Chapter 3 Quiz

When a dividend is declared: A. assets decrease. B. liabilities increase. C. stockholders' equity increases. D. All of these answer choices are correct.

B

Included in Pro Engineering's December 31 trial balance is unearned revenue of $12,000. Management reviewed the company's progress on the underlying contracts and determined that $7,000 of revenue should be recognized. Prepare the December 31 adjusting entry.

December 31 Unearned Revenue (Debit 7000) Service Revenue (Credit 7000)

An adjusting entry would never include a: A. debit to an expense account and a credit to an asset account. B. debit to an expense account and a credit to a liability account. C. debit to a liability account and a credit to a revenue account. D. debit to an asset account and a credit to a liability account.

D

If the adjusting entry for an accrued revenue is not made: A. assets will be overstated. B. revenues will be overstated. C. liabilities will be understated. D. equity will be understated.

D

Lindsay Acker, CPA, opened an accounting consulting practice on January 1, 2017. During the first month of operations, the following transactions occurred. 1.Performed services for customers with terms net 60. At January 31, $3,750 of such services was performed but not yet billed. 2.Utility expenses incurred but not paid prior to January 31 totaled $1,220. 3.Purchased computer and networking equipment on January 1 for $40,000, paying $20,000 in cash and signing a $20,000, 3-year note payable. The equipment depreciates $800 per month. Interest is $200 per month. 4.Purchased a one-year insurance policy on January 1 for $18,000. 5.Purchased $1,800 of supplies. On January 31, determined that $850 of supplies were on hand. Prepare the adjusting entries on January 31. (Omit explanations.) Account titles are: Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Accounts Payable.

1. Accounts Receivable (Debit 3750) Service Revenue (Credit 3750) 2. Utilities Expense (Debit 1220) Accounts Payable (Credit 1220) 3. Depreciation Expense (Debit 800) Accumulated Depreciation-Equipment (Credit 800) 3. Interest Expense (Debit 200) Interest Payable (Credit 200) 4. Insurance Expense (Debit 1500) Prepaid Insurance (Credit 1500) 5. Supplies Expense (Debit 950) Supplies (Credit 950)

The difference between the cost of a depreciable asset and its related contra account, Accumulated Depreciation is referred to as the asset's: A. book value. B. fair value. C. market value. D. real value.

A

Which of the following is not a recordable event or item? A. Changes in managerial policy. B. Sales of the company's product in overseas markets. C. Declaration of dividends. D. Purchase of supplies.

A

. An accrued expense is A. an expense which is recorded when cash is received. B. an expense that has been incurred but for which payment has not yet been made. C. an expense for which cash is paid before the expense is incurred. D. initially recorded as an asset.

B

If the entry to close Income Summary to Retained Earnings includes a debit to Income Summary: A. The company has incurred a net loss. B. Retained Earnings will be increased by the current period's net income. C. Dividends paid exceed the net income earned for the period. D. Expenses exceed revenues.

B

The proper sequence of financial statement preparation is: A. The Retained Earnings Statement, the Balance Sheet, the Income Statement, and then the Statement of Cash Flows. B. The Income Statement, the Retained Earnings Statement, the Balance Sheet, and then the Statement of Cash Flows. C. The Balance Sheet, the Retained Earnings Statement, the Income Statement, and then the Statement of Cash Flows. D. The Statement of Cash Flows, the Income Statement, the Retained Earnings Statement, and then the Balance Sheet.

B

_________ is the process of transferring the accounts and amounts from the book of original entry to the ledger accounts. A. Journalizing. B. Posting. C. Closing. D. Ledgerizing.

B

All of the following statements about contra asset accounts are true except: A. Contra asset accounts have normal credit balances. B. Contra asset accounts are permanent accounts. C. Contra asset accounts are not reported in the financial statements. D. Contra asset accounts are increased with credits.

C

Which of the following is not transferred to Retained Earnings at the end of the period? A. Revenues. B. Dividends. C. Common stock. D. Expenses.

C

Factors that shape an accounting information system include the A. transactions in which the business engages B. informational demands of management C. volume of data to be handled D. All of these answer choices are correct.

D

The adjusting entry to record an accrued expense includes a debit to: A. a liability account and a credit to an expense account. B. a liability account and a credit to a revenue account. C. an expense account and a credit to a revenue account. D. an expense account and a credit to a liability account.

D

When a corporation purchases a computer for cash, A. liabilities increase. B. stockholders' equity decreases. C. assets increase. D. the account Cash will be credited.

D

Which of the following is an incorrect depiction of the accounting equation? A. Assets = Liabilities +Stockholders' Equity B. Assets - Stockholders' Equity = Liabilities C. Assets - Liabilities = Stockholders' Equity. D. Assets + Stockholder's Equity = Liabilities.

D

Which of the following statements about a trial balance is incorrect? A. Its primary purpose is to prove the mathematical equality of debits and credits after posting. B. It uncovers errors in journalizing and posting. C. It is useful in the preparation of financial statements. D. It proves that all transactions have been recorded.

D

Pro Engineering, Inc. had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.)Mar. 1 Invested $25,000 cash. 3 Purchased $7,200 of equipment for the business with cash. 6 Purchased supplies on account for $800 (Debit asset account). 15 Paid March rent of $2,000. 28 Performed engineering services for clients, for which $1,600 was collected in cash and $5,800 was billed to the clients.

March 1 Cash (Debit 25000) Owners Equity/ Capital Account (Credit 25000) 3 Equipment (Debit 7200) Cash (Credit 7200) 6 Supplies (Debit 800) Accounts Payable (Credit 800) 15 Rent Expense (Debit 2000) Cash (Credit 2000) 28 Cash (Debit 1600). Accounts Receivable (Debit 5800) Service Revenue (Credit 7400)