PA MIDTERM SAMPLE

40MCQs - 4 Chapters
Chapter 1
1- If total liabilities increased by $4,000, then
a. assets must have decreased by $4,000.
b. owner's equity must have increased by $4,000.
c. assets must have increased by $4,000, or owner's equity must have decreased by $4,000.
d. assets and owner's equity each increased by $2,000.
A = Lia +4,000 + OE
A - Lia = OE
→ A cung chieu voi Lia, OE
→ Lia, OE nguoc chieu nhau
→ Để equation xảy ra

2- As of June 30, 2008, Houston Company has assets of $100,000 and owner’s equity of $5,000.
What are the liabilities for Houston Company as of June 30, 2008?
a. $85,000
b. $90,000
c. $95,000
d. $100,000
A = Lia + OE → Lia = A - OE

3. If total liabilities decreased by $15,000 and owner’s equity increased by $5,000 during a
period of time, then total assets must change by what amount and direction during that
same period?
a. $20,000 increase
b. $10,000 decrease
c. $10,000 increase
d. $15,000 decrease
A = Lia - 15,000 + OE + 5,000
-> x
⇒ A + x = Lia + OE
A + x = Lia - 15,000 + OE + 5,000
-> x = -15,000 + 5,000 = -10,000

4- Jenner Company began the year with owner’s equity of $15,000. During the year, Jenner
received additional owner investments of $21,000, recorded expenses of $60,000, and had owner
drawings of $4,000. If Jenner’s ending owner’s equity was $46,000, what was the company’s
revenue for the year?
a. $70,000
b. $74,000
c. $91,000
d. $95,000
OE2 = OE1 + change in the OE
OE2 = OE1 + (OC - OD + REV - EXP)
46 = 15 + 21 - 4 + REV - 60
-> Shift + Solve

5- On October 1, Bennington Enterprises reported owner’s equity of $35,000. During October,

no additional investments were made and the company earned net income of $4,000. If
owner’s equity at October 31 totals $32,000, what amount of owner drawings were made
during the month?
a. $0
b. $1,000
c. $3,000
d. $7,000
OE2 = OE1 + (O.I - OD + Rev - Exp) => 32 = 35 - OD + 4 => OD = 7,000

6- Jimmy's Car Repair Shop started the year with total assets of $270,000 and total liabilities of
$180,000. During the year, the business recorded $450,000 in car repair revenues, $255,000 in
expenses, and Jimmy withdrew $45,000.
Jimmy's Capital balance changed by what amount from the beginning of the year to the end of
the year?
a. $45,000
b. $195,000
c. $90,000
d. $150,000
→ OE1 = 270 - 180 = 90
OE2 = OE1 + (O.I - OD + Rev - Exp) -> change
→ Change = 0 - 45,000 + 450,000 - 255,000 = 150,000

7- Berwick Company compiled the following financial information as of December 31, 2008:
● Revenues $140,000
● Berwick, Capital (1/1/08) 105,000
● Equipment 40,000
● Expenses 125,000
● Cash 35,000
● Berwick, Drawings 10,000
● Supplies 5,000
● Accounts payable 20,000
 ● Accounts receivable 15,000
Berwick’s owner’s equity on December 31, 2008 is
a. $105,000.
b. $110,000.
c. $80,000.
d. $120,000.
OE2 = OE1 + (O.I - OD + Rev - Exp) = 105 - 10 + 140 - 125 = 110,000

8- James Company purchases $600 of equipment from Mundelein Inc. for cash. The effect
on the components of the basic accounting equation of James Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.
→ Cash, equipment
→ Cash giam, Equipment tang

9- Morreale Beaver Company buys a $12,000 van on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and owner's equity statement only.
d. income statement, owner's equity statement, and balance sheet.
Income statement → Rev + Expenses
→ Other accounts -> belongs to BS
-> Equipment, AP

10- Which of the following events is not a business transaction? -> monetary unit
a. Investment of cash by the owner
b. Hired employees
c. Incurred utility expenses for the month
d. Earned revenue for services provided
Chapter 2
1- Which one of the following is not a part of an account?
a. Credit side
b. Trial balance -> report
c. Debit side
d. Title

2- Which of the following correctly identifies normal balances of accounts?

a. Assets Debit
Liabilities Credit
Owner’s Capital Credit
Revenues Debit
Expenses Credit
b. Assets Debit
Liabilities Credit
Owner’s Capital Credit
Revenues Credit
Expenses Credit
c. Assets Credit
Liabilities Debit
Owner’s Capital Debit
Revenues Credit
Expenses Debit
d. Assets Debit
Liabilities Credit
Owner’s Capital Credit
Revenues Credit
Expenses Debit

