Accounting Unit 1 Exam

On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $________ (100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $________ (100/3,600) of insurance expense would be reported at the time of purchase.

100; 3600

work sheet

an internal accounting aid which helps in preparing financial statements.

A process of analyzing data to identify meaningful relations and trends is called data ____________.

analytics.

Place the steps in the adjusting process in the correct order in which they would be performed. a. record an adjusting entry b. determine what the current account balance is c. determine what the correct account balance should be

b. determine what the current account balance is c. determine what the correct account balance should be a. record an adjusting entry

Brown Company purchased $900 of supplies on credit. Illustrate how to record the transaction to T-accounts by completing the following sentence. Accounts payable would be _____________ (debited,/credited) on the ___________ (left/right) side of the T-account, and Supplies would be _____________ (debited/credited) on the ___________ (left/right) side of the T-account.

credited; right; debited; left

Vito Co. had current assets of $9,000 and current liabilities of $6,000 at the end of the year. Net income during the year was $21,000. The current ratio for the period is: a. 2.33 b. 28% c. 1.5 d. 67%

c. 1.5

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below. a. Credit Interest receivable for $600. b. Debit Cash for $600. c. Debit Interest receivable for $600. d. Debit Interest revenue for $600.

c. debit interest receivable for $600

By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries ___________ (expense/payable) account and ___________ (debit/credit) the Salaries _______________ (expense/payable/unearned) account.

expense; credit; payable

.A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest ______________ (expense/payable/receivable) account and __________(debit/credit) the Interest _________(expense/payable/receivable) account.

expense; credit; payable

A graphical presentation of data to help in understanding their significance is called data _____________.

visualization

A $300,000 building was purchased on December 1. It is estimated that it will have a life of 20 years and zero salvage value. Calculate depreciation expense for the month of December using straight-line depreciation. a. $15,000 b. $0 c. $1,250 d. $2,500

$300,000/20 years = $15,000 per year. $15,000/12 months= 1250. c. $1,250

Given the following information for Jackson's Boots, calculate its Debt Ratio for the current year. $ in thousands Total assets: $250 Total liabilities: $100 Total equity: $150

0.4

Which of the following statements describes why accrual accounting better reflects a business's performance? (Check all that apply.) a. Comparability of financial statements is improved. b. Revenues are always recorded in the period in which they are earned. c. It provides a better focus and understanding of how cash is spent and why it is received. d. Expenses are always recognized in the period in which they are incurred.

a. Comparability of financial statements is improved. b. Revenues are always recorded in the period in which they are earned. d. Expenses are always recognized in the period in which they are incurred.

trial balance

a list of accounts and their balances at a point in time.

In defining a reporting period, which of the following statements is (are) correct? (Check all that apply.) a. A one-year reporting period is known as the fiscal year. b. A reporting period refers to each day in the calendar year. c. A reporting period is used to determine the due date of payables. d. A reporting period is determined by the business. e. A reporting period can be one month, one quarter or one year.

a. A one-year reporting period is known as the fiscal year. d. A reporting period is determined by the business. e. A reporting period can be one month, one quarter or one year.

Explain what unearned revenues are by choosing the correct statement below. a. Unearned revenues refer to cash received in advance of providing a service or product. b. Unearned revenues refer to income reported on the income statement. c. Unearned revenues refer to customer payments which have not yet been received. d. Unearned revenues refer to amounts owed to the company that have not yet been billed.

a. Unearned revenues refer to cash received in advance of providing a service or product.

Which of the following accounts is considered a prepaid expense? a. Accounts payable b. Supplies c. Utility expense d. Wages expense

b. supplies

Select the statement below that explains how to use the Income Summary account. a. The Income Summary account is debited for the sum of all revenue accounts during the closing process. b. The Income Summary account is used during the closing process to facilitate the closing of all permanent accounts. c. The Income Summary account is used during the closing process to facilitate the closing of revenue and expense accounts. d. The Income Summary account is credited during the adjusting process, as it is a contra asset account.

c. the income summary account is used during the closing process to facilitate the closing of revenue and expense accounts

Which of the accounts below are considered accrued expenses? a. Cash, Building, Equipment b. Unearned revenue, Utility expense c. Common Stock, Dividends d. Wages expense, Interest expense

d. wages expense, interest expense

Butter Company purchased $300 of supplies for cash. Illustrate how to record the transaction into T-accounts by completing the following sentence. The Supplies account would be creditedBlank 1Blank 1 credited , Incorrect Unavailable(debited/credited) on the leftBlank 2Blank 2 left , Correct Unavailable(left/right) side of the T-account and the Cash account would be debitedBlank 3Blank 3 debited , Incorrect Unavailable(debited/credited) on the rightBlank 4Blank 4 right , Correct Unavailable (left/right) side of the T-account.

debited; left; credited; right

debt ratio formula

debt ratio = total liabilities / total assets

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) ____________ (increase/decrease) in total liabilities or equity.

increase

balance sheet

reports a business's assets, liabilities and equity on a specific date.

income statement

reports a business's revenues and expenses for a period of time.

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the ____________ (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and ___________ (debit/credit) the ______________ (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

interest receivable; credit; interest revenue

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the _____________ (Retained earnings / Cash) account balance as well as any debit balance in the _____________ (Dividends / Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement.

retained earnings; dividends

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the ________________ (Retained earnings / Cash) account balance as well as any debit balance in the ________________ (Dividends / Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement.

retained earnings; dividends

The expanded accounting equation is defined as: _________ = Liabilities + Common Stock +___________ - ___________ - Dividends. Do not include the word "account" or "accounts" in your answer.

Assets = Liabilities + Common Stock + Revenues - Expenses - Dividends

Define a journal.

a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred

define accounting

accounting is a system that identifies, records, and communicates financial information

Accounts payable refer to obligations owed (by/to) the business and are classified as a(n) (asset/liability/expense) account.

by; liability

Managerial accounting is focused on the needs of a. external users b. lenders c. internal users d. customers

c. internal users

Which of the following statements is correct about prepaid accounts a. Prepaid accounts are also called prepaid liabilities and are classified as liabilities. b. Prepaid accounts are another name for accounts receivable and are reported as an asset. c. Prepaid accounts are current expense accounts and are reported on the income statement. d. Prepaid accounts are also called prepaid expenses and are considered assets.

d. prepaid accounts are also called prepaid expenses and are considered assets

Which of the following describes a general ledger? a. The general ledger describes all liability accounts. b. The general ledger combines sales and expenses to determine the net income of a business. c. The general ledger is a record containing all accounts used by a company. d. The general ledger is a record of all transactions in alphabetical order.

c. the general ledger is a record containing all accounts used by a company.

Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence. Jackson would decrease (expenses/cash/revenues) and increase (expenses/equity/revenues) in the accounting equation.

cash; expenses

During September, Sally's Hair Salon purchased $900 of supplies on credit. In October, Sally's makes a payment of $200 on this bill. Record the October transaction into Sally's accounting equation by: (choose all that apply) a. decreasing Cash, $200. b. increasing Supplies, $900. c. decreasing Accounts Payable, $200. d. decreasing Accounts Receivable, $200. e. increasing Supplies, $200.

a. decreasing cash $200 c. decreasing accounts payable $200

The _____ is the first financial statement to be prepared. a. income statement b. balance sheet c. statement of retained earnings

a. income statement

The definition of revenues includes which of the following statements? (choose all that apply) a. Revenues are the sales of products or services to customers by a business. b. Revenues increase equity. c. Revenues are resources owned or controlled by a company. d. Revenues are creditor's claims against the company.

a. revenues are the sales of products or services to customers by a business. b. revenues increase equity.

