Accounting 207 Exam 1

Baden Industries borrows $20,000 at 7% annual interest for six months on October 1, 2022. Which is the appropriate entry to accrue interest if Baden employs a December 31, 2022, fiscal year? a. Interest Expense $350 Interest Payable $350 b. Interest Expense $1,400 Interest Payable $1,400 c. Interest Expense $350 Notes Payable $350 d. Notes Payable $1,400 Interest Payable $1,400

a. Interest Expense $350 Interest Payable $350

On August 15, 2022, Kinney Industries signs a $200,000, 8%, twelve-month note payable. Which of the following entries correctly records the accrued interest on December 31, 2022? a. Interest Expense $6,000 Interest Payable $6,000 b. Interest Expense $5,333.33 Interest Payable $5,333.33 c. Interest Expense $16,000 Interest Payable $16,000 d. Interest Expense $10,000 Interest Payable $10,000

a. Interest Expense $6,000 Interest Payable $6,000

The fiscal year opened for Noland Manufacturing with a $2,700 balance in its prepaid insurance account. They purchased $9,600 in insurance policies during the year. If $1,725 of insurance has expired during the year, what is the year-end balance in the prepaid insurance account? a. $10,575 b. $12,300 c. $7,875 d. $5,175

a. $10,575

At December 31, 2022, before any year-end adjustments, Dallis Company's Prepaid Insurance account had a balance of $5,800. It was determined that $2,600 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be: a. $2,600. b. $3,200. c. $5,800 . d. $2,800.

a. $2,600.

Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance? Debit Credit Cash $ 831 Accounts receivable 1,049 Inventory 1,562 Prepaid rent 43 Equipment 150 Accumulated depreciation-equipment $ 26 Accounts payable 41 Unearned service revenue 86 Common stock 103 Retained earnings 3,305 Service revenue 159 Interest revenue 28 Salaries and wages expense 80 Travel expense 33 Totals $3,748 $3,748 a. $3,635 b. $3,609 c. $3,748 d. $3,722

a. $3,635

Which types of accounts will appear in the post-closing trial balance? a. Permanent accounts. b. Temporary accounts. c. Accounts shown in the income statement columns of a work sheet. d. None of these answer choices are correct.

a. Permanent accounts.

On June 1, 2022, England Inc. reported a cash balance of $42,000. During June, England made deposits of $16,000 and made disbursements totaling $48,000. What is the cash balance at the end of June? a. $10,000 credit balance b. $58,000 debit balance c. $10,000 debit balance d. $6,000 credit balance

c. $10,000 debit balance

Skypress Company collected $11,200 in September of 2021 for 4 months of service which would take place from October of 2021 through January of 2022. The revenue reported from this transaction during 2022 would be: a. $0. b. $8,400. c. $11,200. d. $2,800.

d. $2,800.

A credit is not the normal balance for which account listed below? a. Common Stock b. Revenue c. Accounts Payable d. Dividends

d. Dividends

The usual sequence of steps in the recording process is to a. analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts. b. analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal. c. analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal. d. analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.

a. analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.

Green Realty Company received a check for $24,000 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 $24,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31: a. debit Unearned Rent Revenue, $4,000; credit Rent Revenue, $4,000. b. debit Rent Revenue, $4,000; credit Unearned Rent Revenue, $4,000. c. debit Unearned Rent Revenue, $24,000; credit Rent Revenue, $24,000. d. debit Cash, $24,000; credit Rent Revenue, $24,000.

a. debit Unearned Rent Revenue, $4,000; credit Rent Revenue, $4,000.

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. debits Cash and credits Unearned Service Revenue.

When a company has performed a service but has not yet received payment, it a. debits accounts receivable and credits service revenue. b. debits revenue from services and credits accounts receivable. c. debits revenue from services and credits accounts payable. d. makes no entry until the cash is received.

a. debits accounts receivable and credits service revenue.