3- An accountant has debited an asset account for $1,400 and credited a liability account for
$500. What can be done to complete the recording of the transaction?
a. Nothing further must be done.
b. Debit an owner’s equity account for $900.
c. Debit another asset account for $900.
d. Credit another asset account for $900.
-> In a transaction: Total debits = Total credits -> double entry

4- On June 1, 2016, Barcelona Inc. reported a cash balance of $11,000. During June, Barcelona
made deposits of $3,000 and made disbursements totalling $9,000. What is the cash balance at
the end of June?
a. $5,000 debit balance
b. $14,000 debit balance
c. $5,000 credit balance
d. $4,000 credit balance
-> Beginning balance = 11,000 debit balance
-> Transactions:
+ Tang cash -> debit cash 3,000
+ Giam cash -> credit cash 9,000
-> Balance:
Cash .
11,000 | 9,000
3,000 |
-> 5,000 debit balance

5- Bertoli Company showed the following balances at the end of its first year:
Cash $4,000 → Debit
Prepaid insurance 7,000 → Debit
Accounts receivable 8,000 → Debit
Accounts payable 4,000 → Credit
Notes payable 7,000 → Credit
Owner’s Capital 3,000 → Credit
Owner’s Drawings 2,000 → Debit
Revenues 32,000 → Credit
Expenses 25,000 → Debit
What did Bertoli Company show as total credits on its trial balance?
a. $14,000
b. $46,000
c. $44,000
d. $48,000

6- During February 2016, its first month of operations, the owner of Solstice Co. invested cash of
$50,000. Solstice had cash revenues of $16,000 and paid expenses of $21,000. Assuming no
other transactions impacted the cash account, what is the balance in Cash on February 29?
a. $5,000 credit
b. $5,000 debit
c. $45,000 debit
d. $55,000 debit
Invest -> Cash increase -> debit 50,000
Cash revenue -> Cash revenue -> debit 16,000
Paid expense -> Cash expenses -> credit 21,000
7- On October 1, 2016, Medina Co. had an accounts payable balance of $50,000. During the
month, the company made purchases on account of $35,000 and made payments on account of
$48,000. At October 31, 2016, the accounts payable balance is
a. $37,000.
b. $33,000.
c. $63,000.
d. $133,000.
AP balance -> Credit balance -> Credit 50,000
AP increase -> Credit AP 35,000
AP decrease -> Debit AP 48,000
-> Credit balance of 37,000

8- Which of the following journal entries is recorded correctly and in the standard format?
a. Salaries and Wages Expense ............................................ 500
Cash ............................................................................ 2,500
Advertising Expense . ......................................................... 2,000

b. Salaries and Wages Expense . ........................................... 500

Advertising Expense . ......................................................... 2,000
Cash ............................................................................2,500
c. Cash .................................................................................. 2,500
Salaries and Wages Expense ...................................... 500
Advertising Expense .................................................... 2,000

d. Salaries and Wages Expense ............................................ 500

Advertising Expense .......................................................... 2,000
Cash . ........................................................................... 2,500

9- Haselhof Company purchases equipment for $2,400 and supplies for $700 from Behrman Co.
for $3,100 cash. The entry for this transaction will include a
a. debit to Equipment $2,400 and a debit to Supplies Expense $700 for Behrman.
b. credit to Cash for Behrman.
c. credit to Accounts Payable for Hasselhoff.
d. debit to Equipment $2,400 and a debit to Supplies $700 for Hasselhoff.

10- A trial balance would only help in detecting which one of the following errors?
a. A transaction that is not journalized
b. A journal entry that is posted twice
c. Offsetting errors are made in recording the transaction
d. A transposition error when transferring the debit side of journal entry to the ledger
Chapter 3
1- Which of the following time periods would not be referred to as an interim period?
a. Monthly
b. Quarterly
c. Semi-annually
d. Annually

2- Ken's Tune-up Shop follows the revenue recognition principle. Ken services a car on July
31. The customer picks up the vehicle on August 1 and mails the payment to Ken on August 5.
Ken receives the check in the mail on August 6. When should Ken show that the revenue was
earned?
a. July 31
b. August 1
c. August 5
d. August 6

3- A furniture factory's employees work overtime to finish an order that is sold on February 28.
The office sends a statement to the customer in early March and payment is received by
mid-March. The overtime wages should be expensed in
a. February.
b. March.
c. the period when the workers receive their checks.
d. either in February or March depending on when the pay period ends.