Which of the following are part of the FASB conceptual framework: (choose all that apply) a. Elements b. Qualitative characteristics c. Recognition and measurement d. Objectives e. Principles f. Assumptions

elements, qualitative characteristics, recognition and measurement, and objectives.

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the (Cash/Equipment/Supplies) account and a decrease to the (Cash/Equipment/Supplies) account.

equipment; cash

True or false: Assets are claims (by creditors) against the company.

false

Users who do not directly run the organization and have limited access to accounting information are known as (internal/external) users.

external

Given the following lists of accounts, choose the one that contains only assets. a. Cash, Building, Supplies, Accounts Receivable b. Cash, Building, Accounts Payable, Land c. Supplies, Common Stock, Cash, Accounts Receivable d. Building, Accounts Payable, Equipment

a. cash, building, supplies, accounts receivable

The accounts payable account is a(n) ______ account. a. expense b. revenue c. liability d. asset

c. liability

The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the a. expense recognition principle b. revenue recognition principle c. full disclosure principle d. measurement principle

a. expense recognition principle

Define a trial balance.

It is a list of each account and its balance at any given time and is used to verify that debits = credits

Which of the following show a correct date line for a Balance Sheet: a. December 31, 20xx b. For quarter ended December 31, 20xx c. For year ended December 31, 20xx d. For month ended December 31, 20xx

a. December 31, 20xx

Ethics are defined as: (choose all that apply) a. accepted standards of good and bad behavior. b. determining the value of financial information in a business. c. choosing the alternative that will increase the net income of the company. d. beliefs that distinguish right from wrong.

a. accepted standards of good and bad behavior d. beliefs that distinguish right from wrong

Identify the correct definition of an asset: a. An asset is a resource that a business owns or controls b. An asset refers to the claims of the owners c. An asset is an amount owed to a creditor

a. an asset is a resource that a business owns or controls

Dividends of $50 are paid to the shareholders of a company. How would this affect the equity of a business? a. Assets are decreased and equity is decreased. b. Assets are decreased and liabilities are decreased. c. Equity is increased and assets are increased. d. Assets are increased and equity is decreased.

a. assets are decreased and equity is decreased

The Building account is a(n) (asset/liability/expense) account and is reported on the (left/right) side of the accounting equation.

asset; left

Prepaid accounts are (assets/liabilities) that represent prepayments of future expenses and are increased with a (debit/credit).

assets; debit

When financial statements are prepared, unexpired prepaid accounts are recorded as (expenses/assets/liabilities) and the expired portion of the prepaid account is reported as a(n) (expense/asset/liability).

assets; expense

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities).

assets; expenses

From the following statements, identify the correct definition of a liability. a. The claims of a business's owners. b. A company's obligation to provide assets, products or services to others. c. Something of value that a business owns.

b. a company's obligation to provide assets, products or services to others.

Which of the following statements is correct regarding common stock? a. Common stock does not affect equity. b. Common stock causes equity to increase. c. Common stock causes assets to decrease. d. Common stock causes creditor debt to increase.

b. common stock causes equity to increase

Which of the following statements describes the effect of expenses on equity? a. Expenses have little or no effect on equity. b. Expenses cause equity to increase. c. Expenses decrease equity only in the period they are paid. d. Expenses cause equity to decrease.

d. expenses cause equity to decrease.

There are several types of accounts that impact equity. Which of the accounts below cause equity to increase? a. Common Stock and Revenues b. Revenues and Assets c. Common Stock and Expenses d. Dividends and Assets

a. Common Stock and Revenues

Which of the following statements is the correct definition of a creditor? a. A creditor is an individual or organization that has a right to receive payments from a business. b. A creditor is an individual or organization that owes money to a business. c. A creditor is an individual or organization which is trying to borrow money from a business. d. A creditor is an individual or organization which purchases merchandise from a business on account.

a. a creditor is an individual or organization that has a right to receive payments from a business.

Given the following list of accounts, identify which are classified as assets. Select all that apply. a. Supplies b. Equipment c. Common Stock d. Wages Payable e. Accounts Receivable f. Land g. Dividends h. Cash

a. supplies b. equipment e. accounts receivable f. land h. cash

Which of the following statements is accurate about the Land account? (Check all that apply.) a. The Land account is an asset. b. The Land account records the costs of purchasing an office, warehouse or store. c. The Land account is an expense account. d. The Land account is used to record the costs of land purchased by the business. e. The Land account is increased on the left side of its T-account.

a. the land account is an asset d. the land account is used to record the costs of land purchased by the business e. the land account is increased on the left side of its T-account

The correct definition of an income statement includes which of the following? a. The statement describes a business's revenues and expenses over a period of time. b. The statement identifies cash inflows and outflows during a period of time. c. The statement explains changes in equity over a period of time. d. The statement describes a company's assets, liabilities and equity at a point in time.

a. the statement describes a business's revenues and expenses over a period of time.

Generally accepted accounting principles (GAAP) wants information to have: (choose all that apply) a. conceptual history b. rules c. faithful representation d. relevance

c. faithful representation d. relevance

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following? a. Increase Cash; increase Supplies. b. Increase Cash; increase Expenses. c. Increase Supplies; increase Revenues. d. Decrease Cash; increase Supplies.

d. decrease cash; increase supplies

An external user of accounting information a. directly manages organization operations b. helps to monitor costs and ensure quality c. uses internal reports d. does not directly run the organization

d. does not directly run the organization

The four general accounting principles include: (Check all that apply). a. business entity b. going concern c. time period d. full disclosure e. expense recognition f. measurement g. revenue recognition

d. full disclosure e. expense recognition f. measurement g. revenue recognition

The _____ principle states that accounting information is based on actual cost. a. expense recognition b. revenue recognition c. full disclosure d. measurement

d. measurement

Dividends cause a(n) (increase/decrease) in equity and are recorded directly in (common stock/dividends/equity) .

decrease, dividends

An account is a record of increases and _____________ in a specific asset, liability, equity, revenue or expense.

decreases

Owner investments cause a(n) (increase/decrease) in equity.

increase

The Notes payable account is a(n) (asset/liability/expense) account and is increased on the (left/right) side of the T-account.

liability; right

What is the formula for net income?

net income = revenues - expenses

Equity is composed of contributed capital and ____ ______

retained earnings.

Define a general ledger.

It is a collection of all accounts with their activity and balances that exist in a business.

Define a chart of accounts.

