accounting test 1 practice questions

which of the following transactions on the books of tetco oil company increase total assets? A. Borrowed $50,000 from the bank. B. Received $90,000 cash from customers on accounts receivable. C. Made cash purchase of land for a building site, $85,000. D. Sold land and received cash of $11,000. (The land was carried on the company's books at $11,000).

A. Borrowed $50,000 from the bank. (CASH ^ LIABILITIES \/) B. Received $90,000 cash from customers on accounts receivable. (ASSETS ^ \/) C. Made cash purchase of land for a building site, $85,000. (ASSETS ^ \/) D. Sold land and received cash of $11,000. (The land was carried on the company's books at $11,000). (ASSETS ^ \/)

Which of these statements is false? A. Decreases in liabilities and increases in revenues are recorded with a credit. B. Decreases in assets and increases in stockholders' equity are recorded with a credit. C. Increases in both assets and expenses are recorded with a debit. D. Increases in assets and decreases in liabilities are recorded with a debit. HINT: USE THE DEBIT AND CREDIT T-ACCOUNT DIAGRAM THAT WAS SHOWN IN CLASS

A. Decreases in liabilities and increases in revenues are recorded with a credit.

Which of the following transactions is considered an accrued expense? I. Salaries that employees have earned but not received II. Management fees received in advance Unearned Revenue III. Newspaper advertising that has been purchased but has not yet appeared in the newspaper Prepaid Expense A. I only C. III only B. II only D. Both I and II

A. I only

A financial statement user wants to review the revenue and expense of a business. This information would be found on the ________________. A. Income statement. B. Statement of retained earnings. C. Balance sheet. D. Statement of cash flows.

A. Income statement.

Which of these statements is correct? A. The account is a basic summary device used in accounting. B. A journal is a grouping of accounts. (Ledger) C. The debit side of an account is the side where increases are recorded. (Depends on account) D. The ledger is a record of transactions. (Journal)

A. The account is a basic summary device used in accounting.

Which of the following statements is false? A. The periodicity assumption requires companies to prepare financial statements at least quarterly. (Life of company is divided into artificial time periods.) B. According to the revenue recognition principle, revenue should be recorded when a product or service has been delivered to the customer. C. When possible, expenses that can be linked to a specific revenue should be deducted from revenue in the same period that the revenue is recorded. D. The revenue recognition principle and the expense recognition (matching) principle support the practice of preparing adjusting entries.

A. The periodicity assumption requires companies to prepare financial statements at least quarterly. (Life of company is divided into artificial time periods.)

Note Payable has a normal beginning balance of $40,200. During the period, new borrowings total $100,000 and payments on loans total $20,600. Determine the correct ending balance in Note Payable. A. $39,200, debit B. $119,600, credit C. $39,200, credit D. $160,800, credit

B. $119,600, credit Notes Payable |$40,200 (Balance) |100,000 New Payment20,600 | |$119,600 (End. Bal.)

the journal entry to record the performance of services on account for $1,200 is: a) accounts payable 1,200 service revenue 1,200 B. Accounts Receivable 1,200 Service Revenue 1,200 C. Cash 1,200 Service Revenue 1,200 D. Service Revenue 1,200 Accounts Payable 1,200

B. Accounts Receivable 1,200 Service Revenue 1,200 -performance means provided service -on account means that customer did not pay cash but charged it and owes money to company

Resources owned by the business that are expected to provide service potential or economic benefit now and in the future are: A. Liabilities. B. Assets C. Revenues D. Capital Stock

B. Assets

Which of the following accounts is not considered a current asset? A. Accounts Receivable C. Inventory B. Equipment D. Prepaid Rent

B. Equipment

If total liabilities decreased by $14,000 during the year and stockholders' equity increased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n): A. $14,000 increase B. $20,000 increase C. $8,000 decrease D. $8,000 increase

C. $8,000 decrease a = l + oe (^) 8,000 =(decrease) 14,000 + (^)6,000

Which of these is (are) an example of an asset account? A. Service Revenue B. Dividends C. Accounts Receivable D. Salaries Expense

C. Accounts Receivable

What type of account is Unearned Revenue (asset, liability, stockholders' equity, revenue, or expense) and what is its normal balance, respectively? A. Asset, debit B. Expense, debit C. Liability, credit D. Revenue, credit

