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On September 1, 2006, Olpe Corporation paid $2,400 for a 1-year insurance policy. What amount of expense should Olpe report for the year ended December 31, 2006? A) $800 B) $1,200 C) $2,400 D) $0

A) $800

Which of the following is not an accounting event? A) A customer places an order for goods. B) A firm issues stock for cash. C) A firm received, but did not pay, a bill for advertising. D) A firm purchased equipment on account.

A) A customer places an order for goods.

A database system differs from manual and computer-based transactions system in that- A) A database system contains information about business events and accounting events B) A database system only produces accounting reports C) A database system produces more financial statements than transaction based systems D) A database system produces only nonaccounting reports Answer: A Difficulty: Medium

A) A database system contains information about business events and accounting events

On which financial statement would unearned revenue be reported? A) Balance sheet B) Income statement C) Statement of cash flows D) None; unearned revenue would not be reported in the financial statements

A) Balance sheet

Which of the following is an index for the accounts listed in the ledger? A) Chart of Accounts B) Trial balance C) Adjusted Trial Balance D) Ledger Account index

A) Chart of Accounts

Palisades Corporation purchased equipment by signing a long-term note payable. What was the effect of this transaction? A) Increased assets and increased liabilities B) Increased assets and increased owners' equity. C) Increased assets and decreased owners' equity. D) Increased owners' equity and decreased liabilities

A) Increased assets and increased liabilities

A firm billed a customer for services but did not collect cash. What is the effect of this transaction? A) Increases assets, increases revenues B) Increases assets, decreases assets C) Decreases assets, increases expenses D) Decreases assets, decreases liabilities

A) Increases assets, increases revenues

Which of the following is not a characteristic of an accounting event? A) Must be the result of a management decision. B) Must be specific to the entity for which records are being kept. C) Must be measurable in monetary term. D) Must impact the entity's assets, liabilities, and/or owners' equity.

A) Must be the result of a management decision.

Which of the following appears on both the income statement and the statement of stockholders' equity? A) Net income B) Operating income C) Retained earnings D) Unearned revenue

A) Net income

Which of the following terms is used to refer to balance sheet accounts? A) Permanent accounts B) Temporary accounts C) Contra accounts D) Tangible accounts

A) Permanent accounts

Valhalla Company sold goods on account to a customer for $75,000. The goods cost Valhalla $60,000. How should Valhalla report this transaction? A) Revenue of $75,000; expense $60,000 B) Revenue, $75,000. C) Revenue and operating cash inflows, $15,000. D) Revenue, $15,000.

A) Revenue of $75,000; expense $60,000

Which of the following accounts would be closed at the end of a period? A) Sales B) Retained Earnings C) Unearned Revenue D) Prepaid Expense

A) Sales

The ending cash balance can be found on the: A) balance sheet and statement of cash flows B) balance sheet only C) statement of cash flows only D) balance sheet and income statement

A) balance sheet and statement of cash flows

Expenses are increased with ______ because they ______ owners' equity. A) debits, decrease B) credits, increase C) debits, increase D) credits, decrease

A) debits, decrease

A chronological record of accounting events is maintained in the: A) general journal B) general ledger C) trial balance D) T-accounts

A) general journal

If an adjustment for revenue that has been earned but not recorded was not made A) net income and assets would be understated B) liabilities and owners' equity would be understated C) assets and owners' equity would be overstated D) revenues and liabilities would be overstated

A) net income and assets would be understated

The ______ lists only the permanent accounts of an organization. A) post-closing trial balance B) trial balance C) adjusted trial balance D) income statement

A) post-closing trial balance

43. The last step in the accounting cycle is to prepare: A) the post-closing trial balance B) adjusting entries C) financial statements D) closing entries

A) the post-closing trial balance

The following is a list of the eight steps in the accounting cycle. Match the numbers 1 though 8 to the events below to indicate the sequence of the accounting cycle steps. _____ A. Prepare and adjusted trial balance _____ B. Prepare financial statements _____ C. Identify, analyze, and record events in journal _____ D. Prepare post closing trial balance _____ E. Make closing entries in journal and post to ledger _____ F. Enter adjusting entries in journal and post to ledger _____ G. Post entries from journal to ledger _____ H. Prepare trial balance

A. 5 B. 6 C. 1 D. 8 E. 7 F. 4 G. 2 H. 3

A firm received a payment in advance on a customer's special order. What is the effect of this transaction? A) Increases assets, increases revenues B) Increases assets, increases liabilities C) Decreases assets, increases expenses D) Decreases assets, decreases liabilities

