - Liabilities
B
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 account for specific assets and liabilities but only one account for stockholders' equity items. D) The left side of an account is the credit or decrease side
B
A chart of accounts for a business firm A) is a graph. B) indicates the amount of profit or loss for the period. C) lists the accounts in the ledger. D) shows the balance of each account in the general ledger.
C
A company that receives money in advance of performing a service A) debits cash and credits prepaid services. B) debits unearned fees and credits accounts payable. C) debits cash and credits unearned service revenue. D) debits cash and credits accounts receivable
C
A revenue account A) is increased with a debit. B) is decreased with a credit. C) is increased with a credit. D) has a normal balance of a debit.
C
Closing entries: A) are prepared before the financial statements. B) reduce the number of permanent accounts. C) cause the revenue and expense accounts to have zero balances. D) summarize the activity in every account.
C
Customarily, a trial balance is prepared A) at the end of each day. B) after each journal entry is posted. C) at the end of an accounting period. D) only at the inception of the business.
C
If services are rendered on account, then A) assets will decrease. B) liabilities will increase. C) stockholders' equity will increase. D) liabilities will decrease.
C
Posting A) transfers ledger transaction data to the journal. B) normally occurs before journalizing. C) accumulates the effects of journalized transactions in the individual accounts. D) enters transaction data in the journal.
C
The basic form of a journal entry has the A) debit account entered first and indented. B) credit account entered first and indented. C) debit account entered first at the extreme left margin. D) credit account entered first at the extreme left margin.
C
The ledger accounts are typically arranged in A) chronological order. B) alphabetical order. C) financial statement order. D) order of appearance in the journal
C
The normal balance of any account is the A) left side. B) right side. C) side which increases that account. D) side which decreases that account.
C
Which of the following is a true statement about closing the books of a corporation? A) Expenses are closed to the Expense Summary account. B) Only revenues are closed to the Income Summary account. C) Revenues and expenses are closed to the Income Summary account. D) Revenues, expenses, and the Dividends account are closed to the Income Summary account.
C
Which of the following items has no effect on retained earnings? A) Expense B) Dividends C) Land purchase D) Revenue
C
Which of the following statements is true? A) Debits increase assets and increase liabilities. B) Credits decrease assets and decrease liabilities. C) Credits decrease assets and increase liabilities. D) Debits increase liabilities and decrease assets.
C
Which statement is correct? A) Accumulated Depreciation should always have a debit balance in the adjusted trial balance. B) Accumulated Depreciation is added to the long-term liabilities on the balance sheet. C) Accumulated Depreciation, Equipment represents the total cost of equipment that has expired up to the date of the balance sheet. D) Accumulated Depreciation is used to reveal the value of the related asset on the date of the balance sheet
C
A company spends $20 million dollars for an office building. Over what period should the cost be written off? A) When the $20 million is expended in cash. B) All in the first year. C) After $20 million in revenue is earned. D) None of these answer choices are correct.
D
A debit is not the normal balance for which account listed below? A) Dividends B) Cash C) Accounts Receivable D) Service Revenue
D
A journal provides A) the balances for each account. B) information about a transaction in several different places. C) a list of all accounts used in the business. D) a chronological record of transactions
D
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) expenses to be overstated. B) net income to be overstated. C) liabilities to be understated. D) revenues to be understated.
D
A revenue account A) is increased by debits. B) is decreased by credits. C) has a normal balance of a debit. D) is increased by credits.
D
A trial balance would only help in detecting which one of the following errors? A) A transaction that is not journalized B) A journal entry that is posted twice C) Offsetting errors made in recording the transaction D) A transposition error when transferring the debit side of journal entry to the ledger
D
Adjustments would not be necessary if financial statements were prepared to reflect net income from: A) monthly operations. B) fiscal year operations. C) interim operations. D) lifetime operations
D
From an accounting standpoint, the acquisition of long-lived assets is essentially a(n): A) accrual of expense. B) accrual of revenue. C) accrual of unearned revenue. D) prepaid expense.
D
If a company pays dividends of $10,000, A) stockholders' equity will be reduced by $10,000. B) net income will be reduced by $10,000. C) retained earnings will be reduced by $10,000. D) Both retained earnings and stockholders' equity will be reduced by $10,000.
D
On April 1, 2013, nPropel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. nPropel records depreciation expense of $48,000 for the calendar year ending December 31, 2013. Which accounting principle has been violated? A) Depreciation principle. B) No principle has been violated. C) Cash principle. D) Expense recognition principle.
D
The accounts of a business before an adjusting entry is made to record accrued revenue reflect an: A) understated liability and an overstated revenue. B) overstated asset and an understated revenue. C) understated expense and an overstated revenue. D) understated asset and an understated revenue.
D
The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: A) contra asset. B) prepayment. C) asset. D) accrued
D
Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)? A) Cost principle. B) Periodicity principle. C) Revenue recognition principle. D) Expense recognition principle
D
The primary difference between accrued revenues and unearned revenues is that accrued revenues have: A) not been recognized and accrued revenues have been. B) been paid and unearned revenues have not. C) been recorded and unearned revenues have not. D) not been recorded and unearned revenues have.
D
The procedure of transferring journal entries to the ledger accounts is called A) journalizing. B) analyzing. C) reporting. D) posting.
D
The purchase of an asset for cash A) increases assets and stockholders' equity. B) increases assets and liabilities. C) decreases assets and increases liabilities. D) leaves total assets unchanged.
D
The right side of an account A) is the correct side. B) reflects all transactions for the accounting period. C) shows all the balances of the accounts in the system. D) is the credit side.
D
The worksheet is: A) part of the journal. B) a financial statement. C) part of the ledger. D) none of these answer choices are correct.
D
Transactions in a journal are initially recorded in A) account number order. B) dollar amount order. C) alphabetical order. D) chronological order.
D
When a service has been performed, but no cash has been received, which of the following statements is true? A) No journal entry is made. B) The entry includes a debit to accounts payable. C) The entry includes a credit to unearned revenue. D) The entry includes a debit to accounts receivable.
D
Which of the following journal entries is recorded correctly and in the basic format? A) Salaries and Wages Expense 550 Cash 1,500 Advertising Expense 950 B) Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,600 C) Cash 1,500 Salaries and Wages Expense 550 Advertising Expense 950 D) Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,500
D
Which one of the following is not a justification for adjusting entries? A) Adjusting entries are necessary to ensure that the revenue recognition principle is followed. B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. C) Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.
D
Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? A) Failure to make the adjustment does not affect the February financial statements. B) Expenses will be overstated by $4,000 and net income and stockholders' equity will be understated by $4,000. C) Assets will be overstated by $8,000 and net income and stockholders' equity will be understated by $8,000. D) Assets will be overstated by $4,000 and net income and stockholders' equity will be overstated by $4,000.
D Feedback: $48,000 ÷ 12 = $4,000
