analyse adjustment data, prepare adjusting

Reviewer: entries, prepare financial statements, journalize

MULTIPLE CHOICES closing entries and post to the ledger
1. The natural business year d. prepare financial statements, journalize closing
a. is a fiscal year that ends when business entries and post to the ledger, analyze and record
activities are at its lowest point. transactions, post transactions to the ledger,
b. is a calendar year that ends when business prepare a trial balance, analyze adjustment data,
activities are at its lowest point. prepare adjusting entries
c. is a fiscal year that ends when business 7. The following are steps to the accounting
activities are at its highest point. cycle. Of the following, which step should be
d. is a calendar year that ends when business done first.
activities are at its highest point. a. Closing entries are journalized and posted to
2. The worksheet the ledger.
a. is an integral part of the accounting cycle b. Transactions are posted to the ledger.
b. eliminates the need to rewrite the financial c. Adjusting entries are journalized and posted to
statements the ledger.
c. is a working paper that is required d. Financial statements are prepared.
d. is used to summarize account balances and 8. The accounting cycle requires three trial
adjustments for the financial statements balances be done. In what order should they
3. Which one of the steps below is not aided be prepared?
by the preparation of the work sheet? a. Post-closing, unadjusted, adjusted
a. preparing the adjusted trial balance b. Unadjusted, post-closing, adjusted
b. posting to the general ledger c. Unadjusted, adjusted, post-closing
c. preparing the financial statements d. Post-closing, adjusted, unadjusted
d. preparing the closing entries 9. The primary difference between deferred
4. A work sheet includes columns for and accrued expenses is that deferred
a. adjusting entries expenses have
b. closing entries a. been incurred and accrued expenses have not
c. reversing entries b. not been incurred and accrued expenses have
d. adjusting and closing entries been incurred
5. When a work sheet is complete, the c. been recorded and accrued expenses have not
adjustment columns should have been incurred
a. total credits greater than total debits if a net d. not been recorded and accrued expenses have
income was earned been incurred
b. total debits grater than total credits if a net loss 10. Prior to the adjusting process, accrued
was incurred expenses have
c. total debits greater than total credits if a net a. not yet been incurred, paid, or recorded
income was earned b. been incurred, not paid, but have been
d. total debits equal total credits recorded
6. The proper sequence for the steps in the c. been incurred, not paid, and not recorded
accounting cycle is a follows d. been paid but have not yet been incurred
a. analyze and record transactions, post 11. Prior to the adjusting process, accrued
transaction to the ledger, prepare a trial balance, revenue has
prepare financial statements, journalize closing a. been earned and cash received
entries, analyze adjustment data and prepare b. been earned and not recorded as revenue
adjusting entries c. not been earned but recorded as revenue
b. prepare a trial balance, analyze adjustment d. not been recorded as revenue but cash has
data, prepare adjusting entries, prepare financial been received
statements, journalize closing entries and post to 12. What is the major difference between a
the ledger, analyze and record transactions, post periodic and perpetual inventory system?
transactions to the ledger a. Under the periodic inventory system, the
c. analyze and record transactions, post purchase of inventory will be debited to the
transactions to the ledger, prepare a trial balance, Purchases
account a. increases the balance of a contra asset
b. Under the periodic inventory system, no journal account
entry is recorded at the time of the sale of b. increases the balance of an asset account
inventory. c. decreases the balance of an stockholders’
c. Under the periodic inventory system, all equity account
adjustments such as purchases returns and d. increases the balance of an expense account
allowances 17. Deferred revenue is revenue that is
and discounts are reconciled at the end of the a. earned and the cash has been received
month. b. earned but the cash has not been received
d. All are correct. c. not earned and the cash has not been received
13. Robles Co. sells $1,000 of inventory to d. not earned but the cash has been received
Salas Co.for cash. Robles paid $650 for the 18. The cash basis of accounting records
merchandise. Under a perpetual inventory revenues and expenses when the cash is
system, the following journal entry(ies) would exchanged while the accrual basis of
be recorded. accounting
a. Cash 1,000 Dr, Merchandise Inventory 650 Cr a. records revenues when they are earned and
b. Cash 1,000 Dr, Sales 1,000 Cr, Cost of expenses when they are paid
Merchandise Sold 650 Dr, Merchandise Inventory b. records revenues and expenses when they are
650 Cr. incurred.
c. Cash 1,000 Dr, Sales 1,000 Cr c. records revenues when cash is received and
d. Accounts Receivable 1,000 Dr, Sales 1,000 Cr, expenses when they are incurred.
