Intermediate Acc 3

Owens Industries is trying to increase its profile in the community. As part of this effort, Owens sponsors a Little League baseball team. The cost of sponsorship is $850. What impact does this transaction have on Owens' accounting equation (A = L + SE)? A : It decreases both assets and stockholder's equity by $850. B : It decreases assets and increases stockholder's equity by $850. C : It increases both assets and stockholder's equity by $850. D : It decreases both assets and liabilities by $850

A

Cost of goods sold appears on the income statement of a service firm but not a merchandising firm. True False

False

Real accounts are periodically closed. True False

False

Each general journal entry consists of how many parts? One. Two. Three. Four.

Four

Which of the following is an internal event? A transaction with another entity. Using machinery in operations. A change in the price of a good that an entity buys or sells. A flood.

Using machinery in operations.

Adjustments are often prepared after the balance sheet date, but dated as of the balance sheet date. after the balance sheet date, and dated after the balance sheet date. before the balance sheet date, but dated as of the balance sheet date. before the balance sheet date, and dated after the balance sheet date.

after the balance sheet date, but dated as of the balance sheet date.

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

all of these answer choices are correct.

When a dividend is declared: assets decrease. liabilities increase. stockholders' equity increases. all of these answer choices are correct.

liabilities increase

Unearned revenues are: revenues. liabilities. accruals. all of these answer choices are correct

liabilities.

A trial balance proves that debits and credits are equal in the ledger. chronologically lists transactions and other events. proves that a company recorded all transactions. All of these answer choices are correct.

proves that debits and credits are equal in the ledger

An accrued revenue can best be described as an amount A : not collected but currently included in earnings. B : Collected and currently included in earnings. C : not collected and not currently included in earnings. D : collected but not currently included in earnings.

A

If expenses are greater than revenues, the Income Summary account will be closed by a debit to A : Retained Earnings and a credit to Income Summary. B : Income Summary and a credit to Cash. C : Cash and a credit to Income Summary. D : Income Summary and a credit to Retained Earnings.

A

Which of the following best describes the difference between the accounting cycle of a merchandising company and that of a service company? A : There is no difference between the accounting cycle of a merchandising company and that of a service company. B : The merchandising company must prepare an unadjusted trial balance prior to recording adjusting entries, while a service company is not required to do this. C : The merchandising company must prepare reversing entries as part of the accounting cycle, while such entries are optional for the service company. D : The service company must prepare a post-closing trial balance, while such a trial balance is optional for the merchandising company.

A

To convert cash receipts from customers to revenue on an accrual basis, which of the following adjustments is necessary? Add ending Accounts Receivable. Subtract ending Unearned Service Revenue. Subtract beginning Accounts Receivable. All of these answer choices are correct.

All of these answer choices are correct.

Which of the following accounts will have a zero balance after closing entries have been posted? A : Asset B : Dividends C : Equity D : Liability

B

Which of the following is not a principal purpose of an unadjusted trial balance? A : It supplies a listing of open accounts and their balances. B : It proves that debits and credits were properly entered in the ledger accounts. C : It proves that debits and credits of equal amounts are in the ledger. D : It is the basis for any adjustments to the account balances.

B

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

Common stock

Which of the following items is reported on the balance sheet but not on the adjusted trial balance? A : the unearned service revenue B : the accumulated depreciation for equipment C : the allowance for doubtful accounts D : the ending retained earnings balance

D

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

It proves that all transactions have been recorded.

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

Retained Earnings will be increased by the current period's net income

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

The Income Statement, the Retained Earnings Statement, the Balance Sheet, and then the Statement of Cash Flows.

After journalizing and posting all adjusting entries, a company prepares an adjusted trial balance that is the primary basis for preparation of the financial statements. True False

True

Companies may prepare a trial balance at any time. True False

True

Depreciation allocates the cost of long-lived assets to expense over the periods which benefit from their use (useful life). True False

True

Financial statements can be prepared directly from the adjusted trial balance. True False

True

Revenue, equity and liability accounts have normal credit balances. True False

True

The accounting cycle for a merchandiser is the same as the accounting cycle for a service firm. True False

True

Transaction analysis is the same under GAAP and IFRS, but sometimes different standards impact how transactions are recorded. True False

True

Transactions are initially recorded in the general journal. True False

True

When a company makes reversing entries, it debits all cash payments of expenses to the related expense account. True False

True

When a merchandiser prepares closing entries, Cost of Goods Sold is credited and Income Summary is debited. True False

True

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

book value

Double-entry accounting system is the basis of accounting systems under -GAAP only. -IFRS only. -both GAAP and IFRS. -neither GAAP nor IFRS.

both GAAP and IFRS.

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

debit to an asset account and a credit to a liability account.

Adjusting entries can be classified as either: accruals or reversals deferrals or accruals. real or nominal. internal or external.

deferrals or accruals.

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

equity will be understated.

_________ is the process of transferring the accounts and amounts from the book of original entry to the ledger accounts.

posting

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

the account Cash will be credited.

Which of the following is an example of an accrued expense? A : property taxes incurred during the year, to be paid in the first quarter of the subsequent year B : rent earned during the period, to be received at the end of the year C : depreciation expense D : supplies purchased at the beginning of the year and debited to an expense account

A

Which of the following statements best describes the purpose of closing entries? A : They reduce the balances of revenue and expense accounts to zero so that the accounts can be used to accumulate the revenues and expenses of the next period. B : They complete the record of various transactions that was started in a prior period. C : They determine the amount of gain or loss for the period. D : They facilitate posting and preparing a trial balance.