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

Before sorting/transferring amounts to the financial statement columns on a worksheet, the Trial Balance, _________________ (Income Statement, Adjustments) and Adjusted Trial Balance columns must ________________ (balance, clear).

adjustments; balance

All of the following are on an unclassified balance sheet: (Check all that apply). a. Total current liabilities b. Total liabilities c. Total assets d. Total noncurrent assets e. Total current assets f. Total noncurrent liabilities

b. total liabilities c. total assets

Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements. a. General ledger b. Trial balance c. T-account d. General journal

b. trial balance

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be ______________ (debited/credited) on the __________ (left/right) side of the T-account and the Common stock account would be _______________ (debited/credited) on the _________ (left/right) side of the T-account.

debited; left; credited; right

Brown Co. had current assets of $15,000, total assets of $30,000 and current liabilities of $9,000 at the end of the year. The current ratio for the period is: a. 0.5 b. 3.33 c. 1.67 d. 2.0

15000/9000= 1.67

Given the following information for Mouse Inc., calculate its profit margin for the year 2018. Net Income: (2018) $500; (2019) $450 Net Sales: (2018) $3500; (2019) $3650 Accounts Receivable : (2018) $2150; (2019) $1500 a. 14.29% b. 61.42% c. 7% d. 57%

500/3500 = 14.29%

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt. (Check all that apply.) a. A company that finances their assets by borrowing will need to make enough money to pay off the debt. b. A company's required debt payments may be greater than its ability to generate money to make those payments. c. If a company has a lot of debt, they may not be able to afford to take on new debt. d. Assessing a company's risk of paying off debt is not required when the company is highly leveraged.

a. A company that finances their assets by borrowing will need to make enough money to pay off the debt. b. A company's required debt payments may be greater than its ability to generate money to make those payments. c. If a company has a lot of debt, they may not be able to afford to take on new debt.

Which of the following statements about the Dividends account is (are) correct? (Check all that apply.) a. Dividends is used to record distributions of assets to the owners of a business. b. Dividends decrease equity. c. Dividends is increased when assets are paid to the owners. d. Dividends is increased by an owner investments. e. Dividends are increased on the left side of the T-account.

a. Dividends is used to record distributions of assets to the owners of a business. b. Dividends decrease equity. c. Dividends is increased when assets are paid to the owners. e. Dividends are increased on the left side of the T-account

Which of the following statements is (are) correct about completing a work sheet? (Check all that apply.) a. If a net income occurs, it is added to the Credit column of the Balance Sheet. b. If a net income occurs, it is added to the Debit column of the Income Statement. c. Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. d. The words "net income" or "net loss" should be written on a line in the Income Statement columns of the worksheet. e. If a loss occurs, it is added to the Debit column of the Balance Sheet.

a. If a net income occurs, it is added to the Credit column of the Balance Sheet. b. If a net income occurs, it is added to the Debit column of the Income Statement. c. Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. e. If a loss occurs, it is added to the Debit column of the Balance Sheet.

A plant asset can be defined by which of the following statements? (Check all that apply.) a. Its original cost (minus any salvage value) is expensed over its useful life. b. Its original cost is expensed in the period in which it was purchased. c. It is reported on the balance sheet. d. It is a tangible long-term asset. e. It has a life within the business greater than one year or the current operating cycle, whichever is longer.

a. Its original cost (minus any savage value) is expensed over its useful life. c. It is reported on the balance sheet. d. It is a tangible long-term asset. e. It has a life within the business greater than one year or the current operating cycle, whichever is longer.

Which of the following statements is (are) correct regarding a T-account? (Check all that apply.) a. A T-account will show the debit and credit effects of transactions. b. A T-account reflects whether a transaction was posted correctly. c. A T-account represents a ledger account. d. A T-account may be used as a tool to visualize the effects of a transaction.

a. a T-account will show the debit and credit effects of transactions. c. a T-account represents a ledger account d. a T-account may be used as a tool to visualize the effects of a transaction.

The Income Summary account can be defined as which of the following? (Check all that apply.) a. A temporary account b. An account that contains a credit for the sum of all revenues c. An account that contains a credit for the sum of all expenses d. An account whose balance equals net income or net loss e. A permanent account f. An account used during the closing process

a. a temporary account b. an account that contains a credit for the sum of all revenues d. an account whose balance equals net income or net loss f. an account used during the closing process

Which of the following statements is correct regarding a work sheet and the adjustment process? a. Adjusting journal entries are prepared from the Adjustments columns of a work sheet. b. Adjusting journal entries are journalized in the work sheet. c. Adjusting journal entries are prepared from the Adjusted Trial Balance columns. d. After keying adjustments in the work sheet, it is not necessary to journalize the adjustments in a journal.

a. adjusting journal entries are prepared from the adjustments columns of a work sheet

Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.) a. Adjustments involve increasing both an expense and a liability account. b. They are reported on an income statement. c. They refer to earnings which have been earned, but not yet billed. d. They refer to costs that are incurred in a period, but are both unpaid and unrecorded. e. Examples of accrued expenses are wages expense and interest expense. f. They are also called accounts receivable.

a. adjustments involve both an expense and a liability account. b. they are reported on an income statement d. they refer to costs that are incurred in a period, but are both unpaid and unrecorded e. examples of accrued expenses are wages expense and interest expense

Determine which of the following transactions may require adjustments. (Check all that apply.) a. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. b. a 24-month insurance policy was prepaid c. An employee was paid his weekly wages in full at the end of the week. d. Rent was paid for the month. e. Equipment was purchased in the middle of the year. f. a one-month premium on an insurance policy was paid g. Six months of rent were paid in advance. h. Supplies were purchased at the beginning of the year, but not all were used.

a. an advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. b. a 24-month insurance policy was prepaid e. equipment was purchased in the middle of the year g. six months of rent were paid in advance h. supplies were purchased at the beginning of the year, but not all were used.

When does the closing process take place? a. At the end of an accounting period b. Before financial statements are prepared c. At the beginning of an accounting period d. Multiple times throughout a month to determine net income

a. at the end of an accounting period

Describe your understanding of the closing process by identifying the correct steps below. (Check all that apply.) a. Close the Dividends account. b. Close the Common Stock account c. Close all expense accounts. d. Close all asset accounts. e. Close all revenue accounts. f. Close the Income Summary account.

a. close the dividends account c. close all expense accounts e. close all revenue accounts f. close the income summary account

StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December: (Select all that apply). a. debit accounts receivable b. debit cash c. credit services revenue d. debit services revenue e. credit accounts payable

a. debit accounts receivable c. credit services revenue

Explain the required steps to complete a work sheet by placing the following steps in the correct order. (Put the first step at the top.) Instructions a. Enter unadjusted trial balance. b. Sort adjusted trial balance amounts to financial statements. c. Enter adjustments. d. Total financial statement columns, compute income or loss and balance columns. e. Prepare adjusted trial balance.

a. enter unadjusted trial balance c. enter adjustments e. prepare adjusted trial balance b. sort adjusted trial balance amounts to financial statements d. total financial statement columns, compute income or loss and balance columns

Which of the accounts below would appear in the equity section of a classified balance sheet? a. Retained Earnings b. Service Revenue c. Income Summary

a. retained earnings

Review the following statements and select the ones that are correct regarding sorting accounts from the Adjusted Trial Balance columns of a work sheet to the Income Statement and Balance Sheet columns in order to prepare for our last step of completing the worksheet. (Check all that apply.) a. Expense accounts go to the Income Statement Debit column. b. Liabilities go to the Balance Sheet Credit column. c. Dividends go to the Income Statement Debit column. d. Dividends go to the Balance Sheet Debit column.

a. expense accounts go to the income statement debit column b. liabilities go to the balance sheet column d. dividends go to the balance sheet debit column

A classified balance sheet can be described as a balance sheet that: (Check all that apply.) a. is more useful to decision makers. b. lists all assets according to the size of their balance with larger dollar amounts listed first. c. organizes assets and liabilities into important subgroups. d. lists current assets in the order of how quickly they can be converted to cash. e. contains subgroups for expenses and revenues.

a. is more useful to decision makers c. organizes assets and liabilities into important subgroups d. lists current assets and liabilities into important subgroups

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process. (Check all that apply.) a. Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet. b. Journalizing and posting adjusting entries are not mandatory when a work sheet is involved. c. A work sheet is a journal. d. Information from the Adjustments columns are used for the adjusting journal entries.

a. journalizing and posting adjusting entries is required after adjustments are entered in a work sheet. d. information from the adjustments columns are used for the adjusting journal entries

What defines a long-term investment? (Check all that apply.) a. Long-term investments are sometimes referred to as non current investments. b. Long-term investments are used to produce or sell products and services. c. Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. d. Long-term investments are long-term resources that usually lack physical form.

a. long-term investments are sometimes referred to as non current investments c. notes receivable and stock and bond investments are assets that are expected to be held for more than one year.