Cost of Merchandise Sold 650 Dr, Merchandise d. records revenues and expenses when the
Inventory 650 Cr company needs to apply for a loan.
14. Black Company sold Red Company 19. The fiscal year selected by companies
merchandise on account FOB shipping point, a. is the same as the calendar year
2/10, net 30, for $10,000. Black prepaid the b. begins with the first day of the month and ends
$200 shipping charge. Which of the following on the last day of the twelfth month
entries does Black make to record this sale? c. must always begin on January 1.
a. Accounts Receivable-Red, debit $10,000; d. will change each year
Sales, credit $10,000 20. Which of the accounts below would appear
b. Accounts Receivable-Red, debit $10,000; in the Balance Sheet columns of the work
Sales, credit $10,000, and Accounts Receivable- sheet?
Red, debit $200; Cash, credit $200 a. Service Revenue
c. Accounts Receivable-Red, debit $10,400; b. Prepaid Rent
Sales, credit $10,400 c. Supplies Expense
d. Accounts Receivable-Red, debit $10,000; d. None are correct
Sales, credit $10,000, and Cash, debit $200 ; 21. The difference between the totals of the
Accounts Receivable-Red, credit $200; debit and credit columns of the Adjusted Trial
15. If the effect of the debit portion of an Balance columns on a work sheet
adjusting entry is to increase the balance of a. is the amount of net income or loss
an expense account, which of the following b. indicates there is an error on the work sheet
describes the effect of the credit portion of the c. is not unusual when preparing the work sheet
entry? d. is the net difference between revenue,
a. decreases the balance of an stockholders’ expenses, and dividends
equity account 22. When is the adjusted trial balance
b. increases the balance of an liability account prepared?
c. increases the balance of an asset account a. Before adjusting journal entries are posted
d. decreases the balance of an expense account b. After adjusting journal entries are posted.
16. If the effect of the credit portion of an c. After the adjusting journal entries are
adjusting entry is to increase the balance of a journalized
liability account, which of the following d. Before the adjusting journal entries are
describes the effect of the debit portion of the journalized.
entry?
23. On October 1, the company pays rent for c. Net income will be overstated for the current
twelve months in advance and debits an asset year.
account. At year end, the adjusting entry on d. Total liabilities and total assets will be
the work sheet would understated.
a. increase an expense account 29. Which of the following is an example of an
b. decrease a liability account accrued expense?
c. increase an asset account a. Salary owed but not yet paid
d. decrease an expense account b. Fees received but not yet earned
24. On August 1, a company collects revenue c. Supplies on hand
in advance for the next twelve months and d. A two-year premium paid on a fire insurance
credits a liability account. The adjusting entry policy
at year end on the work sheet would 30. Which of the following is not true
a. increase a liability account regarding depreciation?
b. decrease an asset account a. Depreciation allocates the cost of a fixed asset
c. decrease a revenue account over its estimated life.
d. decrease a liability account b. Depreciation expense reflects the decrease in
25. At the end of the fiscal year, the usual market value each year.
adjusting entry to Prepaid Insurance to record c. Depreciation is an allocation not a valuation
expired insurance was omitted. Which of the method.
following statements is true? d. Depreciation expense does not measure
a. Total assets at the end of the year will be changes in market value.