B) Increases assets, increases liabilities

Smithville Company purchased machinery four years ago for $24,000. Smithville estimates that the machinery will have a total useful life of six years. What amount will Smithville include in total assets for machinery? A) $24,000 B) $8,000 C) $16,000 D) $4,000

B) $8,000

Net income would increase as a result of which of the following adjustments: A) Recording depreciation B) Accruing a revenue C) Accruing an expense D) Adjusting a prepaid account

B) Accruing a revenue

When a firm has net income, which of the following is not an appropriate closing entry? A) Debit Sales, credit Income Summary B) Debit Retained Earnings, credit Income Summary C) Debit Income Summary, credit Insurance Expense D) Debit Income Summary, credit Depreciation Expense

B) Debit Retained Earnings, credit Income Summary

Where would the issuance of stock for cash be reported? A) On both the income statement and the statement of cash flows B) On both the statement of cash flows and the statement of stockholders' equity C) On the statement of cash flows but not the statement of stockholders' equity D) On neither the income statement nor the statement of cash flows

B) On both the statement of cash flows and the statement of stockholders' equity

Which of the following events results in an expense event? A) Paid for merchandise previously purchased on account. B) Received utility bill but did not pay it. C) Paid rent for the next three months. D) Provided services to a client.

B) Received utility bill but did not pay it.

Which of the following accounts would normally have a credit balance? A) Accounts Receivable B) Retained Earnings C) Inventory D) Depreciation Expense

B) Retained Earnings

The adjusting entry to accrue interest earned would include a: A) credit to interest payable B) debit to interest receivable C) debit to cash D) credit to interest expense

B) debit to interest receivable

The entry to record the full payment of the premium on a two-year insurance policy would include a: A) debit to insurance expense B) debit to prepaid insurance C) credit to accounts receivable D) credit to accounts payable

B) debit to prepaid insurance

Debiting an account always means A) entering an amount on the right side of the account B) entering an amount on the left side of the account C) increasing the account balance D) decreasing the account balance

B) entering an amount on the left side of the account

Revenues and expenses are listed on the: A) balance sheet B) income statement C) statement of financial position D) statement of stockholders' equity

B) income statement

The most likely explanation for the following journal entry would be: A) performed a service and immediately received the cash B) performed a service and billed the customer C) performed a service for a customer who had paid for the service ahead of time D) recorded the receipt of cash from a customer for services previously performed

B) performed a service and billed the customer

The fact that a trial balance is in balance: A) guarantees that correct accounts have been debited and credited B) proves the equality of debits and credits C) assures the preparer that all journal entries were made D) all of the above are correct

B) proves the equality of debits and credits

An example of a permanent account is the: A) utilities expense account B) unearned revenue account C) service revenue account D) depreciation expense account

B) unearned revenue account

In a computer-based transaction system which of the following serves as the journal? A) Master file B)Transaction file C) Accumulation file D) Data file

B)Transaction file

A company began the month with $400 of supplies and purchased $1,000 more. At the end of the month, $300 of supplies were on hand. The expense for the month was A) $1,400 B) $1,300 C) $1,100 D) $1,000

C) $1,100

On April 1, 2005, a firm borrowed $100,000 on a 6% note. The note is due on April 1, 2006. No interest is to be paid until then. What amount of interest expense should it report in its income statement for December 31, 2005? A) $0 B) $1,500 C) $4,500 D) $6,000

C) $4,500

Which of the following events results in a revenue event? A) A customer pays for services to be provided over the next four months. B) A customer pays for merchandise previously purchased on account. C) A customer purchases merchandise on open account D) A bank loan is obtained

C) A customer purchases merchandise on open account

Net income would decrease as a result of which of the following adjustments? A) Adjusting unearned revenue B) Accruing a revenue C) Accruing an expense D) Recording revenue earned but not received

C) Accruing an expense

Which financial statement would report a firm's total profits accumulated to date minus distributions to owners? A) Income statement B) Statement of cash flows C) Balance sheet D) Statement of cost of goods sold

C) Balance sheet

Which of the following association of accounts and statements is not correct? A) Cash & Balance Sheet B) Revenue & Income Statement C) Dividends Paid & Income Statement D) Prepaid Insurance & Balance Sheet

C) Dividends Paid & Income Statement

Which of the following accounts would normally have a debit balance? A) Accounts Payable B) Retained Earnings C) Inventory D) Accumulated Depreciation

C) Inventory

After closing entries are made which of the following grouping of accounts will all have balances? A) Assets, Revenue, Liability B) Liabilities, Assets, Expenses C) Owners' Equity, Assets, Liabilites D) Assets, Liabilities, Expenses

C) Owners' Equity, Assets, Liabilites

Which of the following is not a part of the formal process of recording accounting events? A) general journal B) general ledger C) T-Accounts D) All of the above are part of the formal process of recording accounting events.