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.) a. Mortgage payable b. Unearned rent c. Notes receivable (due in three years) d. Notes payable (due in five months) e. Bonds payable (due in five years) f. Accounts payable

a. mortgage payable e. bonds payable (due in five years)

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.) a. Permanent accounts are reported on the balance sheet. b. Temporary accounts have a balance for one period only. c. Permanent accounts will appear on a post-closing trial balance. d. Retained Earnings is a permanent account, but Dividends is a temporary account. e. Temporary accounts will appear on a post-closing trial balance. f. Temporary accounts are reported on the income statement.

a. permanent accounts are reported on the balance sheet. b. temporary accounts have a balance for one period only. c. permanent accounts will appear on a post-closing trial balance. d. retained earnings is a permanent account, but dividends is a temporary account. f. temporary accounts are reported on the income statement.

Which of the following is correct regarding posting a transaction? a. Posting means to transfer journal information to a ledger. b. Posting takes place once during an accounting period. c. Posting means to enter transactions into a journal.

a. posting means to transfer journal information to a ledger

Identify which of the accounts below would be classified as a current asset. (Check all that apply.) a. Prepaid rent b. Accounts receivable c. Cash d. Office supplies e. Equipment f. Land

a. prepaid rent b. accounts receivable c. cash d. office supplies

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) a. Supplies expense would be debited for $300. b. Supplies expense would be debited for $700. c. Supplies would be credited for $300. d. Supplies would be debited for $300. e. Supplies expense would be credited for $300.

a. supplies expense would be debited for $300 c. supplies would be credited for $300

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.) a. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. b. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. c. The adjusted trial balance is used to prepare financial statements. d. The unadjusted trial balance is more up to date and should be used to prepare financial statements.

a. the adjusted trial balance generally has more accounts listed than the unadjusted trial balance b. the adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. c. the adjusted trial balance is used to prepare financial statements.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.) a. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. b. The unadjusted trial balance is more up to date and should be used to prepare financial statements. c. The adjusted trial balance is used to prepare financial statements. d. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted.

a. the adjusted trial balance generally has more accounts listed that the unadjusted trial balance.

Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below. a. The company would add the net income amount to the Credit column of the Balance Sheet column of a work sheet. b. The Retained Earnings account ending balance, reflected in the Credit column of the Balance Sheet, would include the net income. c. The net income would be added to the Credit column of the Income Statement columns.

a. the company would add the net income amount to the credit column of the balance sheet column of a work sheet.

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.) a. The cycle contains steps for adjusting and closing accounts. b. The accounting cycle takes place anytime the general ledger accounts need adjusting. c. The accounting cycle refers to steps followed by a company to prepare its financial statements. d. The accounting cycle is a series of steps repeated each reporting period. e. The accounting cycle contains 10 steps. f. The accounting cycle refers to the steps that occur within a company to approve expenses for payment.

a. the cycle contains steps for adjusting and closing accounts c. the accounting cycle refers to stops followed by a company to prepare its financial statements d. the accounting cycle is a series of steps repeated each reporting period e. the accounting cycle contains 10 steps

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.) a. They are reported on a balance sheet. b. They are also called accounts receivable. c. They refer to earnings which have been earned, but not yet billed. d. They are also called deferred revenues. e. They refer to cash received in advance of performing a service or product. f. They are a liability.

a. they are reported on a balance sheet d. they are also called deferred revenues e. they refer to cash received in advance of performing a service or product f. they are a liability

Which of the following describes accrued revenue? (Check all that apply) a. They refer to earnings which have been earned but not yet billed. b. Adjustments involve increasing both an expense account and a liability account. c. Accounts receivable is usually increased when accruing revenues. d. They refer to revenues that are earned in a period, but have not been received and are unrecorded. e. The adjustment causes an increase in an asset account and an increase in a revenue account.

a. they refer to earnings which have been earned but not yet billed c. accounts receivable is usually increased when accruing revenues d. they refer to revenues that are earned in a period, but not been received and are unrecorded e. the adjustment causes an increase in an asset account and an increase in a revenue account

Which of the following would be included on an income statement? (Check all that apply.) a. Total expenses b. Total revenues c. Total liabilities d. Total equity e. Total assets f. Net income

a. total expenses b. total revenues f. net income

Financial statements are prepared from a(n) a. trial balance b. general ledger c. journal entries d. chart of accounts

a. trial balance

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the _______________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account and __________ (debit/credit) the _______________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account.

accounts receivable; credit; service revenue

Equipment is a(n) (asset/liability/expense) account. It is reported on the (left/right) side of the accounting equation and is (increased/decreased) when equipment is purchased.

asset; left; increased

What is a plant asset? a. A plant asset refers to the stock purchased by a business held for future investment. b. A plant asset refers to a long-term tangible asset used to produce and sell products or services. c. A plant asset is the portion of a current asset which will be used up in the next accounting period. d. A plant asset is considered temporary and will be used up within one accounting period.

b. A plant asset refers to a long-term tangible asset used to produce and sell products or services.

Given the statements below, choose the most accurate definition of dividends. a. Resources owned or controlled by a company b. Outflows of cash or other assets paid to the owners of a corporation c. Cost of providing products or services to customers d. Assets earned from a company's earning activities e. Cash or other assets an owner puts into the business

b. Outflows of cash or other assets paid to the owners of a corporation

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry? a. Supplies would be debited for $200. b. Supplies expense would be debited for $600. c. Supplies expense would be debited for $200. d. Supplies would be credited for $200.

b. Supplies expense would be debited for $600

Describe the final step in the adjusting process. a. The final step is to post to a trial balance so financial statements can be prepared. b. The final step is to create an adjusting journal entry to get from step 1 to step 2. c. The final step is to determine the correct balance of an account. d. The final step is to determine the current balance of an account.

b. The final step is to create an adjusting journal entry to get from step 1 to step 2.