understated. 31. A fiscal year
b. Owner's equity at the end of the year will be a. ordinarily begins on the first day of a month
understated. and ends on the last day of the following twelfth
c. Net income for the year will be overstated. month
d. Insurance Expense will be overstated. b. for a business is determined by the federal
26. Which of the accounting steps in the government
accounting process below would be c. always begins on January 1 and ends on
completed last? December 31 of the same year
a. preparing the adjusted trial balance d. should end at the height of the business's
b. posting annual operating cycle
c. preparing the financial statements 32. Net income appears on the work sheet in
d. journalizing the
27. The adjusting entry to adjust supplies was a. debit column of the Balance Sheet columns
omitted at the end of the year. This would b. debit column of the Adjustments columns
effect the income statements by having c. debit column of the Income Statement columns
a. expenses understated and therefore net d. credit column of the Income Statement
income overstated columns
b. revenues understated and therefore net 33. A net loss appears on the work sheet in
income understated the
c. expenses understated and therefore net a. debit column of the Balance Sheet columns
income understated b. credit column of the Balance Sheet columns
d. expenses overstated and therefore net income c. debit column of the Income Statement columns
understated d. credit column of the Adjustments columns
28. At the end of the fiscal year, the usual 34. In the accounting cycle, the last step is
adjusting entry for depreciation on equipment a. preparing the financial statements
was omitted. Which of the following b. journalizing and posting the adjusting entries
statements is true? c. preparing a post-closing trial balance
a. Total assets will be understated at the end of d. journalizing and posting the closing entries
the current year. 35. During the end-of-period processing which
b. The balance sheet and income statement will of the following best describes the logical
be misstated but the statement of owner's order of this process
equity will be correct for the current year.
a. Preparation of adjustments, adjusted trial b. balance sheet as a current liability
balance, financial statements c. balance sheet in the stockholders’ equity
b. Preparation of Income Statement, adjusted trial section
balance, Balance Sheet d. income statement as revenue
c. Preparation of adjusted trial balance, cross- 42. Which one of the fixed asset accounts
referencing, journalizing listed below will not have a related contra
d. Preparation of adjustments, adjusted trial asset account?
balance, posting a. Office Equipment
36. What is the major difference between the b. Land
Unadjusted Trial Balance and the Adjusted c. Delivery Equipment
Trial Balance? d. Building
a. The Adjusted Trial Balance will show the net 43. Prepaid insurance is reported on the
income (loss) as an additional account. balance sheet as a
b. Both will need to be in balance in order to a. current asset
continue with the end-of-period processing b. fixed asset
c. The Adjusted Trial Balance includes the c. current liability
postings of the adjustments for the period in the d. long-term liability
balance of 44. The income statement is prepared from the
the accounts. a. adjusted trial balance
d. The Unadjusted Trial Balance will be used to b. income statement columns of the work sheet
record the adjustments for the period. c. either the adjusted trial balance or the income
37. Once the adjusting entries are posted, the statement columns of the work sheet
Adjusted Trial Balance will prepared to d. both the adjusted trial balance and the income
a. verify that the debits and credits are in balance. statement columns of the work sheet
b. verify that all of the adjustments were posted in 45. The income statement should be prepared
the correct accounts. a. before the statement of retained earnings and
c. verify that the net income (loss) is correct for balance sheet
the period. b. after the statement of retained earnings and
d. verify the correct flow of accounts into the before the balance sheet
financial statements. c. after the statement of retained earnings and
38. When preparing the statement of retained balance sheet
earnings, the beginning retained earnings d. after the balance sheet and before the
balance can always be found statement of retained earnings
a. in the Income Statement columns of the work 46. The Balance Sheet should be prepared
sheet a. before the income statement and the statement
b. in the statement of cash flows of retained earnings
c. in the general ledger b. before the income statement and after the
d. in the Balance Sheet columns of the work statement of retained earnings
sheet c. after the income statement and the statement
39. Accumulated Depreciation appears on the of retained earnings
a. balance sheet in the current assets section d. after the income statement and before the
b. balance sheet in the property, plant and statement of retained earnings
equipment section 47. The Income Statement will include the
c. balance sheet in the long-term liabilities section following accounts
d. income statement as an operating expense a. Revenues less Expenses (ordered largest to
40. Notes Receivable due in 345 days appear smallest amount) with Miscellaneous Expense
on the listed
a. balance sheet in the current assets section last
b. balance sheet in the fixed assets section b. Revenues less Expenses (ordered smallest to
c. balance sheet in the current liabilities section largest amounts) with Miscellaneous Expense
d. income statement as an expense listed
41. Unearned Fees appear on the last
a. balance sheet in the current assets section
c. Revenues less Expenses (ordered in a. Cash, Fees Earned, Unearned Revenues
alphabetical order) b. Prepaid Expenses, Unearned Revenues, Fees
d. Revenues less Expenses (order is not Earned
important) c. Capital Stock, Dividends, Income Summary
48. The classified Balance Sheet will d. Dividends, Fees Earned, Rent Expense
subsection the assets section as follows 55. There are four closing entries. The first
a. Current Assets and Other Assets one is to close ____, the second one is to
b. Current Assets and Property, Plant, and close ____, the third one is to close ____, and
Equipment the last one is to close ____.
