Chapter 0 Intermediate Accounting: Review - Accounting Cycle Review
Q 0.11: The ______________ is prepared to prove equality of the total debit balances and the total credit balances in the ledger after all adjustments have been made. A adjusted trial balance B ledger C general journal D closing entry
A
Q 0.18: Which of the following account balances will be the same on both the adjusted trial balance and the post-closing trial balance? A Common Stock B Rent Expense C Retained Earnings D Service Revenue
A
Q 0.1: Bedrock Company received a payment on accounts receivable from a customer. Which of the following correctly describes the impact of this cash receipt? It will A not affect total assets. B increase stockholders' equity. C decrease net income. D increase liabilities.
A
Q 0.22: On the retained earnings statement, A dividends are subtracted to calculate the end-of-year retained earnings balance. B dividends are ignored. C a net loss is ignored. D dividends are added to calculate the end-of-year retained earnings balance.
A
Q 0.24: Which of the following accounts is closed with a debit to Retained Earnings? A Dividends B Unearned Revenue C Service Revenue D Salaries and Wages Expense
A
Q 0.31: An adjusting entry recording accrued salaries for a period indicates that Salaries and Wages Expense has been incurred but has not yet been paid or recorded. A True B False
A
Q 0.40: A post-closing trial balance will show A permanent accounts to be carried forward to the next accounting period. B temporary accounts to be carried forward to the next accounting period. C that no mistakes were made in bookkeeping. D the company's net income for the period.
A
Q 0.44: If assets have decreased by $4,000, or stockholders' equity has increased by $4,000, then total liabilities must have This is correct answer : A decreased by $4,000. B decreased by $2,000. C increased by $2,000. D increased by $4,000.
A
Q 0.48: Which of the following is included in the journal entry for equipment purchased for $20,000 by issuing a note for the purchase? A credit to Notes Payable B debit to Notes Receivable C credit to Equipment D credit to Cash
A
Q 0.7: Which of the following errors, each considered individually, would cause the trial balance to be out of balance? A Cash of $430 received from a customer on account was posted as a debit of $340 to Cash and as a credit of $430 to Accounts Receivable. B A transaction was not posted. C A payment of $148 to a creditor was posted as a debit to Accounts Payable of $148 and a credit of $148 to Accounts Receivable. D A transaction was posted twice.
A
Q 0.8: The accountant for Lamps and More, Inc. should have recorded the following correct entry: Jan. 15 Notes Receivable.....345-Dr. Equipment.....345-Cr. Instead, she misunderstood the transaction and debited Notes Payable account incorrectly. Which of the following is wrong entry pertaining to this transaction? A Jan. 15 Notes Payable.....345-Dr. Equipment.....345-Cr. B Jan. 15 Equipment.....345-Dr. Notes Receivable.....345-Cr. C Jan. 15 Notes Payable.....345-Dr. Cash.....345-Cr. D Jan. 15 Notes Receivable.....345-Dr. Equipment.....345-Cr.