4- Dorting Company purchased a computer system for $3,600 on January 1, 2008. The Company
expects to use the computer system for 3 years. It has no salvage value.
Monthly depreciation expense on the asset is
a. $0.
b. $100.
c. $1,200.
d. $3,600.
Depreciation expense = (Cost - salvage value)/Lifespan = 1,200 (annual depreciation)
-> Monthly depreciation = 1,200/12 = 100
Deferrals or Accruals
-> Deferrals
Jan 1, 2008 - 3,600
Dec 31, 2010
After one year -> used up ⅓ value of the computer

5- Baden Realty Company received a check for $18,000 on July 1 which represents a 6
month advance payment of rent on a building it rents to a client. Unearned Rent was
credited for the full $18,000. Financial statements will be prepared on July 31. Baden
Realty should make the following adjusting entry on July 31:
a. Debit Unearned Rent, $3,000; Credit Rental Revenue, $3,000.
b. Debit Rental Revenue, $3,000; Credit Unearned Rent, $3,000.
c. Debit Unearned Rent, $18,000; Credit Rental Revenue, $18,000.
d. Debit Cash, $18,000; Credit Rental Revenue, $18,000.

Book: 18,000 unearned revenue (liability) -> in the book for 6 months
In reality: After 1 month -> performed 1-month service
→ Need adjustment -> rental 1 month -> revenue for 1 month, decrease the unearned revenue.

6- At December 31, 2008, before any year-end adjustments, Karr Company's Insurance
Expense account had a balance of $1,450 and its Prepaid Insurance account had a
balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had expired.
The adjusted balance for Insurance Expense for the year would be
a. $3,000.
b. $1,450.
c. $4,450.
d. $2,250.

Expense debit balance 1,450

Expense increase 3,000 -> debit expense 3,000

7- Keypress Company collected $6,500 in May of 2008 for 5 months of service which would
take place from October of 2008 through February of 2009. The revenue reported from
this transaction during 2008 would be
a. $0.
b. $3,900.
c. $6,500.
d. $2,600.

Deferrals -> Unearned revenue

Collected money on May
Start at Oct to February = 5 months
→ Revenue recognised at Oct - Dec = 3 months
Monthly revenue = 6,500/5 = 1,300 -> 3 months = 3,900
→ Balance of Unearned revenue at Dec 31 = 2,600

8- Sue Smiley has performed $500 of CPA services for a client but has not billed the client
as of the end of the accounting period. What adjusting entry must Sue make?
a. Debit Cash and credit Unearned Revenue
b. Debit Accounts Receivable and credit Unearned Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Revenue and credit Service Revenue

9- Clark Real Estate signed a four-month note payable in the amount of $8,000 on
September 1. The note requires interest at an annual rate of 9%. The amount of interest
to be accrued at the end of September is
a. $240.
b. $60.
c. $720.
d. $80.
Interest expense = A*rate*period = 8,000*9%*1/12 = 60
-> Total liability = 8,000 + 60 = 8,060
Interest payable

10- Employees at B Corporation are paid $5,000 cash every Friday for working Monday
through Friday. The calendar year accounting period ends on Wednesday, December 31.
How much salary expense should be recorded two days later on January 2?
a. $5,000
b. $3,000
c. None, matching requires the weekly salary to be accrued on December 31.
d. $2,000

Mon
Tues
Wed — record the accrued expenses
Thurs
Fri — record the accrued expenses for Thurs and Fri
Chapter 4
1- A worksheet can be thought of as a(n)
a. permanent accounting record.
b. optional device used by accountants.
c. part of the general ledger.
d. part of the journal.

2- The account, Supplies, will appear in the following debit columns of the worksheet.
a. Trial balance
b. Adjusted trial balance
c. Balance sheet
d. All of these

3- Assuming that there is a net loss for the period, debits equal credits in all but which section of
the worksheet?
a. Income statement columns
b. Adjustments columns
c. Trial balance columns
d. Adjusted trial balance columns

4- The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the owner's capital account.
c. the ending balance in the owner's capital account.
d. Zero.
Revenue = 20,000 -> Debit revenue, Credit Income Summary
Expense = 12,000 -> Credit Expense, Debit Income Summary
-> Balance = 8,000
The income statement for the month of June, 2008 of Delgado Enterprises contains the following
Information:
Revenues $7,000
Expenses:
Wages Expense $2,000
Rent Expense 1,000
Supplies Expense 300
Advertising Expense 200
Insurance Expense 100
Total expenses 3,600
Net income $3,400