Which of the statements below is correct regarding the difference between a temporary account and a permanent account? a. Permanent account balances will be transferred to the Retained Earnings account. b. A temporary account will not appear on a post-closing trial balance. c. A permanent account will not appear on a post-closing trial balance. d. Temporary account balances will be carried to the next accounting period.

b. a temporary account will not appear on a post-closing trial balance

Which of the following financial statements report(s) the financial position of a business over a period of time? (Check all that apply.) a. Balance sheet b. Statement of cash flows c. Statement of retained earnings d. Income statement

b. statement of cash flows c. statement of retained earnings d. income statement

Rather than debiting an asset account, which of the following statements explains an alternate recording procedure to journalize prepaid expenses, such as prepaid rent or supplies. (Check all that apply.) a. Record all prepaid expenses with credits to expense accounts b. Any unused prepaids existing at end of period are transferred to asset accounts. c. Record all prepaid expenses with credits to liability accounts. d. Record all prepaid expenses with debits to expense accounts.

b. any unused prepaids existing at end of period are transferred to asset accounts d. record all prepaid expenses with debits to expense accounts

Summarize the steps in the closing process by selecting the correct choice below. a. Close income statement debit balance accounts; close income statement credit balance accounts; close income summary; close withdrawals. b. Close income statement credit balance accounts; close income statement debit balance accounts; close income summary; close withdrawals. c. Close income statement credit balance accounts; close income summary; close withdrawals; close income statement debit balance accounts. d. Close income statement credit balance accounts; close income summary; close income statement debit balance accounts; close withdrawals.

b. close income statement credit balance accounts; close income statement debit balance accounts; close income summary; close withdrawals.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction? a. Debit accounts receivable and credit cash b. Debit accounts receivable and credit services revenue c. Debit cash and credit services revenue

b. debit accounts receivable and credit services revenue

On December 28, I. Greasy Catering Company completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below. a. Debit Unearned revenue for $600. b. Debit Accounts receivable for $600. c. Credit Accounts receivable for $600. d. Debit Catering revenue for $600.

b. debit accounts receivable for $600

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry? a. Debit Salaries payable for $500. b. Debit Salaries expense for $500. c. Credit Salaries expense for $500. d. Credit Unearned revenues for $500.

b. debit salaries expense for $500

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.) a. debit to Insurance expense for $4,800. b. debit to Insurance expense for $400. c. credit to Prepaid insurance for $400. d. debit to Prepaid insurance for $400. e. credit to Insurance expense for $400.

b. debit to insurance expense for $400 c. credit to prepaid insurance for $400

Which of the following defines long-term liabilities? a. Long-term liabilities are obligations due to be paid within one year. b. Long-term liabilities are debts of a business that are not due to be settled within one year. c. Long-term liabilities are reported before current liabilities on a classified balance sheet. d. Long-term liabilities are costs incurred within an accounting period that have uncertain benefits.

b. long-term liabilities are debts of a businesss that are not due to be settled within one year

A reversing entry can be described as a(n): (Check all that apply.) a. entry that reduces expenses reported on the income statement. b. optional entry. c. entry that is the exact opposite of an accrual adjusting entry. d. entry that is used for adjusting entries involving accrued revenues and accrued expenses. e. entry whose purpose is to simplify a company's record keeping. f. required entry done at the end of an accounting period.

b. optional entry c. entry that is the exact opposite of an accrual adjusting entry d. entry that is used for adjusting entries involving accrued revenues and accrued expenses e. entry whose purpose is to simplify a company's record keeping.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.) a. Operating expenses. b. Plant assets. c. Long-term investments. d. Noncurrent equity. e. Current assets. f. Tangible current assets. g. Noncurrent (long-term) liabilities.

b. plant assets c. long-term investments e. current assets g. noncurrent (long-term) liabilities

The revenue recognition principle states that revenue: a. is recognized when expenses are paid b. should be recorded when goods or services are provided to customers at an amount expected to be received c. should be recorded at the end of the accounting cycle in which the sale was made d. should be recorded when payment has been received

b. should be recorded when goods or services are provided to customers at an amount expected to be received.

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.) a. Common Stock b. Supplies c. Prepaid rent d. Accounts payable e. Prepaid insurance

b. supplies c. prepaid rent e. prepaid insurance

On Nov.1, Lyons Company pays $2,400 cash for supplies. Show how to use T-accounts to record this transaction by selecting the correct answer below. a. Supplies would be credited; Cash would be credited. b. Supplies would be debited, and Cash would be credited. c. Cash would be debited, and Supplies would be credited d. Supplies expense would be credited; Cash would be debited.

b. supplies would be debited, and cash would be credited

Explain the difference between the unadjusted and the adjusted trial balance. a. The unadjusted trial balance is more up to date than the adjusted trial balance. b. The adjusted trial balance is prepared after adjusting entries have been recorded and posted. c. The unadjusted trial balance is more accurate and should be used to prepare financial statements. d. The adjusted trial balance contains only the accounts which were adjusted. The unadjusted trial balance contains all of the remaining accounts.

b. the adjusted trial balance is prepared after adjusting entries have been recorded and posted.

Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. (Check all that apply.) a. The balance sheet is the first financial statement prepared. b. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. c. The income statement is the first financial statement prepared after preparing the adjusted trial balance d. The adjusted trial balance includes all accounts and balances appearing in financial statements. e. The ending Retained Earnings account balance on the balance sheet is transferred from the adjusted trial balance. f. Financial statements are easier to prepare using the adjusted trial balance than the general ledger.

b. the ending retained earnings account balance on the balance sheet is taken from the statement of retained earnings e. the ending retained earnings account balance on the balance sheet is transferred from the adjusted trial balance

Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. (Check all that apply.) a. The ending Retained Earnings account balance on the balance sheet is transferred from the adjusted trial balance. b. The income statement is the first financial statement prepared after preparing the adjusted trial balance c. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. d. Financial statements are easier to prepare using the adjusted trial balance than the general ledger. e. The adjusted trial balance includes all accounts and balances appearing in financial statements. f. The balance sheet is the first financial statement prepared.

b. the income statement is the first financial statement prepared after preparing the adjusted trial balance c. the ending retained earnings account balance on the balance sheet is taken from the statement of retained earnings d. financial statements are easier to prepare using the adjusted trial balance than the general ledger

Identify which group of accounts may require adjustments at the end of the accounting period. a. Utilities expense; Cash; Common Stock b. Unearned revenue; Supplies; Prepaid rent c. Cash; Notes receivable; Land

b. unearned revenue; supplies; prepaid rent

Choose the account(s) below, that would have a normal credit balance. (Check all that apply). a. Supplies Expense b. Unearned Revenues c. Accounts Payable d. Common Stock e. Revenues

b. unearned revenues c. accounts payable d. common stock e. revenues

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order. a. verify that total debt balance equals total credit balance b. compute the total of debt balances and credit balances c. list each account title and its amount from the general ledger

c, b, a

$21,000 of equipment is purchased on December 1. It is estimated that it will have a life of 5 years and zero salvage value. Calculate depreciation expense as of December 31 of the first year using the straight-line method. a. $4,200 b. $700 c. $350 d. $21,000

c. $350

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.) a. Expenses are recorded when they are paid and revenues are recorded when payment is received. b. Revenues are recorded when they are earned or services are performed. c. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. d. Matching of expenses with revenues is a major part of the adjusting process.

c. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. d. Matching of expenses with revenues is a major part of the adjusting process.