A
Q 0.52: Bird Company's adjusted trial balance is shown below. Assuming no errors were made while preparing the adjusted trial balance, what is the balance of the Prepaid insurance account? Service revenue-$6,360 Equipment-8,880 Cash-3,030 Prepaid insurance-? Unearned service rev.-6,384 Depreciation expense-768 Salaries and wages expense-1,260 Accum. depreciation-1,536 Common stock-468 Retained earnings-660 A : $1,470 B : $810 C : $1,602 D : $2,238
A $6,360 + $6,384 + $468 + $1,536 + $660 = $15,408 $15,408 - $3,030 - $1,260 - $8,880 - $768 = $1,470 Total credits = (Ser. rev. + Un. ser. rev.+ com. st.+ acc. dep. + ret. earn.) Total credits - Debits = Prepaid insurance
Q 0.13: Given the following adjusted trial balance and assuming no errors were made, what is the amount of Common stock? Cash-$1,662 Accounts receivable-2,098 Inventory-3,124 Prepaid rent-86 Equipment-300 Accumulated depreciation-equipment-52 Accounts payable-82 Unearned service revenue-172 Common stock-? Retained earnings-6,610 Service revenue-318 Interest revenue-56 Salaries and wages expense-160 Travel expense-66 A $206 B $54 C $276 D $120
A $1,662 + $2,098 + $3,124 + $86 + $300 + $160 + $66 = $7,496 Total debits = (Cash + acc. rec. + inven. + prep. rent. + equip. + salaries & wages exp. + travel exp.) $7,496 - $52 - $82 - $172 - $6,610 - $318 - $56 = $206 Total debits - Credits = Common stock
Q 0.39: The following items are taken from the adjusted trial balance prepared as of December 31, 2017. All accounts have normal balances. What is the amount of net income (net loss) for 2017? Cash-$4,720 Prepaid Insurance-3,520 Supplies-2,240 Equipment-32,640 Accounts Payable-3,040 Unearned Revenue-7,840 Common Stock-11,200 Retained Earnings-6,240 Dividends-3,520 Service Revenue-10,080 Rent Expense-2,400 Salaries and Wages Expense-3,680 Insurance Expense-1,280 Supplies Expense-4,960 Depreciation Expense-320 Accumulated Depreciation-640 Salaries and Wages Payable-480 Accounts Receivable-640 Notes Payable, Due 2020-20,400 A ($2,560) B ($5,280) C ($3,200) D ($6,080)
A $10,080 - $2,400 - $3,680 - $1,280 - $4,960 - $320 = ($2,560)
Q 0.25: Assets decrease when expenses are A left unpaid. B paid in cash. C increased. D placed on account.
B
Q 0.26: All business transactions are first entered in A the general ledger. B the journal. C the financial statements. D transaction accounts.
B
Q 0.28: A post-closing trial balance shows both income statement accounts and balance sheet accounts. A True B False
B
Q 0.33: Within the past two weeks, Fanny's Flowers has completed each of the activities listed below. Of these activities, which should be recorded in the company's accounting records? A fired one full-time employee B purchased a new walk-in cooler C hired two part-time employees D entered into contract negotiations with a new floral wholesaler
B
Q 0.34: A credit balance in the income summary account represents a A net loss. B net profit. C dividend. D cash balance.
B
Q 0.51: A post-closing trial balance shows both income statement accounts and balance sheet accounts. A : True B : False
B
Q 0.57: Which of the following accounts will have a zero balance after closing entries have been journalized and posted? A : Unearned Rent Revenue B : Dividends C : Prepaid Rent D : Accumulated Depreciation
B
Q 0.3: The classification and normal balance of the Accounts Payable account is A stockholders' equity with a debit balance. B asset with a debit balance. C a liability with a credit balance. D an expense with a debit balance.
C
Q 0.43: Which section of the adjusted trial balance is used to help prepare the balance sheet? A The revenue and expense accounts that occur at the bottom of the adjusted trial balance. B The revenue and expense accounts that occur at the top of the adjusted trial balance. C The assets and liabilities accounts that occur at the top of the adjusted trial balance. D The assets and liabilities accounts that occur at the bottom of the adjusted trial balance.
C
Q 0.45: Salaries and Wages Expense should have been accrued on December 31st, but the entry was not made. The result of this oversight is that A stockholder's equity is understated. B net income is understated. C liabilities are understated. D assets are understated.
C
Q 0.54: After preparing its financial statements for November, Unique Interiors notices that its income statement shows total expenses that are $200 too high and total revenues that are $300 too low. What effect will these errors have on Unique's balance sheet for the month, assuming all other account balances listed on that sheet are correct? A : These errors mean that the firm's balance sheet will show a total liabilities and stockholders' equity amount that is $100 higher than its total assets amount. B : These errors mean that the firm's balance sheet will show a total liabilities and stockholders' equity amount that is $500 lower than its total assets amount. C : These errors mean that the firm's balance sheet will show a total liabilities and stockholders' equity amount that is $100 lower than its total assets amount. D : These errors mean that the firm's balance sheet will show a total liabilities and stockholders' equity amount that is $500 higher than its total assets amount.