c. Current Assets and Long-Term Assets a. Revenues, expenses, income summary,
d. Other Assets and Property, Plant and dividends account
Equipment b. Expenses, assets, income summary, capital
49. The classified Balance Sheet will divide its stock account
Liabilities Section as the following c. Capital stock account, dividends account,
subsections income summary, assets
a. Current Liabilities and Long-Term Liabilities d. Dividends account, income summary,
b. Current Liabilities and Other Liabilities expenses, revenues
c. Other Liabilities and Long-Term Liabilities 56. All of the closing entries will adjust ____ to
d. Present Liabilities and Tomorrow’s Liabilities update that account.
50. Long-term liabilities are those liabilities a. the dividends account
that b. the retained earnings account
a. will be paid in less than one year c. the cash account
b. are due to paid in 5 to 10 years d. the income summary account
c. are due to be paid in more than one year 57. Closing entries
d. are liabilities owed to the owner and will never a. need not be journalized if adjusting entries are
be paid prepared
51. Which is the following that is not true b. need not be posted if the financial statements
about closing entries? are prepared from the work sheet
a. There are four closing entries that update the c. are not needed if adjusting entries are prepared
stockholders’ equity account. d. must be journalized and posted
b. After the second closing entry, the income 58. Closing entries are dated in the journal as
summary account is equal to the net income or of
(loss) for the period. a. the date they are actually journalized, although
c. All real accounts are closed at the end of the they are generally prepared after the end of the
period. accounting period
d. By closing nominal accounts at the end of the b. the last day of the accounting period, although
period to zero, it is possible to isolate next they are actually journalized after the end of the
period’s information correctly. accounting period
52. The income summary account is also c. the first day of the accounting period, although
called they are actually journalized after the end of the
a. the closing account accounting period
b. the clearing account d. the first day of the subsequent accounting
c. the nominal account period
d. the temporary account 59. Which of the accounts below would be
53. After posting the second closing entry to closed by posting a debit to the account?
the income summary account, the balance will a. Unearned Revenue
be equal to b. Fees Earned
a. zero. c. Dividends
b. stockholders’ equity. d. Rent Expense
c. revenues for the period 60. Which of the following accounts should be
d. the net income or (loss) for the period. closed to Income Summary at the end of the
54. Which of the following account groups are all fiscal year?
considered nominal accounts? a. Supplies Expense
b. Accumulated Depreciation expired insurance was omitted. Which of the
c. Prepaid Insurance following statements is true?
d. Unearned Rent a. Total assets at the end of the year will be
61. Which of the following accounts will not be understated.
closed to Income Summary at the end of the b. Stockholders’ equity at the end of the year will
fiscal year? be understated.
a. Salaries Expense c. Net income for the year will be overstated.
b. Fees Earned d. Insurance Expense will be overstated.
c. Unearned Rent 68. At the end of the fiscal year, the usual
d. Depreciation Expense adjusting entry for depreciation on equipment
62. Which of the following accounts will be was omitted. Which of the following
closed to the retained earnings account at the statements is true?
end of the fiscal year? a. Total assets will be understated at the end of
a. Rent Expense the current year.
b. Fees Earned b. The balance sheet and income statement will
c. Income Summary be misstated but the statement of retained
d. Depreciation Expense earnings will be correct for the current year.
