Acct. 304 Test 1 Ch. 3

Information related to the Berkley Company for the calendar year 2014 follows: Liabilities, December 31, 2010 $400 Assets, December 31, 2010 700 Dividends distributed during 2010 90 Liabilities, December 31, 2009 250 Assets, December 31, 2009 350 Assuming no capital stock was issued during 2014, the net income earned by the Berkley Company during 2014 was Answers: $110 $200 $260 $290

290

A company's T-accounts Are all increased by debits and decreased by credits. Record debits on the right side or the left side of the T-account, depending on if the T-account represents an asset or a liability. a. Neither I nor II. b. I only. c. I and II. d. II only.

A

On July 1, Nestor Company purchased a 2-year insurance policy and recorded Prepaid Insurance of $2,400. At the end of the current year, Nestor Company must make which of the following journal entries? a. Debit Insurance Expense $600; credit Prepaid Insurance $600 b. Debit Prepaid Insurance $600; credit Insurance Expense $600 c. Debit Prepaid Insurance $1,800; credit Insurance Expense $1,800 d. Debit Insurance Expense $600; credit Cash $600

A

Subsidiary ledgers a. Are used to reduce the size of the general ledger. b. Are updated at the end of the accounting period based on the information contained in the control account. c. Commonly include an inventory subsidiary ledger and a property, plant, and equipment subsidiary ledger. d. All of the choices are correct regarding subsidiary ledgers.

A

Which of the following correctly represents the expanded accounting equation using the ten elements of financial accounting? a. Assets = Liabilities + (Contributed Capital + Beginning Retained Earnings + Beginning AOCI + Revenues - Expenses + Gains - Losses - Dividends + Other Comprehensive Income). b. Assets = Liabilities + (Contributed Capital + Beginning Retained Earnings + Beginning Cash + Revenues - Expenses - Gains + Losses + Dividends - Ending Cash). c. Assets = Liabilities + (Common Stock + Beginning Inventory + Beginning Cash - Revenues + Expenses + Gains - Losses - Dividends - Ending Inventory). d. Assets = Liabilities - (Contributed Capital - Beginning Retained Earnings - Beginning AOCI + Revenues - Expenses + Gains - Losses + Dividends + Other Comprehensive Income).

A

Which of the following is an incorrect description of the account and its behavior? a. Cash is a temporary account whose balance is carried forward into the next accounting period. b. Common Stock is a permanent account whose balance is carried forward into the next accounting period. c. Accounts payable is a permanent account whose balance is carried forward into the next accounting period. d. Sales is a temporary account whose balance is not carried forward to the next accounting period.

A

Which of the following pairings of a term and a definition is incorrect? a. Posting - transferring debit or credit amounts from the general ledger to the appropriate financial statement. b. Contra account - an account created to show a reduction from a related account. c. Account - stores recorded monetary information from transactions and events. d. General ledger - entire set of accounts for a company.

A

A trial balance does not identify all types of errors, which of the following are errors are not identified using the trial balance? incorrectly recorded transaction amount, but debits still equal credits incorrectly posted to the wrong account transaction was not recorded All of these choices

All of these choices

Under cash-basis accounting, a. Cost of goods sold is recorded when the company collects cash from the related sale. b. Net income is the same as the net operating cash flow for the period. c. A company must prepare a balance sheet. d. All of the choices are correct regarding cash-basis accounting.

B

A closing entry a. Is optional for a company to make at year-end. b. Reduces temporary and permanent accounts to zero at the end of the accounting period. c. Updates the Retained Earnings account. d. All of the choices are correct.

C

A trial balance Is used to verify that the total of debit balances is equal to the total of credit balances. Lists all the company's general ledger accounts and their balances. a. Neither I nor II. b. I only. c. I and II. d. II only.

C

Adjusting entries a. Are made at the beginning of the accounting period to ready the books for the year's activity. b. Will affect two permanent accounts or two temporary accounts, but not one permanent and one temporary account. c. Are necessary because not all accounts are up to date at the end of the accounting period. d. All of the choices are correct regarding adjusting entries.

C

The five major steps in the accounting cycle include all of the following except: a. Prepare the financial statements. b. Prepare and post adjusting entries. c. Prepare reversing entries. d. Prepare and post closing entries.

C

Using a worksheet to prepare financial statements requires a series of steps. Place the following steps in the correct order: Year-end adjustments are entered on the worksheet. Each column is properly totaled and checked. Financial statements and closing entries are prepared. The trial balance is listed with the current accounts and balances. a. I, II, III, then IV. b. IV, II, I, then III. c. IV, I, II, then III. d. II, IV, I, then III.