B A firm's income statement calculates net income by subtracting total expenses from total revenues. Here, Unique's net income calculation will be $500 too low because the firm will have used a total revenue amount that is $300 too low and a total expense amount that is $200 too high. This, in turn, means that when Unique compiles its retained earnings statement, it will add in a net income amount that is $500 too low. As a result, the firm's retained earnings statement will show a month-end amount that is $500 lower than the correctl amount. Finally, because Unique's retained earnings amount is added to its common stock amount when calculating total liabilities and stockholders' equity on the firm's balance sheet, the firm will arrive at a total liabilities and stockholder's equity amount that is both $500 lower than the correct amount and $500 lower than the total assets amount shown on the balance sheet.
Q 0.63: In which of the following cases would an adjusting entry be required for a company with a June 30th year-end? A : Cash is paid for supplies to be used from March 1st to April 30th. B : A utility bill received on June 24th is to be paid on July 10th. C : Salaries earned from June 1st to June 15th are to be paid on June 20th. D : A three-month insurance policy is purchased on February 6th.
B The adjusting entry is necessary because the expense has occurred although payment will not be made until the subsequent accounting period.
Q 0.14: Which of the following correctly depicts where each account balance will be displayed? A: Adjusted trial balance: End-of-the year balance for Retained Earnings Balance sheet Beginning-of-the year balance for Retained Earnings B: Adjusted trial balance: Beginning-of-the year balance for Cash Balance sheet End-of-the year balance for Cash C: Adjusted trial balance: Beginning-of-the year balance for Retained Earnings Balance sheet End-of-the year balance for Retained Earnings D: Adjusted trial balance: End-of-the year balance for Cash Balance sheet Beginning-of-the year balance for Cash
C
Q 0.15: On December 31, 2016 Jasper Enterprises had a retained earnings account balance of $432,800. During the year Jasper declared and paid a $20,200 dividend. At December 31, 2017, Jasper reported retained earnings of $439,500. What amount of net income (net loss) did Jasper report for 2017? A $13,500 B ($13,500) C $26,900 D $6,700
C
Q 0.23: Adjusting entries always impact A a balance sheet account and the statement of cash flows. B the income statement and the statement of cash flows. C a balance sheet account and an income statement account. D the tax return and the income statement.
C
Q 0.2: Bluebird, Inc. had a transaction that caused a $2,500 decrease in both assets and total liabilities. This transaction could have been a(n) A investment of $2,500 cash in the business by the stockholders. B purchase of office equipment for $2,500 cash. C repayment of a $2,500 bank loan. D purchase of office equipment for $12,000, paying $9,500 cash and issuing a note payable for the balance.
C
Q 0.37: If a transaction is not journalized, what effect will this have on the trial balance? A Assets will be more than liabilities. B Credits will be higher than debits. C The trial balance will still balance. D Debits will be higher than credits.
C
Q 0.4: Cargo Industries began the month with a $10,000 debit balance in the Cash account. During the month, the total of the debit entries to the Cash account amounted to $4,000 and the total of the credit entries to the Cash account amounted to $4,800. The Cash account has a A $800 credit balance. B $10,800 debit balance. C $9,200 debit balance. D $14,800 debit balance.
C
Q 0.50: What does a trial balance prove? A : that all transactions have been recorded correctly B : that the ledger is posted correctly C : the mathematical equality of debits and credits after the posting process D : that all transactions have been posted
C
Q 0.60: Which of the following financial statements is prepared using the Retained Earnings account, the Dividends account, and the income statement? A : the statement of cash flows B : the adjusted trial balance C : the retained earnings statement D : the balance sheet
C
Q 0.62: Which of the following account balances will change between the adjusted trial balance and post-closing trial balance? A : Accounts Receivable B : Common Stock C : Retained Earnings D : Notes Payable
C
Q 0.56: McGinnis Construction is a cash-basis company with a fiscal year-end of June 30. McGinnis' employees earn a normal weekly wage of $12,500 during a five-day work week. June 30 falls on a Thursday for the current year. McGinnis also performed services of $40,900 during the last four days of June, but they are not paid in full until July 8. McGinnis' net income for the most recent year will be ________ by________. A : understated; $40,900. B : overstated; $30,900. C : understated; $30,900. D : overstated; $10,000.
