QUIZ 2 FAR

The following account balances were gathered from Phillip Company's adjusted trial balance on December 31, 2021: Calculate the total liabilities. a. 1,177,000 b. 1,281,000 c. 1,214,000 d. 1,348,000

a. 1,177,000

Phillip Company was formed on January 1, 2021 with 5,000,000 from his own pocket and borrowed funds of 1,500,000. During the 1st year, net profit was 2,500,000 and Phillip withdraw 500,000 cash. No additional activities affected the equity in 2021. On December 31, 2021, Phillip's liabilities increased to 1,800,000. On December 31, what amount should be reported as total assets? a. 6,800,000 b. 8,800,000 c. 9,300,000 d. 6,500,000

b. 8,800,000

Which of the following statements regarding a trial balance is INCORRECT? a. A trial balance is a test of the equality of the debit and credit balances in the ledger. b. A trial balance proves that no errors of any kind have been made in the accounts during the accounting period. c. A trial balance helps to localize errors within an identifiable time period. d. A trial balance is a list of all of the open accounts in the ledger with their balances.

b. A trial balance proves that no errors of any kind have been made in the accounts during the accounting period.

An unadjusted trial balance a. Proves that no errors have been made in the accounting records b. Provides information that is helpful when making adjusting entries. c. Usually contains the account balances that should appear in the financial statements d. Is a summary taken directly from the general journal.

b. Provides information that is helpful when making adjusting entries.

Your bookkeeper is confused on the rules of debits and credits. Which one of the following would you advise him/her? a. Assets, liabilities and equity have normal debit balances. b. The normal balance of a contra account is the opposite of its related account. c. The normal balance of an account determines the side in which the account is decreased. d. To combine a credit amount with another credit amount this means you subtract.

b. The normal balance of a contra account is the opposite of its related account.

Which of these statements is FALSE? a. All expense accounts are nominal accounts because they will be closed to Income Summary. b. Unearned Revenue increases Equity. c. Accounts that can be found in the Balance Sheet are real or permanent accounts. d. Accumulated depreciation and allowance for bad debts are Contra-Assets.

b. Unearned Revenue increases Equity.

On January 1, 2021 Phillip Company showed total assets of 5,000,000 and total liabilities and equity of 2,000,000 and 3,000,000 respectively. During the current year, he invested additional capital of 800,000 and withdraw funds amounting to 300,000. On December 31, 2021, total assets increased by 2,500,000 and total liabilities increased by 1,200,000. Calculate the profit for the current year. a. 1,100,000 b. 1,200,000 c. 800,000 d. 1,300,000

c. 800,000

Which of the following is an INCORRECT statement? a. In the accounting equation, assets are on the left side of the equation which has a normal debit balance. b. Nominal accounts are accounts relating to expenses/losses and incomes/gains. c. Tangible real accounts are assets that do not have physical existence. d. The difference between the total debits and total credits in a single account is the account's balance.

c. Tangible real accounts are assets that do not have physical existence.

Which of the following statements is TRUE? a. To increase Salaries expense, the account is credited. b. When cash is received from a customer, it must be credited c. To decrease Accounts Payable, it must be debited. d. When accounts payable is settled/paid, it must be credited

c. To decrease Accounts Payable, it must be debited.

The following account balances were gathered from Phillip Company's adjusted trial balance on December 31, 2021: Calculate the total assets. a. 607,000 b. 597,000 c. 642,000 d. 538,000

d. 538,000

Which is done first in the accounting process considering the following? a. Financial statements are prepared b. A post-closing trial balance is prepared c. Nominal accounts are closed d. Adjusting entries are recorded

d. Adjusting entries are recorded

Which of the following statements is TRUE? a. When expenses exceed revenues, there is net income b. Revenues are permanent/real accounts c. Accounts that can be found in the balance sheet are called real/nominal accounts d. Income statement accounts are closed at the end of the period.

d. Income statement accounts are closed at the end of the period.

Which of the following items does NOT fall under the definition of a Liability? a. Allowance for Bad Debts b. Deferred Revenue/Unearned Income c. Accounts Payable d. Bank Loan

a. Allowance for Bad Debts

The trial balance a. Can be used to uncover errors in journalizing and posting b. Is a listing of all the accounts and their balances in the order of accounts appearing in the statement of financial position. c. Is used to prepare the statement of financial position while the general ledger is used to prepare the income statement. d. Has the primary purpose of proving that all journal entries were made for the period.

a. Can be used to uncover errors in journalizing and posting

All are incorrect statements, except a. Increase in Assets: Debit b. Decrease in Liability: Credit c. Increase in Equity: Debit d. Decrease in Assets: Debit

a. Increase in Assets: Debit

What is the logical order of the following steps in the accounting cycle? a. Journalize the closing entries, post the closing entries and then take the post-closing trial balance. b. Post the closing entries, take a post-closing trial balance, then journalize the closing entries c. Prepare the income statement, prepare the balance sheet and then prepare a worksheet. d. Post the journal entries to the ledger accounts, prepare a worksheet and then take a trial balance.

a. Journalize the closing entries, post the closing entries and then take the post-closing trial balance.

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 proves that debits and credits were properly entered in the ledger accounts. c. It is the basis for any adjustments to the account balances. d. It proves that debits and credits of equal amounts are in the ledger

b. It proves that debits and credits were properly entered in the ledger accounts.

An optional step in the accounting cycle is the preparation of a. Adjusting entries b. Post-closing trial balance and reversing entries c. Posting to the ledger and unadjusted trial balance

b. Post-closing trial balance and reversing entries

Mr. Cell, a supplier, has an account receivable from your business. This means that your business a. Sells goods to Mr. Cell b. Borrow money from Mr. Cell. c. Has an accounts payable to Mr. Cell d. Has a note payable to Mr. Cell

c. Has an accounts payable to Mr. Cell

What is the last step in the accounting cycle considering the following? a. Journalize and post closing entries. b. Prepare financial statements c. Prepare a post-closing trial balance. d. Journalize and post adjusting entries

c. Prepare a post-closing trial balance.