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below. a. Cash would be credited for $3,600. b. Prepaid insurance would be credited for $3,600. c. Insurance expense would be debited for $300. d. Insurance expense would be debited for $3,600.

c. Insurance expense would be debited for $300

Describe an unclassified balance sheet. a. An unclassified balance sheet organizes assets and liabilities into important subgroups. b. An unclassified balance sheet lists all operating expenses separate from its non-operating expenses. c. An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity. d. An unclassified balance sheet is one where assets are separated into operating assets and non-operating assets.

c. an unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity

Which of the following accounts would be sorted from the Adjusted Trial Balance of a work sheet to the Balance Sheet & Statement of Owner's Equity columns on a work sheet? a. Accounts receivable; Service revenue; Prepaid rent b. Land; Unearned rent; Supplies expense c. Cash; Accounts payable; Owner, Withdrawals d. Cash; Wages expense; Land

c. cash; accounts payable; owner, withdrawals

Choose the statement below that explains what "closing" means. a. Closing means to adjust an account's balance to its correct amount. b. Closing means to transfer an expense account's balance to the income statement. c. Closing means to bring an account balance to zero. d. Closing means to transfer the balance in an account to an asset account.

c. closing means to bring an account balance to zero

What are current liabilities? (Check all that apply.) a. Current liabilities are obligations that are not due to be settled within one year or the operating cycle, whichever is longer. b. Current liabilities are property, plant and equipment that are tangible and depreciated. c. Current liabilities are reported in the order of those to be settled first. d. Current liabilities are obligations due to be paid within one year.

c. current liabilities are reported in the order of those to be settled first. d. current liabilities are obligations due to be paid within one year.

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below. a. Credit Cash; debit Common stock b. Debit Investments; credit Cash. c. Debit Cash; credit Common stock d. Debit Cash; credit Revenue.

c. debit cash; credit common stock

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below. a. Credit Unearned revenues for $30. b. Credit Interest expense for $30. c. Debit Interest expense for $30. d. Debit Interest payable for $30.

c. debit interest expense for $30

Which of the following is correct regarding a work sheet? a. The adjusted trial balance column totals will be off by the net income amount. b. If a company reports net income, then this amount will be added to the Adjustments column. c. Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns. d. If an account requires more than one adjustment, the second adjustment is not entered.

c. each set of column totals must balance on the trial balance columns, adjustments columns and the adjusted trial balance columns

Select the statement below that describes a post-closing trial balance. a. It is a listing of all temporary accounts and their balances after closing. b. It is a listing of all permanent accounts and their balances immediately after the adjusting process. c. It is a listing of all permanent accounts and their balances after closing. d. It is a financial statement that describes all revenue and expense accounts after closing,

c. it is a listing of all permanent accounts and their balances after closing

Define the Income Summary account. a. It is a permanent account used during the closing process to summarize revenues and expenses. b. It is a temporary account used during the adjusting process to summarize assets and liabilities. c. It is a temporary account used during the closing process to summarize revenues and expenses.

c. it is a temporary account used during the closing process to summarize revenues and expenses

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.) a. Notes receivable due in 3 months b. Cash c. Notes receivable due in 2 years d. Investments in bonds e. Accounts receivable f. Franchise g. Equipment

c. notes receivable due in 2 years d. investments in bonds

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation. a. prepare an adjusted trial balance b. prepare financial statements c. prepare an unadjusted trial balance d. journalize and post adjusting entries

c. prepare an unadjusted trial balance d. journalize and post adjusting entries a. prepare an adjusted trial balance b. prepare financial statements

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) a. Accounts receivable would be debited for $700. b. Unearned revenue would be debited for $300. c. Service revenue would be credited for $700. d. Service revenue would be credited for $300. e. Unearned revenue would be debited for $700.+

c. service revenue would be credited for $700 e. unearned revenue would be debited for $700

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.) a. Mortgage payable b. Accounts receivable c. Taxes payable d. Notes payable (due in three years) e. Unearned rent f. Notes payable (due in three months) g. Accounts payable

c. taxes payable e. unearned rent f. notes payable g. accounts payable

Which of the statements below explains the accounting cycle? a. The accounting cycle is another name for the adjustment process at the end of the period. b. The accounting cycle is another name for the closing process at the end of the year. c. The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements. d. The accounting cycle refers to the work sheet used during the period to record adjustments and the post-closing trial balance.

c. the accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements

Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet? a. The difference between the totals of the Trial Balance columns of the worksheet is net income or net loss. b. The difference between the totals of the Adjusted Trial Balance Debit and Credit columns is net income or net loss. c. The difference between the totals of the debit and credit columns of the Income Statement columns is net income or net loss. d. The difference between the debit column of the Balance Sheet and the debit column of the Income Statement is net income or net loss.

c. the difference between the totals of the debit and credit columns of the income statement columns is net income or net loss

Review and complete the following statement regarding the Income Summary account. The Income Summary account is ______________ (debited/credited) for the sum of all revenue accounts and is ________________ (debited/credited) for the sum of all expense accounts and its balance will be transferred to the _______________ (Retained Earnings/Cash) account.

credited; debited; retained earnings

Current assets are: a. difficult to convert to cash or other monetary assets b. property, plant and equipment that are tangible and depreciated c. equipment and other assets that have a life greater than one year d. cash and other resources that are expected to be sold, collected or used within one year

d. cash and other resources that are expected to be sold, collected or used within one year

Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building. a. Debit Building; credit Accumulated depreciation. b. Debit Depreciation expense; credit Building. c. Debit Accumulated depreciation; credit Depreciation expense. d. Debit Depreciation expense; credit Accumulated depreciation.

d. debit depreciation expense; credit accumulated depreciation

Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy. The company immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired. Demonstrate the required adjustment needed at the end of the period. a. Debit Prepaid insurance for $400. b. Debit Insurance expense $400. c. Credit Prepaid insurance $800. d. Debit Prepaid insurance $800.

d. debit prepaid insurance $800

On December 31, AB Consulting recorded two days' wages of $100 in an adjusting entry which included a debit to Salaries Expense and a credit to Salaries Payable. On January 1, the accountant prepared a reversing entry which included which of the following? a. Debit Salaries Expense $100; credit Cash $100. b. Debit Salaries Payable $100; credit Cash $100. c. Debit Salaries Expense $100; Credit Salaries Payable $100. d. Debit Salaries Payable $100; credit Salaries Expense $100.

d. debit salaries payable $100; credit salaries expense $100

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate the December 31 adjusting entry by choosing the correct statement below. a. Debit Unearned revenues for $600. b. Credit Unearned revenues for $400. c. Debit Service revenue for $400. d. Debit Unearned revenues for $400.

d. debit unearned revenues for $400

After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements? a. Sort adjusted trial balance amounts to the Adjustments columns. b. Sort adjusted trial balance amounts to the post-closing Trial Balance columns. c. Sort adjusted trial balance amounts to the Trial Balance columns. d. Sort adjusted trial balance amounts to the financial statement columns.

d. sort adjusted trial balance amounts to the financial statement columns

Demonstrate your knowledge of a depreciation adjusting entry by completing the following sentence. A depreciation adjustment would include a debit to _____________ (depreciation expense/accumulated depreciation/building) and __________ (debit/credit) to) ____________ (depreciation expense/accumulated depreciation/building).

depreciation expense; credit; accumulated depreciation

The closing process takes place at the ________________ (end/beginning) of an accounting period, after the ________________ (adjusted/unadjusted) trial balance is prepared and _______________ (after/before) the financial statements are prepared.

end; adjusted; after

A trial balance is a(n) ________ (list/balance/chart) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of ___________ account balances. Use one word for each blank.

list; credit

Review the following totals from a work sheet. Based on these totals, the company experienced (a) net ___________ (income/loss) of $__________. Income Statement: Debit: $10,000 Credit: $7,500 Balance Sheet: Debit: $41,000 Credit: $43,500

loss; $2,500

The formula to figure out the profit margin of a company is ________________ (Net income/Accounts receivable/Net sales) divided by ________________ (Net income/Cash/Net sales).

net income; net sales

Define equity by completing the following statement. Equity is the _______________ (creditor's/litigator's/owner's) claim on the assets of a business. In a proprietorship, this claim is reported in the _______________ (asset/equity/liability) section of a balance sheet in the ________________ (Retained earnings/Revenue/Cash) account.

owner's; equity; retained earnings

A post-closing trial balance is a list of ___________________ (permanent/temporary) accounts and their balances _____________ (after/before) all ______________ (adjusting/closing) entries have been journalized and posted.

permanent; after; closing

Transferring entries from the journal to the ledger is called (posting/preparing/journalizing).

posting

statement of cash flows

reports the inflows and outflows of cash during a period of time.