C By dividing $12,500 by 5, each work day results in $2,500 in wages. This results in a total of $10,000 in accrued wages since year-end is on a Thursday. Subtracting the revenue that should be recorded of $40,900 from the accrued wages results in net income being understated by $30,900.
Q 0.53: Which of the following accounting entries would you MOST expect to accompany a $9,000 decrease in cash, and why? A : A $9,000 increase in Common Stock, because common stock is part of stockholders' equity and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity B : A $9,000 increase in Unearned Service Revenue, because unearned service revenue is a liability and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity C : A $9,000 increase in Equipment, because cash is an asset, so an equal but opposite change to another asset account such as Equipment will offset the decrease to the Cash account. D : A $9,000 increase in Service Revenue, because service revenue is a liability and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity
C Equipment is considered an asset, similar to cash. A change in a firm's assets must be offset by an equal but opposite change in assets or an equal change in liabilities or stockholders' equity. The only option that follows this rule is the $9,000 increase in the Equipment account.
Q 0.64: As of October 31, Crosswire Communications has the following account balances: Cash $12800 Prepaid Insurance 800 Equipment 68000 Accounts Receivable 9200 Notes Payable 24500 Accounts Payable 7500 Common Stock 51500 Dividends 800 Service Revenue 14400 Salaries and Wages Expense 4500 Rent Expense 1800 After preparing the firm's trial balance, Crosswire's accounting staff notices that the total of the debit column is $112,300, while the total of the credit column is $83,500. What does this finding suggest? A : The difference between the two columns suggests that the accounting staff mistakenly categorized Accounts Receivable as a credit and Accounts Payable as a debit. B : The difference between the two columns suggests that the accounting staff mistakenly categorized Notes Payable as a debit. C : The difference between the two columns suggests that the accounting staff mistakenly categorized Service Revenue as a debit. D : The difference between the two columns suggests that the accounting staff mistakenly categorized Cash as a credit rather than a debit.
C When properly compiled, a trial balance proves the mathematical equality of debits and credits after posting. Here, the difference between the columns suggests that an error has been made. If we compile our own trial balance using the amounts listed here, we find the total debits (Cash, Prepaid Insurance, Equipment, Accounts Receivable, Dividends, Salaries and Wages Expense, and Rent Expense) add up to $97,900, as do the total credits (Notes Payable, Accounts Payable, Common Stock, and Service Revenue). Thus, Crosswire's staff must have improperly categorized one of the values as a debit rather than a credit, or vice versa. Since the total of Crosswire's debit column is $112,300 - $83,500 = $28,800 greater than it should be, the firm's staff must have improperly categorized Service Revenue ($28,800/2 = $14,400) as a debit instead of a credit.
Q 0.19: A December 31, 2017 balance sheet could be prepared directly from the A December 31, 2017 adjusted trial balance. B 2017 general journal. C December 31, 2017 trial balance. D December 31, 2017 post-closing trial balance.
D
Q 0.21: If a company posted a debit of $5,000 to Notes Payable and a credit of $5,000 to Cash, it has most likely A borrowed cash of $5,000 by signing a note payable. B collected $5,000 from a customer. C used $5,000 to purchase equipment. D paid off an existing note payable with cash.