C. Liability, credit

Which of the following accounts is not considered a current liability? A. Accounts Payable B. Accrued Interest Payable C. Mortgage Payable D. Unearned Subscription Revenue

C. Mortgage Payable

The Armstead Company has $1,800 worth of office supplies on hand at the beginning of the year. Purchases of office supplies totaled $4,000 during the year. A year-end inventory revealed $2,100 worth of office supplies still on hand. Which of the following is the correct adjusting entry for supplies? Determine the amount used. A. Supplies 2,100 Cash 2,100 B. Supplies Expense 5,800 Supplies 5,800 C. Supplies Expense 3,700 Supplies 3,700 D. None of the above is the correct adjusting entry

C. Supplies Expense 3,700 Supplies 3,700

On November 1, 2013, the Jernigan Company paid $4,800 for a one-year insurance policy. On December 31, 2013, the adjusting entry would include: A. a debit to Insurance Expense, $4,800. B. a credit to Insurance Payable, $800. C. a credit to Prepaid Insurance, $800. D. a debit to Insurance Expense, $4,000

C. a credit to Prepaid Insurance, $800.

Which of these could not be a closing entry? A. Income Summary XX Salary Expense XX B. Retained Earnings XX Dividends XX C. Service Revenue XX Income Summary XX D. All of the above could be a closing entry

D. All of the above could be a closing entry

All of the following are external users of accounting information except for: A. Labor unions. B. Taxing authorities. C. Regulatory agencies. D. Company officers.

D. Company officers.

List the accounts that are closed.

Revenues closed to Income Summary Expenses closed to Income Summary Income Summary closed to Retained Earnings Dividends closed to Retained Earnings Note: All revenue and expense accounts are individually closed.

Service revenues earned by not yet billed would be classified as what kind of adjustment? a. Accrued revenue (Revenue earned (service provided) and Customer owes money) b. Prepaid expense (Expenses paid for in advance. Not incurred.) c. Unearned revenue (Money received in advance. Not yet earned.) d. Accrued expense (Expense incurred not yet paid)

a. Accrued revenue (Revenue earned (service provided) and Customer owes money)

The financial statement that shows the financial position of a company at a point in time is: a. Balance Sheet b. Income Statement c. Statement of Retained Earnings d. Statement of Cash Flow

a. Balance Sheet

The adjusting journal entry for the transaction in question 30 would include: a. Credit to revenue b. Debit to cash (Customer owes) c. Credit to prepaid expense (not an expense) d. Credit to cash (cash is never used in an adjusting entry

a. Credit to revenue

If Jones Company pays $2,000 in dividends to shareholders' what is the effect on the accounting equation: Use expanded accounting equation to answer this question. a. Decrease stockholders' equity and decrease assets b. Increase assets and decrease stockholders' equity c. Increase assets and decrease assets d. Decrease assets and decrease liabilities

a. Decrease stockholders' equity and decrease assets

Using the information in question 32, Mary Jones would make an adjustment each month to what account: a. Prepaid expense b. Cash c. Accounts payable d. Landscaping revenue

a. Prepaid expense

Which of the following statements is true? Use expanded accounting equation to help in answering. a. Revenues cause an increase in Stockholders' Equity b. Dividends do not effect Stockholders' Equity (Decrease SE) c. Expenses cause an increase in Stockholders' Equity (Decrease SE) d. Liabilities cause a decrease in Stockholders' Equity (No impact on SE)

a. Revenues cause an increase in Stockholders' Equity

Using accrual accounting, expenses are recorded and reported only a. when they are incurred whether or not cash is paid. b. when they are incurred and paid at the same time. c. if they are paid before they are incurred. d. if they are paid after they are incurred.

a. when they are incurred whether or not cash is paid.

revenues earned but not billed

accounts receivable (debit) and revenues (credit) accrued revenue

what are total assets

accounts receivable + office equipment + cash + supplies + prepaid insurance + copyright

which of the following is true? a) owners' equity - assets = liabilities b) assets = liabilities + owners' equity c) assets + liabilities = owners' equity d) liabilities = owners' equity + assets

b) assets = liabilities + owners' equity

Dobson Company paid $1,200 on account. The effect of this transaction on Dobson's accounting equation is to: a) decrease liabilities and increase stockholders' equity b) decrease assets and decrease liabilities c) have no effect on total assets d) decrease assets and decrease stockholders' equity

b) decrease assets and decrease liabilities transaction: accounts payable 1,200 Cash 1,200