6- The entry to close the expense accounts includes a

a. debit to Income Summary for $3,400.
b. credit to Rent Expense for $1,000,
c. credit to Income Summary for $3,600.
d. debit to Wages Expense for $2,000.
To close the total expense account -> credit total expense 3,600 + debit IS 3,600
To close the Wages expense account -> credit Wages expense 2,000 + Debit IS 2,000
To close the Rent expense account -> credit Rent expense + Debit IS

5- The entry to close the revenue account includes a

a. debit to Income Summary for $3,400.
b. credit to Income Summary for $3,400.
c. debit to Income Summary for $7,000.
d. credit to Income Summary for $7,000.
Revenue = 7,000 credit -> close: Debit revenue 7,000, Credit Income Summary 7,000

7- The entry to close Income Summary to Delgado, Capital includes

a. a debit to Revenue for $7,000.
b. credits to Expenses totalling $3,600.
c. a credit to Income Summary for $3,400
d. a credit to Delgado, Capital for $3,400.

The income statement for the year 2008 of Nova Co. contains the following information:
Revenues $70,000
Expenses:
Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 6,000
 Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) $(3,500)
8- The entry to close the revenue account includes a
a. debit to Income Summary for $3,500.
b. credit to Income Summary for $3,500.
c. debit to Revenues for $70,000.
d. credit to Revenues for $70,000.

9- The entry to close the expense accounts includes a

a. debit to Income Summary for $3,500.
b. credit to Income Summary for $3,500.
c. debit to Income Summary for $73,500.
d. debit to Wages Expense for $2,500.

10- The entry to close Income Summary to Nova, Capital includes

a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $73,500.
c. a credit to Income Summary for $3,500.
d. a credit to Nova, Capital for $3,500.

11- Speedy Bike Company received a $940 check from a customer for the balance due. The
transaction was erroneously recorded as a debit to Cash $490 and a credit to Service
Revenue $490. The correcting entry is
a. debit Cash, $940; credit Accounts Receivable, $940.
b. debit Cash, $450 and Accounts Receivable, $490; credit Service Revenue, $940.
c. debit Cash, $450 and Service Revenue, $490; credit Accounts Receivable, $940.
d. debit Accounts Receivable, $940; credit Cash, $450 and Service Revenue, $490.

Accounts & Explanation Debit Credit

Cash 490
Service revenue 490
Correcting:
Cash 450
Service Revenue 490
AR 940

12- Tyler Company paid $530 on account to a creditor. The transaction was erroneously
recorded as a debit to Cash of $350 and a credit to Accounts Receivable, $350. The
correcting entry is
a. Accounts Payable................................................................ 530
Cash......................................................................... 530
b. Accounts Receivable ........................................................... 350
Cash......................................................................... 350
c. Accounts Receivable ........................................................... 350
Accounts Payable .................................................... 350
d. Accounts Receivable ........................................................... 350
Accounts Payable................................................................ 530
Cash......................................................................... 880

The following items are taken from the financial statements of Cerner Company for the year
ending December 31, 2008:
Accounts payable $ 18,000
Accounts receivable 11,000
Accumulated depreciation – equipment 28,000
Advertising expense 21,000
Cash 15,000
Cerner, Capital (1/1/08) 102,000
Cerner, Drawing 14,000
Depreciation expense 12,000
Insurance expense 3,000
Note payable, due 6/30/09 70,000
Prepaid insurance (12-month policy) 6,000
Rent expense 17,000
Salaries expense 32,000
Service revenue 133,000
Supplies 4,000
Supplies expense 6,000
Equipment 210,000

13- What is the company’s net income for the year ending December 31, 2008?
a. $133,000
b. $42,000 = 133 - 21 - 12 - 3 - 17 - 32 - 6
c. $28,000
d. $12,000

14- What is the balance that would be reported for owner’s equity on December 31, 2008?
a. $102,000
b. $130,000
c. $144,000
d. $158,000

15- What are the total current assets as at December 31, 2008?
a. $26,000
b. $32,000
c. $36,000
d. $218,000

16- What is the book value of the equipment at December 31, 2008? -> BV = Cost - Acc. Dep.
a. $238,000
b. $210,000
c. $182,000
d. $170,000

17- What are the total current liabilities at December 31, 2008?
a. $18,000
b. $70,000
c. $88,000
d. $0

18- What are the total long-term liabilities at December 31, 2008?
a. $0
b. $70,000
c. $88,000
d. $90,000

19- What is total liabilities and owner’s equity at December 31, 2008?
a. $176,000
b. $190,000
c. $218,000
d. $232,000

20- All of the following are owner's equity accounts except

a. the Capital account.
b. Capital Stock.
c. Investment in Stock.
d. Retained Earnings.