D
Q 0.27: Which of the following accounts will appear first on a trial balance? A Dividends B Rent Expense C Common Stock D Accounts Payable
D
Q 0.29: The account for ________ will be found on an adjusted trial balance but not an unadjusted trial balance. A Accounts Payable B Equipment C Salaries and Wages Expense D Depreciation Expense
D
Q 0.30: Which of the following accounts will have a zero balance after closing entries have been journalized and posted? A Unearned Rent Revenue B Accumulated Depreciation C Prepaid Rent D Dividends
D
Q 0.32: After preparing its monthly financial statements, a company realizes that its adjusted trial balance contains several errors. Of the errors listed below, which would directly affect the company's income statement? A a $200 overstatement in Dividends B a $100 shortfall in Common Stock C a $100 overstatement in Cash D a $200 shortfall in Interest Expense
D
Q 0.38: On June 1, 2017, Harry's Dog Grooming received $800 cash for services rendered. The entry to record this transaction will include A a credit to Accounts Payable. B a debit to Service Revenue. C a credit to Accounts Receivable. D a debit to Cash.
D
Q 0.42: Lynch Custom Adventures utilizes accrual-basis accounting. Until the ________ proves the ________ of debits and credits, Lynch will be unable to prepare GAAP-based financial statements. A unadjusted trial balance, equality B adjusting entries, excess C unadjusted trial balance, discrepancy D adjusted trial balance, equality
D
Q 0.47: Which of the following statements is correct in relation to the closing entry process? A All permanent accounts are closed at the financial year end. B All assets and liability accounts are closed at the financial year end. C All of the choices are correct. D All temporary accounts are closed at the financial year end.
D
Q 0.49: A typical ledger would have the following accounts in which order? A : Interest Expense, Retained Earnings, Accounts Payable, Accounts Receivable. B : Interest Expense, Accounts Payable, Accounts Receivable, Retained Earnings. C : Accounts Payable, Accounts Receivable, Interest Expense, Retained Earnings. D : Accounts Receivable, Accounts Payable, Retained Earnings, Interest Expense.
D
Q 0.55: What is the difference between the financial statements/schedules prepared by Cindy's Cupcakes, a cash-basis entity, and Gourmet Cakes, an accrual-basis entity? A : Cindy's Cupcakes will prepare an adjusted trial balance, and Gourmet Cakes will not. B : Cindy's Cupcakes will prepare a retained earnings statement, and Gourmet Cakes will not. C : Gourmet Cakes will prepare a retained earnings statement, and Cindy's Cupcakes will not. D : Gourmet Cakes will prepare an adjusted trial balance, and Cindy's Cupcakes will not.
D
Q 0.59: Which of the following accounts will be closed to a zero balance at the end of the fiscal year? A : accumulated depreciation B : prepaid insurance C : inventory D : insurance expense
D
Q 0.5: Management could determine the amounts due to suppliers by examining which ledger account? A Accounts Receivable B Supplies C Service Revenue D Accounts Payable
D
Q 0.65: On May 10, Cardoza Construction purchased equipment of $500 on account. The entry to record the purchase will include a debit to ________ and a credit to ________. A : Accounts Receivable; Equipment B : Equipment; Accounts Receivable C : Equipment; Cash D : Equipment; Accounts Payable
D
Q 0.6: If a company posted a debit of $5,000 to Notes Payable and a credit of $5,000 to Cash, it has most likely A collected $5,000 from a customer. B borrowed cash of $5,000 by signing a note payable. C used $5,000 to purchase equipment. D paid off an existing note payable with cash.
D
Q 0.9: The book value is A the amount of liability still left to be paid on a plant asset. B the amount of cash paid for the asset on the purchase date. C always equal to the market value for plant assets. D the difference between the balance of a plant asset account and the related accumulated depreciation account.
D
Q 0.16: During 2017, Carla's Crafts reported net income of $5,900 and Sales Revenue of $13,000. Carla's closing entries include a A credit to Income Summary for $7,100. B credit to Retained Earnings for $7,100. C debit to Income Summary for $13,000. D debit to Income Summary for $7,100.
D $13,000 - $5,900 = $7,100 Sales revenue - Net income = Expenses
Q 0.10: Jorge Company had the following transactions during 2017. • Sales of $4,500 on account • Collected $2,000 for services to be performed in 2018 • Paid $1,325 cash in salaries • Purchased airline tickets for $250 in December for a trip to take place in 2018 What is Jorge's 2017 net income using cash-basis accounting? A $5,175 B $4,925 C $675 D $425
D $2,000 - $1,325 - $250 = $425 (Collect. - salaries - air. tick.)