On June 1, Pete Yardscapes received a $2,000 advance from Mary Jones for landscaping work to be performed over the next three months. The required adjusting entry at June 30 for Pete Yardscapes would include: a. Credit to cash b. Debit to unearned revenue c. Credit to unearned revenue d. Debit to accounts receivable

b. Debit to unearned revenue

An adjusted trial balance a. is prepared after the financial statements are completed. b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. c. is a required financial statement under generally accepted accounting principles. d. cannot be used to prepare financial statements.

b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

what is ending retained earnings?

beginning retained earnings + net income - dividends

all of the following are characteristics of a sole proprietorship except: a) A business owned by one person b) Owner has control of the business c) A separate legal entity d) Small owner-operated business

c) A separate legal entity (corporation)

Wilbur owns and operates a fishing tackle shop. Wilbur needs to borrow money to expand; therefore, he prepared financial statements to present to his banker. Wilbur obtained appraisals of the company's property, plant, and equipment to ensure that the balance sheet would reflect the most current value of these assets. Wilbur has violated which of the following principles or assumption? a) fair value principle (applies to actively traded assets such as investment securities) b) Going Concern Assumption c) cost principle (applies to most assets owned by the company) d) monetary unit assumption

c) cost principle (applies to most assets owned by the company)

in a service-type business, revenue is considered earned: a) at the end of the month b) at the end of the year c) when the service is performed d) when cash is received

c) when the service is performed

Smith Co. receives money for services in 2012 which are not performed until 2013. Revenue should be recognized in: a. Both 2012 and 2013 b. 2012 Recorded as an unearned revenue. Received payment in advance. c. 2013 Recognize revenue in year that service is performed. d. Neither 2012 or 2013

c. 2013 Recognize revenue in year that service is performed.

A business organized as a corporation a. is not a separate legal entity in most states. (is a separate legal entity) b. requires that stockholders be personally liable for the debts (stockholders are not personally liable.) c. is owned by its stockholders. d. has tax advantages over a proprietorship or partnership. (Does not have a tax advantage)

c. is owned by its stockholders.

the beginning cash account balance is $38,700. during the period, cash disbursements totaled $144,600. if ending cash is $51,200, then cash receipts must have been: a) $105,900 b) $234,500 c) $132,100 d) $157,100

d) $157,100 Cash credit: 38,700 (bal) debit 144,600 (disb) credit: 157,100 (receipts) normal balance on credit side: 51,200 (end bal)

The periodicity assumption states that a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time periods.

d) the economic life of a business can be divided into artificial time periods

Resources owned by a business and used in carrying out its operating activities are: a. Liabilities b. Stockholders' equity c. Revenues d. Assets

d. Assets

The balance in the prepaid rent account before adjustment at the end of the year is $12,000 and represents three months rent paid on November 1. The adjusting entry required on December 31 assuming no prior adjusting entries have been made is: a. Debit Prepaid Rent, $4,000; Credit Rent Expense $4,000. b. Debit Prepaid Rent, $8,000; Credit Rent Expense, $8,000. c. Debit Rent Expense, $12,000; Credit Prepaid Rent, $12,000. d. Debit Rent Expense, $8,000; Credit Prepaid Rent, $8,000.

d. Debit Rent Expense, $8,000; Credit Prepaid Rent, $8,000.

Which of the following is true about closing entries: a. Only permanent accounts are closed. b. Both permanent and temporary accounts are closed. c. Neither permanent nor temporary accounts are closed d. only temporary accounts are closed

d. only temporary accounts are closed

prepaid insurance has expired

insurance expense (debit) and prepaid insurance (credit) prepaid expense

interest on notes payable has been incurred but not yet paid

interest expense (debit) and interest payable (credit) accrued expense

what is net income

revenues - expenses expenses: salaries expense, insurance expense, and utilities expense

rent collected in advance has been earned

unearned revenue (debit) and revenue (credit) unearned revenue