C) T-Accounts

All of the following accounts are decreased by debits except: A) liabilities B) revenues C) assets D) contributed capital accounts Answer: C Difficulty: Medium

C) assets

All of the following accounts are increased by credits except: A) liabilities B) revenues C) assets D) contributed capital accounts

C) assets

If the year-end depreciation adjustment was not recorded: A) assets and owners' equity would be understated B) liabilities and owners' equity would be overstated C) assets and net income would be overstated D) net income and owners' equity would be understated

C) assets and net income would be overstated

All adjusting entries involve A) credits to income statement accounts B) debits to income statement account C) at least one income statement and one balance sheet account D) the decrease of an asset or the increase in a liability account

C) at least one income statement and one balance sheet account

Which of the following cases would not require an adjusting entry? A) a client has paid for services in advance B) paid for three months rent in advance C) capital stock has been issued for cash but not yet paid for D) interest on a note receivable will not be received until the note is paid off next year

C) capital stock has been issued for cash but not yet paid for

The year-end accrual adjustment to record the estimated expense for a telephone bill not yet received would include a: A) debit to telephone payable B) debit to cash C) credit to accounts payable D) credit to prepaid telephone expense

C) credit to accounts payable

A record of all accounts, showing account activity and cumulative balances is maintained in the: A) general journal B) trial balance C) general ledger D) financial statements

C) general ledger

On which financial statement would salaries expense appear? A) statement of stockholders' equity B) statement of cash flows C) income statement D) balance sheet

C) income statement

If a company fails to accrue the appropriate wage expense at the end of the accounting period, A) owners' equity and current assets will both be overstated B) current liabilities and current assets will both be understated C) net income will be overstated and current liabilities will be understated D) current assets will be overstated and net income will be understated

C) net income will be overstated and current liabilities will be understated

Closing entries are necessary to update the: A) income summary account B) cash account C) retained earnings account D) capital stock account

C) retained earnings account

Which of the following results in a revenue event? A) Stock is issued for cash B) A telephone bill is received but not paid C) A customer pays for merchandise purchased earlier D) A customer buys merchandise but does not pay for it

D) A customer buys merchandise but does not pay for it

Assets and liabilities appear on which statement? A) Schedule of cost of goods sold B) Statement of cash flows C) Income statement D) Balance Sheet

D) Balance Sheet

Which of the following is not an advantage of the computer-based transaction system? A) Transactions can be posted much more quickly than a manual system B) Internal controls and edit checks can prevent and detect errors C) A wide variety of reports can be prepared D) Computer can determine which events are most significant for analysis

D) Computer can determine which events are most significant for analysis

The master file in a computer-based transaction system serves as which of the following? A) Journal B) Income statement C) Ledger D) Post-closing trial balance

D) Post-closing trial balance

Accountants use the term "debit" to refer to A) events that are negative for the firm B) a reduction in amounts owed C) events that increases accounts D) an amount entered on the left-hand side of an account

D) an amount entered on the left-hand side of an account

Accountants use the term "credit" to refer to A) a firm's good accounting events B) a reduction in amounts owed C) events that increases in accounts D) an amount entered on the right-hand side of an account

D) an amount entered on the right-hand side of an account

The entry to record a purchase of supplies on account would include a: A) debit to cash B) debit to accounts receivable C) credit to supplies D) credit to accounts payable

D) credit to accounts payable

The entry to record collections from credit customers would include a: A) debit to accounts payable B) credit to cash C) debit to unearned revenue D) credit to accounts receivable

D) credit to accounts receivable

All of the following are categories of adjusting entries except: A) accruals B) deferrals C) estimated allocations D) estimated payments

D) estimated payments

Dividends are listed on the: A) balance sheet B) income statement C) statement of financial position D) statement of retained earnings

D) statement of retained earnings

Capital stock is listed on the: A) balance sheet only B) statement of stockholders' equity only C) balance sheet and the income statement D) statement of stockholders' equity and the balance sheet

D) statement of stockholders' equity and the balance sheet