Q 0.12: Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance? Service revenue-$8,480 Equipment-$11,840 Cash-4,040 Prepaid insurance-1,960 Unearned service rev.-8,512 Depreciation expense-1,024 Salaries and wages expense-1,680 Accum. depreciation-2,048 Common stock-624 Retained earnings-880 A $17,840 B $18,496 C $19,888 D $20,544
D $8,480 + $8,512 + $624 + $2,048 + $880 = $20,544 (Ser. rev. + Un. ser. rev. + com. st. + acc. dep. + ret. earn.)
Q 0.58: The following items are taken from the adjusted trial balance prepared as of December 31, 2017. All accounts have normal balances. What is the amount of total assets to be reported on the balance sheet at December 31, 2017? Cash-$4,720 Prepaid Insurance-3,520 Supplies-2,240 Equipment-32,640 Accounts Payable- 3,040 Unearned Revenue-7,840 Common Stock-11,200 Retained Earnings-6,240 Dividends-3,520 Service Revenue-10,080 Rent Expense-2,400 Salaries and Wages Expense-3,680 Insurance Expense-1,280 Supplies Expense-4,960 Depreciation Expense-320 Accumulated Depreciation-640 Salaries and Wages Payable-480 Accounts Receivable-640 Notes Payable, due 2020-20,400 A : $42,480 B : $43,600 C : $43,360 D : $43,120
D $4,720 + $3,520 + $2,240 + ($32,640 - $640) + $640 = $43,120
Q 0.61: During the month of May, Apex Industries recorded a $3,000 debit to its Expenses account. Which of the following explanations of this transaction is the MOST accurate? A : This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 debit to an asset account in order to offset the corresponding increase in stockholders' equity. B : This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 debit to an asset account in order to offset the corresponding decrease in stockholders' equity. C : This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 credit to an asset account in order to offset the corresponding increase in stockholders' equity. D : This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 credit to an asset account in order to offset the corresponding decrease in stockholders' equity.
D Expenses should be recorded as a debit to Apex's Expenses account. Because the firm's expenses will have increased by $3,000, its stockholders' equity will have decreased by the same amount. To keep the accounting equation in balance, one option Apex has is to decrease an asset account by the same amount as its stockholders' equity, which means that the firm would also likely record a $3,000 credit to an asset account.
Q 0.17: During 2017, the Retained Earnings account for Brock Street Bakery increased by $5,000. Brock reported net income of $5,900 and Sales Revenue of $13,000. Brock's closing entries included a A credit to Retained Earnings for $5,000. B credit to Income Summary for $5,900. C credit to Income Summary for $7,100. D credit to Dividends for $900.
D One of the closing entries must have closed the Dividends account for $900 because Retained Earnings increased by $5,000 and Net Income was $5,900.
Q 0.20: The post-closing trial balance likely contains an error if the A balance of the Dividends account is zero. B company reported net income for the year. C total of the debit column equals the total of the credit column. D debit column of the post-closing trial balance is the same amount shown for Total Assets on the balance sheet.
D Total Assets on the balance sheet reflects the book value of the depreciable assets, which includes Accumulated Depreciation, a credit balance account.
Q 0.35: How will the See Clear Company record the following transaction on June 8 th ? Paid $1,700 for equipment that was purchased on May 14 th . Identify the correct account name that should be entered in the second row of the journal entry form in order to correctly record this transaction. A Accounts Payable B Cash C Accounts Receivable D Equipment
The transaction is a debit to Accounts Payable and a credit to Cash. When purchased on May 14 th , the company debited Equipment and credited Accounts Payable.
Q 0.46: A revenue account is closed with a __ to the revenue account and a __ to Income Summary.
debit, credit
Q 0.41: Closing entries cause the __ accounts to have zero balances.
revenue and expense
Q 0.36: At every financial year end, __ and expenses are closed to the Income Summary account.
revenues