Acct AP questions
Owens Industries is trying to increase its profile in the community. As part of this effort, Owens sponsors a Little League baseball team. The cost of sponsorship is $850. What impact does this transaction have on Owens' accounting equation (A = L + SE)? A : It decreases assets and increases stockholder's equity by $850. B : It increases both assets and stockholder's equity by $850. C : It decreases both assets and liabilities by $850. D : It decreases both assets and stockholder's equity by $850.
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Which of the following is not a principal purpose of an unadjusted trial balance? A : It supplies a listing of open accounts and their balances. B : It is the basis for any adjustments to the account balances. C : It proves that debits and credits of equal amounts are in the ledger. D : It proves that debits and credits were properly entered in the ledger accounts.
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Which of the following best describes the difference between the financial statements for a merchandising company and those for a service company? A : The merchandising company's financial statements will report gross profit on sales, while the service company's statements do not. B : The merchandising company's financial statements must report depreciation expense, while the service company's statements do not. C : The merchandising company's financial statements do not have to report bad debts, while the service company's statements do. D : The merchandising company's financial statements do not have to report long-term liabilities, while the service company's statements do.
A
Which of the following describes a similarity between an income statement and a statement of cash flows? A : Both statements summarize activities that took place during an accounting period. B : Both statements measure differences between the beginning of the accounting period and the end of the period. C : Both statements reflect the adjusting entries made at the end of an accounting period. D : Both statements carry over accounting data from one accounting period to the next.
A
Which of the following is an example of an accrued expense? A : property taxes incurred during the year, to be paid in the first quarter of the subsequent year B : supplies purchased at the beginning of the year and debited to an expense account C : rent earned during the period, to be received at the end of the year D : depreciation expense
A
The difference between the accounting process and the accounting cycle is A : the accounting cycle represents the steps taken to accomplish the accounting process. B : the accounting process represents the steps taken to accomplish the accounting cycle. C : merely semantic, because both concepts refer to the same thing. D : the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.
B
Which of the following events would not be recorded as part of the accounting cycle? A : a casualty loss of a building due to a tornado B : a 10% increase in the size of the workforce C : an owner's investment of funds in exchange for common stock D : a cash purchase of a delivery van
B
A prepaid expense can best be described as an amount A : not paid and currently matched with earnings. B : paid and currently matched with earnings. C : paid and not currently matched with earnings. D : not paid and not currently matched with earnings.
C
The accounting equation (A = L + SE) must remain in balance A : only when formal financial statements are prepared. B : only when journal entries are recorded. C : throughout each step in the accounting cycle. D : only at the time the trial balance is prepared.
C
An accrued revenue can best be described as an amount A : not collected and not currently included in earnings. B : Collected and currently included in earnings. C : collected but not currently included in earnings. D : not collected but currently included in earnings.
D
If expenses are greater than revenues, the Income Summary account will be closed by a debit to A : Cash and a credit to Income Summary. B : Income Summary and a credit to Cash. C : Income Summary and a credit to Retained Earnings. D : Retained Earnings and a credit to Income Summary.
D
Ransdell Corporation estimates that $15,000 of the current period's credit sales will be uncollectible. Where will these bad debts be reported in Ransdell's financial statements? A : They will be reported on Ransdell's retained earnings statement. B : They will be reported on Ransdell's unadjusted trial balance. C : They will not be reported on any of Ransdell's financial statements. D : They will be reported on Ransdell's income statement.
D
Which of the following statements best describes the purpose of closing entries? A : They determine the amount of gain or loss for the period. B : They complete the record of various transactions that was started in a prior period. C : They facilitate posting and preparing a trial balance. D : They reduce the balances of revenue and expense accounts to zero so that the accounts can be used to accumulate the revenues and expenses of the next period.
D
Which of the following is a characteristic of nominal accounts? They include assets, liabilities, and equity accounts. They are periodically closed by companies. They are also known as permanent accounts. They are reported on companies' balance sheets.
They are periodically closed by companies.