Accrued ___________ are earned in a period that are both unrecorded and not yet received in cash.

revenues

Closing means to transfer account balances from _______________ (asset/liability/permanent/temporary) accounts so that they will start with a ___________ (contra/larger/zero) balance at the beginning of the next period.

temporary; zero

Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is a. $5,750 b. $6,000 c. $3,750

a. $5750

Which of the following statements is (are) correct regarding the Common Stock account? (Check all that apply.) a. The Common Stock account is used to record investments by the owner. b. The Common Stock account is an equity account. c. The Common Stock account is increased on the right side of the T-account. d. The Common Stock account is increased on the left side of the T-account. e. The Common Stock account is used to record purchases of assets.

a. The Common Stock account is used to record investments by the owner. b. The Common Stock account is an equity account. c. The Common Stock account is increased on the right side of the T-account.

Which of the following is the best definition of a source document in the accounting process? a. A source document identifies and describes transactions and is the basis for entering an event into the accounting system. b. A source document is used to determine who hired an employee that is assigned the duty of entering transactions into the accounting process. c. A source document shows all the information about the legal rights a company has in relation to when it should pay a bill.

a. a source document identifies and describes transactions and is the basis for entering an event into the accounting system

Which of the following would be considered a source document in an accounting system? (Check all that apply.) a. Checks b. Budget c. Sales receipt d. Purchase order e. Payroll records

a. checks c. sales receipt d. purchase order e. payroll records

Which of the following items would be considered "cash" and reflected in a company's Cash account? (Check all that apply.) a. Checks b. Prepaid Insurance c. Notes Receivable d. Money orders e. Coins

a. checks d. money orders e. coins

The general ledger can be used to determine which of the following (select all answers which apply): a. common and unique accounts used by a business. b. a complete record of each transaction in one account. c. which accounts are being used by a company and their balances at any given time. d. increases and decreases in all accounts in a business.

a. common and unique accounts used by a business c. which accounts are being used by a company and their balances at any given time. d. increases and decreases in all accounts in a business

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.) a. Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed through the Accumulated Depreciation account. b. Equipment purchases are expensed, in their entirety, in the period in which they occur. c. Equipment is reported on the left side of the accounting equation. d. Equipment is an asset. e. Equipment purchases are reported on the balance sheet.

a. equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed through the Accumulated Depreciation account. c. equipment is reported on the left side of the accounting equation. d. equipment is an asset. e. equipment purchases are reported on the balance sheet

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation. a. Increase Cash by $4,000; Increase Common Stock by $4,000. b. Increase Cash by $4,000; decrease Common Stock by $4,000. c. Decrease Cash by $4,000; decrease Common Stock by $4,000. d. Increase Cash by $4,000; increase Revenues by $4,000.

a. increase cash by $4000; increase common stock by $4000

If a customer makes a partial payment of $100 on a service which has already been billed, you would record this transaction into the accounting equation by: a. increasing Cash and decreasing Accounts Receivable. b. Increasing Cash and decreasing Accounts Payable. c. decreasing Cash and increasing Revenue. d. increasing Cash and increasing Expenses.

a. increasing Cash and decreasing Accounts Receivable

A customer of Landen Consulting Company makes a $400 payment of cash on a bill for services provided last month. Record the receipt of cash in the accounting equation of Landen Consulting by: (choose all that apply) a. increasing Cash, $400. b. decreasing Accounts Payable, $400. c. decreasing Accounts Receivable, $400. d. increasing Revenue, $400.

a. increasing cash $400 c. decreasing accounts receivable $400

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by: a. increasing Cash; increasing Revenues b. increasing Supplies; increasing Revenues c. decreasing Cash; increasing Revenues d. increasing Cash; increasing Expenses

a. increasing cash, increasing revenues

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by: a. increasing Cash; increasing Common Stock b. increasing Cash; increasing Expenses. c. increasing Accounts Payable; increasing Revenues. d. decreasing Cash; increasing Common Stock.

a. increasing cash; increasing common stock

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.) a. It is the promise of another entity to pay a specific sum of money on a specified future date. b. Notes receivable is classified as an asset. c. Notes receivable is classified as a liability. d. Another name for a note receivable is a promissory note.

a. it is the promise of another entity to pay a specific sum of money on a specified future date. b. notes receivable is classified as an asset d. another name for a note receivable is a promissory note

According to the fraud triangle, the three factors that must exist for a person to commit fraud include __, __, and __. (Check all that apply). a. opportunity b. rationalization c. justification d. pressure or incentive

a. opportunity b. rationalization d. pressure or incentive

Which of the following statements is correct regarding revenues? a. Revenues cause equity to increase. b. Revenues will cause assets to decrease. c. Revenues cause equity to decrease. d. Revenues do not affect equity.

a. revenues cause equity to increase

Given the list of accounts below, identify which of them would appear on a balance sheet. (choose all that apply) a. Supplies b. Rental Revenue c. Rent Expense d. Accounts Payable e. Retained earnings, 12/31 f. Cash g. Equipment h. Utilities Expense

a. supplies d. accounts payable e. retained earnings, 12/31 f. cash g. equipment

Which of the following statements explain(s) how the accounting equation applies to businesses? (Check all that apply.) a. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. b. The relation of assets, liabilities and equity is reflected in the equation. c. The equation reflects the fact that, at any point in time, total revenues will always equal total liabilities and assets. d. The equation states that Assets = Liabilities + Equity. e. The equation states that Revenues - Expenses = Assets. f. The equation applies to all transactions and events.

a. the equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. b. the relation of assets, liabilities, and equity is reflected in the equation. d. the equation states that assets = liabilities + equity f. the equation applies to all transactions and events

The heading of every financial statement contains several line items. Identify the correct items from the list below. (Check all that apply.) a. The title of the statement b. The date the financial statement was prepared c. The date or time period the financial statement covers d. The auditor of the financial statement e. The company name.

a. the title of the statement c. the date or time period the financial statement covers e. the company name

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.) a. A liability is an asset waiting to be received by a business. b. A liability is a debt owed by the business. c. A liability is a thing of value owned by the business and is increased on the left side of a T-account. d. A liability is a claim by creditors against the assets of a business. e. A liability can be settled by transferring assets or providing products or services to others.

b. a liability is a debt owed by the business d. a liability is a claim by creditors against the assets of a business e. a liability can be settled by transferring assets or providing products or services to others