C

Which of the following is/are correct regarding the accounting equation and the double-entry system of recording journal entries? a. The accounting equation is represented by Assets + Liabilities = Owner's Equity. b. Debit or credit entries affect three or more accounts in the assets, liabilities, and owner's equity, excluding the temporary accounts. c. The dollar amount of the debits entered in all the related accounts must be equal to the total dollar amount of the credits. d. All of the choices are correct

C

A subsidiary ledger is Selected Answer: a journal used by a company to record its transactions with a similar characteristic a group of accounts, all of which relate to one specific company activity the entire group of accounts for a company a record of all the daily activities

Correct a group of accounts, all of which relate to one specific company activity Answers:

Which of the following adjusting entries involves the recognition of an accrued expense? recording depreciation on a long-lived asset writing off the portion of an insurance policy that has expired recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period recognition of bad debt losses that are expected to result from making sales on credit terms

Correct recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period

The basic purpose of a trial balance is to list all of the accounts in the general ledger list all of the accounts in the general ledger that have a balance be sure that all journal entries have been recorded verify that the total credits equal the total debits

Correct verify that the total credits equal the total debits

How is cost of goods sold computed when a company uses a periodic inventory system? a. Beginning inventory + Net purchases + Ending inventory. b. Ending inventory - Net purchases - Beginning inventory. c. Beginning inventory - Net purchases + Ending inventory. d. Beginning inventory + Net purchases - Ending inventory.

D

The accounting cycle is a series of steps in which accounting information is contained in its transactions, events, and arrangements. What are the series of steps involved in this task? Record, organize, close, report Organize, record, report, analyze Record, organize, summarize, report Analyze, prepare, record, report

Record, organize, summarize, report

Which of the following adjusting entries would be the most likely be reversed? Depreciation Expense 500 Accumulated Depreciation 500 Salary Expense 1980 Salary Payable 1980 Insurance Expense 500 Prepaid Insurance 500 Unearned Subscriptions 2,000 Subscription Revenue 2,000

Salary Expense 1980 Salary Payable 1980

On April 1, 2014, Miller Company paid $6,280 for a two-year insurance policy. On that date, the company charged an asset account. The correct December 31, 2014, adjusting entry would be Prepaid Insurance 3,140 Insurance Expense 3,140 Insurance Expense 2,355 Prepaid Insurance 2,355 Prepaid Insurance 2,355 Insurance Expense 2,355 Insurance Expense 3,925 Prepaid Insurance 3,925

Selected Answer: Correct Insurance Expense 2,355 Prepaid Insurance 2,355 Answers:

Which of the following errors does a trial balance not identify? Unposted transaction transposition slide recording of a debit amount that differs from the credit amount recorded

Unposted

Step two in completing a worksheet is to repare the trial balance subtotal income debit and credit columns combine the trial balance amount of each account with the adjustments analyze accounts

analyze accounts

The total of the individual customer account balances should equal the balance in Accounts Receivable, which is the control account temporary account nominal account contra account

control

On August 1, 2013, Yellow Company paid $6,320 for a three-year insurance policy. On that date, an expense account was charged. In the adjusting entry on December 31, 2013, there would be a debit to Insurance Expense for $175 credit to Prepaid Insurance for $2107 credit to Prepaid Insurance for $527 credit to Insurance Expense for $5,442

credit to Insurance Expense for $5,442

In terms of debits and credits, which types of accounts will have the same (debit or credit) normal balances? dividends, expenses, assets assets, capital stock, revenues retained earnings, dividends, liabilities expenses, liabilities, capital stock

dividends, expenses, assets

Posting is the procedure of transferring information from the journal to the ledger trial balance to the worksheet ledger to the journal worksheet to the financial statements

journal to the ledger

An organization will typically utilize a subsidiary ledger to make sure all debits equal credits make it easier to handle cash received from customers keep customer accounts up to date record customer credit sales outside of the normal double entry system

keep customer accounts up to date record customer credit sales outside of the normal double entry system

The financial statements are the responsibility of the auditors management independent certified accountants Public Accounting Oversight Board

management

The accountant failed to make the adjusting entry to record the depreciation for the year. This error would cause an overstatement of assets an overstatement of expenses an understatement of liabilities an understatement of owners' equity

overstatement of assets

Which of the following is not a reason why a company first prepares a worksheet? simplify recording of adjusting and closing entries in the general journal substitute for the trial balance make it easier to prepare financial statements minimize errors

substitute for the trial balance

When a company uses cash-basis accounting, it frequently does NOT keep up with accounts receivable accounts payable prepaid expenses the company keeps up with all of the above

the company keeps up with all of the above