Module 2 Prep Quiz
The Samuel Company uses the straight-line method to depreciate its equipment. On May 1, 2015, the company purchased some equipment for $224,000. The equipment is estimated to have a useful life of ten years and a salvage value of $20,000. On December 31, 2015, how much depreciation expense should Samuel record for the equipment in the adjusting entry?
$13,600
Information related to the Berkley Company for the calendar year 2015 follows: Liabilities, December 31, 2015 $400 Assets, December 31, 2015 700 Dividends distributed during 2015 90 Liabilities, December 31, 2014 250 Assets, December 31, 2014 350 Assuming no capital stock was issued during 2015, the net income earned by the Berkley Company during 2015 was $110 $260 $290 $200
$290
Reversing entries should not be made for which of the following? Adjusting entries related to estimates. Adjusting entries to accrue revenue to be collected in the next period. Adjusting entries that defer costs by recording them as prepaid expenses. Adjusting entries to expenses that are to be paid in the next period.
Adjusting entries related to estimates..
Which statement is true? All cash sales should be recorded in the cash receipts journal. Returned merchandise from a customer should be entered in the sales journal. All purchases should be recorded in a purchases journal. Closing and reversing entries will be found in the sales journal.
All cash sales should be recorded in the cash receipts journal.
On a worksheet, the balance in the accumulated depreciation account should be extended to which column? Income Statement credit column Balance Sheet debit column Income Statement debit column Balance Sheet credit column
Balance Sheet credit column
Which of the following rules is incorrect? Common stock accounts are increased by debit entries and decreased by credit entries. The accounting equation must always remain in balance. Asset accounts are increased by debit entries and decreased by credit entries. Expense accounts normally have debit balances.
Common stock accounts are increased by debit entries and decreased by credit entries.
The adjustment necessary to convert cash-basis payments for other operating costs to accrual-basis operating expenses requires the addition of ending prepaid expenses to the beginning prepaid expenses, subtracting the beginning accrued expenses from this amount, and finally adding the ending accrued expenses.
False
Rental receipts for the period July 1, 2015, through June 30, 2016, were collected on June 30, 2015. The effects of these economic events on the 2015 financial statements for unearned revenue and rent revenue are Unearned Revenue Rent Revenue I. Increase Increase II. Increase Decrease III. Decrease No effect IV. Decrease Increase
I
The balances in deferred (unearned) revenue accounts represent amounts that are Earned Collected I. Yes No II. Yes Yes III. No No IV. No Yes
IV
Which statement is false? The general journal is still a necessity, even when special journals are used. All transactions involving the receipt of cash are recorded in the cash receipts journal. A purchase of a desk calculator for the office should not be recorded in the purchases journal. If a cash payments journal is in use, postings are usually made only at the end of the month.
If a cash payments journal is in use, postings are usually made only at the end of the month.
On April 1, 2015, Miller Company paid $6,280 for a two-year insurance policy. On that date, Miller recorded the purchase by debiting Prepaid Insurance and crediting Cash. The correct December 31, 2015, adjusting entry would be Insurance Expense 3,925 Prepaid Insurance 3,925 Prepaid Insurance 3,140 Insurance Expense 3,140 Insurance Expense 2,355 Prepaid Insurance 2,355 Prepaid Insurance 2,355 Insurance Expense 2,355
Insurance Expense 2,355 Prepaid Insurance 2,355
On March 31, 2015, the Turi Company purchased a two-year fire insurance policy. Turi recorded the purchase by debiting Prepaid Insurance and crediting Cash for $10,000. Which of the following adjusting entries should Turi prepare at the end of 2015? Insurance Expense 3,750 Prepaid Insurance 3,750 Prepaid Insurance 3,750 Insurance Expense 3,750 Prepaid Insurance 5,500 Insurance Expense 5,500 Insurance Expense 5,000 Prepaid Insurance 5,000
Insurance Expense 3,750 Prepaid Insurance 3,750
On November 1, 2015, the Morrison Company purchased a two-year umbrella insurance policy for $3,600 and recorded the transaction by debiting Prepaid Insurance and crediting Cash. Which of the following adjusting entries would be used by Morrison to properly account for prepaid insurance on December 31, 2015?
Insurance Expense 300 Prepaid Insurance 300
On a worksheet, which account will not be extended to the Balance Sheet columns?
Inventory, January 1
Which of the following is not a major step necessary to complete the accounting cycle? Prepare adjusting entries Prepare and post closing entries Record the transactions, events, and arrangements Prepare the adjusted trial balance
Prepare adjusting entries
The accounting cycle is a series of steps that process the accounting information contained in its transactions, events, and arrangements. What are the steps involved in this task?
Record, organize, summarize, report
The another interpretation of the accounting equation is Assets = Liabilities + Contributed Capital + Beginning Retained Earnings + Net Income - Dividends + Beginning Accumulated Other Comprehensive Income + Other Comprehensive Income.