Which of the following statements is the correct definition of equity? a. Equity is the cost of doing business during a period. b. Equity is the owner's claim on a company's assets. c. Equity addresses the rights of creditors against the assets of a business. d. Equity includes the things of value owned by a business.

b. equity is the owner's claims on a company's assets

The accounting assumption which presumes that a business will continue operating is called the: a. time period b. going-concern c. business entity

b. going-concern

Which of the following statements represent(s) how expenses affect equity? (choose all that apply) a. If expenses decrease, then equity will decrease. b. Higher expenses result in lower total equity. c. If expenses increase, then total equity decreases. d. If expenses increase, then total equity increases.

b. higher expenses result in lower total equity c. if expenses increase, then total equity decreases

Which of the following statements is (are) correct regarding the Notes payable account? (Check all that apply.) a. Notes payable is increased on the left side of the T-account. b. Notes payable is reported on the balance sheet. c. Notes payable is an asset account. d. Notes payable is a formal promise to pay a certain sum of money on a specified future date. e. Notes payable is a liability account.

b. notes payable is reported on the balance sheet d. notes payable is a formal promise to pay a certain sum of money on a specified future date e. notes payable is a liability account

Select the statement below that best defines prepaid accounts. a. Prepaid accounts are expenses and are increased with a credit. b. Prepaid accounts are assets that represent prepayments of future expenses. c. Prepaid accounts are liabilities that are due within a specified time period. d. Prepaid accounts reflect a company's cash balance and include currency, coins and money orders.

b. prepaid accounts are assets that represent prepayments of future expenses

Which of the following accounts impact equity? (Check all that apply.) a. Assets b. Revenue c. Common Stock d. Expenses e. Dividends f. Liabilities

b. revenue c. common stock d. expenses e. dividends

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation? (Check all that apply.) a. Expenses will be decreased. b. Salaries expense will be increased. c. Equity will be decreased. d. Equity will be increased.

b. salaries expense will be increased c. equity will be decreased

Given the statements below, choose the most accurate definition of owner investments. a. Cost of assets or services used to earn revenues b. Stock issuances c. Assets earned from a company's earning activities d. Resources owned or controlled by a company

b. stock issuances

When supplies are purchased on credit it means that: (Check all that apply.) a. the business will be paying for the supplies right away. b. the business will pay for the supplies at a later time. c. the Accounts Payable account will be increased. d. a liability has been incurred.

b. the business will pay for the supplies at a later time. c. the Accounts Payable will be increased. d. a liability has been incurred.

Which of the following are accurate statements regarding how to report or treat prepaid accounts? (Check all that apply.) a. The expired portion of prepaid accounts is treated as liabilities. b. The unexpired portion of prepaid accounts are treated as assets. c. The expired portion of prepaid accounts is reported on the income statement as an expense. d. Over time, the expired portion of prepaid accounts is transferred from the asset account and reported as an expense.

b. the unexpired portion of prepaid accounts are treated as assets c. the expired portion of prepaid accounts is reported on the income statement as an expense d. over time, the expired portion of prepaid accounts is transferred from the asset account and reported as an expense

Which of the following statements are accurate regarding supplies? (Check all that apply.) a. Unused supplies are treated as expenses. b. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. c. Supplies is considered a liability account. d. Supplies are assets until they are used. e. When supplies are purchased, they are added to the Supplies account. f. Unused supplies are treated as assets.

b. unused supplies can be recorded as store supplies, office supplies, or supplies d. supplies are assets until they are used e. when supplies are purchased, they are added to the supplies account. f. unused supplies are treated as assets

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300 calculate the ending balance in the retained earnings account. a. $6,300 b. $14,300 c. $13,700

c. $13,700

Which statement best describes a T-account? a. A T-account is a formal financial statement which reports whether debits = credits at any given time. b. A T-account is used to record transactions in a chronological order and serves as a book of original entry. c. A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions. d. A T-account is used in a business to accurately report the financial status of its operations to the owners.

c. A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions

Which of the following statements is accurate regarding the Building account? a. A Building expense account is used to record the costs of purchasing a store, office, warehouse or factory. b. A Building account is increased on the right side of a T-account because it is an asset. c. Building costs are treated as expenses in the period they are incurred and reported on the income statement. d. A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

c. a building asset account is used to record the costs of purchasing a store, office, warehouse or factory

The correct definition of an "account" includes which of the following? a. A customer's purchase order for buying merchandise b. A cashier's tape register receipt showing total dollars of sales made c. A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item d. A bank report listing checks written and deposits made during a month

c. a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

In every financial statement, there exists single and double underlines. Choose the statement below that describes what these are for and when to use them. a. Double-ruled lines denote an addition or subtraction, and single-ruled lines are used to show the final total on the statement. b. Single underlines are used under every account on a statement and double-ruled lines are used to show an addition or subtraction. c. A single-ruled line denotes an addition or subtraction and double underlines indicate the final totals.

c. a single ruled line denotes an addition or subtraction and double underlines indicate the final totals.

Which statements below define a liability? (Check all that apply.) a. An amount owed to the owners of the business b. Resources owned by the business c. An amount owed to a creditor d. A creditor's claims against the assets of a business e. The company obligations to provide assets, products or services to others

c. an amount owed to a creditor d. a creditor's claims against the assets of a business e. the company's obligations to provide assets, products, or services to others

The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the a. measurement principle b. revenue recognition principle c. full disclosure principle d. expense recognition principle

c. full disclosure principle

On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by: a. increasing Supplies, and decreasing Expenses b. decreasing Cash, and increasing Supplies c. increasing Supplies, and increasing Accounts Payable d. increasing Cash, and increasing Supplies

c. increasing supplies; increasing accounts payable

The principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the a. expense recognition principle b. measurement principle c. revenue recognition principle d. full disclosure principle

c. revenue recognition principle

Which of the following statements below lists the rules of entering transactions into the accounting equation? a. An asset account and a liability account are always affected. b. The accounting equation can be out of balance only when payment will be received at a future date. c. The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity. d. Transactions entered into the accounting equation must involve cash and an equity account.

c. the accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity

Which set of accounts below would have a normal debit balance? a. Expenses, Dividends; Common Stock b. Dividends; Expenses; Unearned rent c. Revenues; Dividends, Prepaid rent d. Expenses; Dividends; Cash

d. Expenses; Dividends; Cash

Which of the following statements is the best definition of the Chart of Accounts? a. It is a book of original entry that includes a chronological record of all transactions that have occurred within a business. b. It is a collection of all accounts with their activity and the balances that exist in a business. c. It is a list of each account and its balance at any given time. d. It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

d. It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Which of the following statements best describes the purpose of the Common Stock account? a. When a business is owed money from a customer, the amount is recorded in the Common Stock account. b. When a business distributes assets to owners, the distribution is recorded in the Common Stock account. c. When a business owes a vendor, the obligation amount is recorded in the Common Stock account. d. When an owner invests in a business, the invested amount is recorded in the Common Stock account

d. When an owner invests in a business, the invested amount is recorded in the Common Stock account

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash. a. Checks, coins, accounts payable b. Checks, money orders, supplies c. Coins, accounts receivables, checks d. Coins, checks, money orders

d. coins, checks, money orders

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

false

True or false: Dividends are resources paid to the stockholders.

true