Which of the following accounts has a normal debit balance? a. Accounts Payable b. Prepaid Rent c. Retained Earnings d. Common Stock

b. Prepaid Rent

he following information is from the Income Statement of the Campus Laundry Service: Revenues Service Revenue $6,500 Expenses Salaries and Wages expense $ 2,450 Advertising expense 500 Rent expense 300 Supplies expense 200 Insurance expense 100 Total expenses 3,550 Net Income $2,950 The entry to close Income Summary includes a: a. credit to Income Summary for $2,950. b. debit to Income Summary for $2,950. c. debit to Retained Earnings for $2,950. d. credit to Common Stock for $2,950.

b. debit to Income Summary for $2,950

The historical cost principle requires that when assets are acquired, they be recorded at a. fair market value. b. the amount paid for them. c. selling price. d. list price.

b. the amount paid for them.

Which of the following is not an advantage of the corporate form of business organization? a. No personal liability b. Easy to transfer ownership c. Favorable tax treatment d. Easy to raise funds

c. Favorable Tax Treatment

Which one of the following is not a quality of useful information? a. Timeliness b. Understandability c. Materiality d. Comparability

c. Materiality

Which statement is incorrect concerning the adjusted trial balance? a. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. b. The adjusted trial balance provides the primary basis for the preparation of financial statements. c. The adjusted trial balance lists the account balances in order of their magnitude. d. The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.

c. The adjusted trial balance lists the account balances in order of their magnitude.

The periodicity assumption states that the economic life of a business can be divided into a. equal time periods. b. cyclical time periods. c. artificial time periods. d. perpetual time periods.

c. artificial time periods.

The primary difference between prepaid and accrued expenses is that prepaid expenses have: a. been incurred and accrued expenses have not. b. not been paid and accrued expenses have. c. been recorded and accrued expenses have not. d. not been recorded and accrued expenses have.

c. been recorded and accrued expenses have not.

All of the following statements regarding the double-entry system are true except a. a two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system. b. the double-entry system provides a logical method for recording transactions. c. both sides of the accounting equation must be affected when recording a transaction using the double-entry system. d. when using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits.

c. both sides of the accounting equation must be affected when recording a transaction using the double-entry system.

Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Supplies Expense, $2,500; credit Supplies, $2,500. b. debit Supplies, $4,500; credit Supplies Expense, $4,500. c. debit Supplies Expense, $4,500; credit Supplies, $4,500. d. debit Supplies, $2,500; credit Supplies Expense, $2,500.

c. debit Supplies Expense, $4,500; credit Supplies, $4,500.

Payments of expenses that will benefit more than one accounting period are identified as: a. expenses. b. revenues. c. prepaid expenses. d. liabilities.

c. prepaid expenses.

The recording process occurs a. once a year. b. once a month. c. repeatedly during the accounting period. d. infrequently in a manual accounting system.

c. repeatedly during the accounting period.

The balance sheet a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders' equity over a period of time. c. reports the assets, liabilities, and stockholders' equity at a specific date. d. presents the revenues and expenses for a specific period of time.

c. reports the assets, liabilities, and stockholders' equity at a specific date.

he best interpretation of the word "credit" is the a. offset side of an account. b. increase side of an account. c. right side of an account. d. decrease side of an account.

c. right side of an account.

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. side which increases that account.

In recording an accounting transaction in a double-entry system, a. the number of debit accounts must equal the number of credit accounts. b. there must always be entries made on both sides of the accounting equation. c. the amount of the debits must equal the amount of the credits. d. there must only be two accounts affected by any transaction.

c. the amount of the debits must equal the amount of the credits.

iven the following adjusted trial balance: Debit Credit Cash $ 831 Accounts receivable 1,049 Inventory 1,562 Prepaid rent 43 Equipment 150 Accumulated depreciation-equipment 26 Accounts payable 41 Unearned service revenue 61 Common stock 103 Retained earnings 3,305 Service revenue 184 Interest revenue 28 Salaries and wages expense 80 Travel expense 33 Total $3,748 $3,748 After closing entries have been posted, the balance in retained earnings will be: a. $3,306. b. $3,220. c. $3,490. d. $3,404.

d. $3,404.

Adjusting entries are made to ensure that: a. expenses are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d. All of these answer choices are correct.

d. All of these answer choices are correct.

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. accrued.

Accumulated Depreciation is a(n): a. expense account. b. stockholders' equity account. c. liability account. d. contra asset account.

d. contra asset account.

The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.

d. going concern assumption.