TRUE
Calculator The Michael Company has an accounts receivable account in its general ledger, and it also maintains a subsidiary ledger that contains an individual account for each of its customers who buys merchandise on credit. Which of the following statements about the general ledger account is not true? The general ledger account is properly referred to as a control account. The balance of the general ledger account should agree with the total of all of the accounts in the subsidiary ledger. The general ledger account is called a permanent account. The general ledger account is also called a contra account.
The general ledger account is also called a contra account.
What relationship exists between the general journal and the general ledger?
The general ledger accounts contain the same information as those in the general journal, but it is just in a different format.
Calculator Which T-account is incorrect? a. Interest Receivable + - b. Capital Stock - + c. Depreciation Expense + - d. Unearned Rent + -
Unearned Rent + -
On February 1, 2015, Apollo Company received $24,000 in advance for a three-year rental of land, and credited Rent Revenue for the entire amount. The correct December 31, 2015 adjusting entry would be
Unearned Rent 7,333 Rent Revenue 7,333
If the trial balance does not balance and the difference between debits and credits is evenly divisible by 9, there is a good chance that a transaction has been journalized to the wrong account. a transposition or a slide has occurred. a transaction has not been recorded. only one side of the transaction has been recorded.
a transposition or slide has occurred
Which of the following adjusting entries would not be reversed in the following accounting period?
an entry that allocated the expired portion of a long-lived asset to the current year's income statement
Marlin Company has all of the special journals that were described in your text (other than the voucher register) as a part of its accounting system. Which of the following journal entries would therefore be recorded in Marlin's general journal?
an entry to record the return of defective purchased merchandise for credit
A prepaid expense is an expense that has been incurred during the accounting period but has been neither paid nor recorded an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period a payment received by the company in advance for the future sale of inventory or performance of services an item that has been earned by the company during the accounting period but has been neither received nor recorded
an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period
Which of the following errors is not identified by using the trial balance?
an unposted transaction
Step two in completing a worksheet is to
analyze accounts
Calculator When reconciling its accounts, Boris Company found the accounts receivable general ledger account had a balance of $35,000, and the accounts receivable subsidiary ledger account balances totaled $33,000. The most likely reason for this difference was cash received from a customer was recorded twice in the general ledger. a sale to a customer was recorded twice in the subsidiary ledger. a sale to a customer was not posted to the general ledger. cash received from a customer was posted twice to the subsidiary ledger.
cash received from a customer was posted twice to the subsidiary ledger.
Which of the following is not a type of adjusting entry? depreciation of long-term physical assets correction of an error in the general journal recording of accrued revenue allocation of unearned revenue
correction of an error in the general journal
On August 1, 2015, Yellow Company paid $6,320 for a three-year insurance policy. On that date, an expense account was charged. In the adjusting entry on December 31, 2015, there would be a
credit to Insurance Expense for $5,442.
On June 1, 2015, Little Corporation received $5,320 in advance for a two-year rental of some land and properly credited Unearned Rent. In the adjusting entry at December 31, 2015, there would be a
credit to Rent Revenue for $1,552
Calculator The Oliver Construction Company received $18,000 for six months rental income in advance on November 1, 2015, and credited the Rental Revenue account. The required adjusting entry on December 31, 2015, would include a debit to Rental Revenue for $6,000 credit to Rental Receivable for $12,000 debit to Rental Revenue for $12,000 credit to Rental Revenue for $6,000
debit to Rental Revenue for $12,000
In terms of debits and credits, which types of accounts have the same (debit or credit) normal balances? dividends, expenses, assets assets, capital stock, revenues expenses, liabilities, capital stock retained earnings, dividends, liabilities
dividends, expenses, assets
Which of the following is an economic resource that should be depreciated over the accounting periods estimated to be benefited?
equipment purchased for use in the business operations
Which of the following errors will be detected by a trial balance?
incorrectly computing the balance of the cash account
An accrued expense is an expense incurred, paid, and recorded. paid and recorded but not incurred. incurred but neither paid nor recorded. whose amount is subject to estimation.
incurred but neither paid nor recorded.
When cash is debited for rents that are collected but are not yet earned, the amount credited should be presented as a separate item in shareholders' equity. presented as a liability until earned. recognized as revenue when collected. recorded as an asset until earned.
presented as a liability until earned.
Calculator The purpose of closing entries is to apportion prepaid expenses and unearned revenues to bring the accounts up to date. update a periodic inventory account for credit sales. update the retained earnings account on a daily basis. reduce all temporary accounts to zero.
reduce all temporary accounts to zero.
The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year. This error would cause an overstatement of shareholders' equity. expenses. liabilities. assets.
shareholders' equity.
The basic purpose of a trial balance is to verify that the total credits equal the total debits. list all of the accounts in the general ledger. list all of the accounts in the general ledger that have a balance. be sure that all journal entries have been recorded.
verify that the total credits equal the total debits.