A

Which one of the following guidelines regarding reversing entries is incorrect? -All accruals should be reversed. -All deferrals for which a company debited or credited the original cash transaction to an expense or revenue account should be reversed. -Adjusting entries for bad debts are reversed. -None of these answer choices are correct.

Adjusting entries for bad debts are reversed.

Which of the following is a reason the trial balance may not contain up-to-date and complete data? -Some items may be unrecorded. -Some costs are not recorded during the accounting period because these costs expire with the passage of time rather than as a result of recurring daily transactions. -Some events are not recorded daily because it's not efficient to do so. -All of these answer choices are correct

All of these answer choices are correct

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

Assets + Stockholder's Equity = Liabilities.

If an adjusting entry is not made for a deferred revenue which was initially credited to an unearned revenue account, which of the following results? Liabilities are understated. Revenues are overstated. Assets are unaffected. All of these answer choices are correct.

Assets are unaffected

A prepaid expense can best be described as an amount A : not paid and currently matched with earnings. B : not paid and not currently matched with earnings. C : paid and not currently matched with earnings. D : paid and currently matched with earnings.

C

A trial balance prepared at year end showed Puccinelli Co.'s debit total exceeding the credit total by $6,300. This discrepancy could have been caused by A : an error in adding the Sales Journal. B : a net loss of $6,300. C : the balance of $700 in the Equipment account being entered as a debit of $7,000. D : the balance of $47,000 in accounts receivable being entered in the trial balance as $40,700.

C

Ransdell Corporation estimates that $15,000 of the current period's credit sales will be uncollectible. Where will these bad debts be reported in Ransdell's financial statements? A : They will be reported on Ransdell's unadjusted trial balance. B : They will be reported on Ransdell's retained earnings statement. C : They will be reported on Ransdell's income statement. D : They will not be reported on any of Ransdell's financial statements.

C

The general journal for Wells Tech includes the entry below. Based on the information in this entry, which of the following can you determine about the corresponding general ledger entries? A : The rent expense of $600 was debited to account 650 and the cash paid was credited to account 500. B : The rent expense of $500 was debited to account 650 and the cash paid was credited to account 600. C : The rent expense of $650 was debited to account 500 and the cash paid was credited to account 600. D : The rent expense of $650 was credited to account 500 and the cash paid was debited to account 600.

C

Which of the following events would not be recorded as part of the accounting cycle? A : a cash purchase of a delivery van B : a casualty loss of a building due to a tornado C : a 10% increase in the size of the workforce D : an owner's investment of funds in exchange for common stock

C

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

Changes in managerial policy.

All of the following statements about contra asset accounts are true except: Contra asset accounts have normal credit balances. Contra asset accounts are deducted from the related asset account to determine book value. Contra asset accounts are not reported in the financial statements. Contra asset accounts are increased with credits.

Contra asset accounts are not reported in the financial statements.

The accounting equation (A = L + SE) must remain in balance A : only at the time the trial balance is prepared. B : only when formal financial statements are prepared. C : only when journal entries are recorded. D : throughout each step in the accounting cycle.

D

Which of the following best describes the difference between the financial statements for a merchandising company and those for a service company? A : The merchandising company's financial statements must report depreciation expense, while the service company's statements do not. B : The merchandising company's financial statements do not have to report bad debts, while the service company's statements do. C : The merchandising company's financial statements do not have to report long-term liabilities, while the service company's statements do. D : The merchandising company's financial statements will report gross profit on sales, while the service company's statements do not.

D

Which of the following describes a similarity between an income statement and a statement of cash flows? A : Both statements reflect the adjusting entries made at the end of an accounting period. B : Both statements measure differences between the beginning of the accounting period and the end of the period. C : Both statements carry over accounting data from one accounting period to the next. D : Both statements summarize activities that took place during an accounting period.

D

Which of the following journal entries is appropriate when a company receives payment in advance for goods or services? A : Credit cash and debit a liability or revenue account. B : Debit cash and credit an expense account. C : Credit cash and debit a revenue account. D : Debit cash and credit a liability account.

D

Which of the following is a nominal account? Interest Payable. Dividends. Cash. Retained earnings.

Dividends

In the closing process, all of the revenue and expense account balances are closed to the: Capital account. Income Summary account. Retained Earnings account. Dividends account.

Income Summary account

Which of the following columns is generally found on a worksheet? Chart of accounts. Statement of cash flows. Income statement. All of these answer choices are correct.

Income statement.

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

an expense account and a credit to a liability account

An accrued expense is an expense which is recorded with the passage of time. an expense that has been incurred but for which payment has not yet been made. an expense for which cash is paid before the expense is incurred. initially recorded as an asset.

an expense that has been incurred but for which payment has not yet been made.

The worksheet: -replaces the financial statements. -is prepared at the beginning of the period to ready the permanent accounts for the activity that will occur during the period. -must be prepared on columnar paper. -none of these answer choices are correct.

none of these answer choices are correct.

If the balances in both accounts receivable and accounts payable decrease during the year -the decrease in both the accounts receivable and accounts payable balances will result in a decrease in cash for the period. -the decrease in both the accounts receivable and accounts payable balances will result in an increase in cash for the period. -the decrease in the accounts receivable balance would result in an increase in cash for the period. -the decrease in the accounts payable balance would result in an increase in cash for the period.

the decrease in the accounts receivable balance would result in an increase in cash for the period.

The double-entry accounting system means -each transaction is recorded with two journal entries. -each item is recorded in a journal entry, then in a general ledger account. -the dual effect of each transaction is recorded with a debit and a credit. -each journal entry must have one debit and one credit, or two debits and two credits.

the dual effect of each transaction is recorded with a debit and a credit.