Exam 1 Practice Accounting

The separate entity assumption means: a. a company's financial statements reflect only the business activities of that company. b. each separate owner's finances must be revealed in the financial statements. c. each separate entity that has a claim on a company's assets must be shown in the financial statements. d. all of the above.

A.

A company has an asset account, Prepaid Utilities, with a balance of $3,750 at the beginning of the month. The company used $980 of utilities during the month. Which of the following statements is true? A) The company should credit Utility Expenses for $980 and debit Prepaid Utilities for $980. B) Retained earnings and stockholders' equity should decrease because of this transaction. C) The company should credit Accrued Liabilities for $980 and debit Utility Expenses for $980. D) Retained earnings and stockholders' equity should be unchanged by this transaction.

B) Retained earnings and stockholders' equity should decrease because of this transaction.

A company has a loan that accrues interest at a rate of $20 a day. The company pays the interest once a quarter. Which of these would be an accurate adjustment for a month in which no payments are made? A) Debit Interest Payable and credit Interest Expense. B) Debit Loans Payable and credit Cash. C) Debit Interest Expense and credit Interest Payable. D) Debit Cash and credit Loans Payable.

C) Debit Interest Expense and credit Interest Payable.

Which of these accounts would normally not be affected by an adjustment? A) Supplies. B) Revenues. C) Expenses. D) Cash.

D)Cash

Accumulated depreciation: A. is an expense account B. is a liability account C. is a regular asset account D. is an asset contra-account

D. is an asset contra-account

If total debits are not equal to total credits in a trial balance, which of the following errors may have occurred? A. posting Wage Expense to Administrative Expenses B. Debiting Accrued Interest instead of debiting Interest Expense C. Debiting Notes Payable instead of debiting Interest Expense D. Posting a credit to Accounts Payable as a debit

Posting a credit to Accounts Payable as a debit

Creditors are: a .people or organizations who owe money to a business. b. people or organizations to whom a business owes money. c. stockholders of a business. d. customers of a business.

b. people or organizations to whom a business owes money.

Which account is least likely to be credited when an expense is recorded? a. Cash. b. Accounts payable. c. Prepaid expenses. d. Accounts receivable.

d. Accounts receivable.