MGT 011A - Chapter 2 Practice Quiz

Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky's journal entry to record this transaction will include a: A. Debit to Telephone Expense for $300. B. Credit to Accounts Payable for $300. C. Debit to Cash for $300. D. Credit to Telephone Expense for $300. E. Debit to Accounts Payable for $300.

A. Debit to Telephone Expense for $300.

A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error? A. $150 understated B. $135 overstated C. $150 overstated D. $15 understated E. $135 understated

B. $135 overstated

Source documents include all of the following except: A. Sales tickets B. Ledgers C. Checks D. Purchase orders E. Bank statements

B. Ledgers

The debt ratio is used: A. To measure the amount of equity relative to the expenses. B. To reflect the risk associated with a company's debts. C. Only by banks when a business applies for a loan. D. To determine how much debt a firm should pay off. E. To determine who a company owes.

B. To reflect the risk associated with a company's debts.

A company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that the: A. Office Supplies account balance will be overstated. B. Trial balance will not balance. C. Error will overstate the debits listed in the journal. D. Total debits in the trial balance will be larger than the total credits. E. Trial balance will be in balance.

B. Trial balance will not balance.

A sales invoice: A. is a type of document B. is a source document C. is not needed by buyers D. gives rise to an entry in the accounting process E. is not necessary in accounting

B. is a source document

Which of the following is a TRUE statement concerning a company's financial statements? A. Balance sheet and income statement data combined contain the complete financial picture of a given company. B. A trial balance is another name for a balance sheet. C. Another name for the income statement is the earnings statement. D. Dividends paid to a company's shareholders are shown on the income statement. E. The balance sheet shows the financial position of a company for a period of time.

C. Another name for the income statement is the earnings statement.

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for a six-month contract in advance. Management Services' journal entry to record this transaction will include a: A. Debit to Unearned Management Fees for $60,000. B. Credit to Management Fees Earned for $60,000. C. Credit to Cash for $60,000. D. Credit to Unearned Management Fees for $60,000. E. Debit to Management Fees Earned for $60,000.

D. Credit to Unearned Management Fees for $60,000.

If the Debit and Credit column totals of a trial balance are equal, then: A. All transactions have been recorded correctly. B. All entries from the journal have been posted to the ledger correctly. C. All ledger account balances are correct. D. The total debit entries and total credit entries are equal. E. The balance sheet would be correct.

D. The total debit entries and total credit entries are equal.

Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction? A. Debit Assets 200,000 ; Credit Common Stock 200,000 B. Debit Cash and Land 200,000 ; Credit Common Stock 200,000 C. Debit Cash 70,000, Debit Land 130,000 ; Credit Common Stock 200,000 D. Debit Common Stock 200,000 ; Credit Cash 70,000, Credit Land 130,000 E. Debit Common Stock 200,000 ; Credit Assets 200,000

C. Debit Cash 70,000, Debit Land 130,000 ; Credit Common Stock 200,000

Which financial statements are prepared for a period of time? A. Income statement, statement of retained earnings, balance sheet and statement of cash flows. B. Balance sheet. C. Income statement, statement of retained earnings, and statement of cash flows. D. Income statement and balance sheet. E. Statement of retained earnings and statement of cash flows.

C. Income statement, statement of retained earnings, and statement of cash flows.

According to IFRS, comparative information on financial statements is: A. Not required. B. Required for publicly traded companies only. C. Required for the preceding period only. D. Required for the last five years. E. Not required, but considered a hallmark for companies of excellence.

C. Required for the preceding period only.

Wisconsin Rentals purchased office supplies on credit. The journal entry made by Wisconsin Rentals to record this transaction will include a: A. Debit to Accounts Payable. B. Debit to Accounts Receivable C. Credit to Cash D. Credit to Accounts Payable E. Credit to Retained Earnings

D. Credit to Accounts Payable

Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. A. 38.6% B. 13.4% C. 34.9% D. 25.9% E. 14.9%

D. 25.9% Explanation: $110/$425 = 25.9%