63. The entry to close the appropriate c. Net income will be overstated for the current
insurance account at the end of the year.
accounting period is d. Total liabilities and total assets will be
a. debit Income Summary; credit Prepaid understated.
Insurance 69. At the end of the fiscal year, the usual
b. debit Prepaid Insurance; credit Income adjusting entry for accrued salaries owed to
Summary employees was omitted. Which of the
c. debit Insurance Expense; credit Income following statements is true?
Summary a. Salary Expense for the year was understated.
d. debit Income Summary; credit Insurance b. The total of the liabilities at the end of the year
Expense was overstated.
64. Which of the following accounts ordinarily c. Net income for the year was understated.
appears in the post-closing trial balance? d. Stockholders’ equity at the end of the year was
a. Dividends understated.
b. Supplies Expense 70. The adjusting entry to adjust supplies was
c. Fees Earned omitted at the end of the year. This would
d. Unearned Rent effect the income statements by having
65. Which of the following is not true a. expenses understated and therefore net
regarding Depreciation? income overstated
a. Depreciation allocates the cost of a fixed asset b. revenues understated and therefore net
over its estimated life. income understated
b. Depreciation expense reflects the decrease in c. expenses understated and therefore net
market value each year. income understated
c. Depreciation is an allocation not a valuation d. expenses overstated and therefore net income
method. understated
d. Depreciation expense does not measure 71. The post-closing trial balance differs from
changes in market value. the adjusted trial balance in that it
66. Which of the following is an example of an a. does not take into account closing entries
accrued expense? b. does not take into account adjusting entries
a. Salary owed but not yet paid c. does not include balance sheet accounts
b. Fees received but not yet earned d. does not include income statement accounts
c. Supplies on hand 72. The stockholders’ equity is
d. A two-year premium paid on a fire insurance a. added to assets and the two are equal to
policy liabilities
67. At the end of the fiscal year, the usual b. added to liabilities and the two are equal to
adjusting entry to Prepaid Insurance to record assets
c. subtracted from liabilities and the net amount is c. debit Insurance Expense, $735, and credit
equal to assets Prepaid Insurance, $735.
d. subtracted from stockholders’ equity and the d. debit Prepaid Insurance, $630, and credit
net amount is equal to net income Cash, $630.
73. Balance sheet accounts 80. What is the proper adjusting entry at April
a. represent amounts accumulated during a 30, the end of the fiscal year, based on a
specific period of time prepaid insurance account balance before
b. are called real accounts adjustment, $16,000, and unexpired amounts
c. have zero balances after the closing entries per analysis of policies, $6,000?
have been posted a. debit Insurance Expense, $6,000; credit
d. are equal to assets and liabilities Prepaid Insurance, $6,000
74. On which financial statement will Income b. debit Insurance Expense, $16,000; credit
Summary be shown? Prepaid Insurance, $16,000
a. Statement of retained earnings c. debit Prepaid Insurance, $10,000; credit
b. Balance Sheet Insurance Expense, $10,000
c. Income Statement d. debit Insurance Expense, $10,000; credit
d. No financial statement Prepaid Insurance, $10,000
75. Which of the items below does not appear 81. The balance in the prepaid rent account
on the work sheet? before adjustment at the end of the year is
a. adjusting entries $24,000, which represents four months' rent
b. the unadjusted trial balance paid on December 1. The adjusting entry
c. closing entries required on December 31 is
d. dividends a. debit Rent Expense, $6,000; credit Prepaid
76. An indication that the work sheet columns Rent, $6,000
are in balance and the work sheet is b. debit Prepaid Rent, $18,000; credit Rent
completed is Expense, $6,000
a. the word "Total" is written at the bottom of each c. debit Rent Expense, $18,000; credit Prepaid
pair of columns Rent, $6,000
b. each pair of columns is double underlined d. debit Prepaid Rent, $6,000; credit Rent
c. each pair of columns has the totals circled Expense, $6,000
d. the final figures are written in ink 82. During the end-of-period processing which
77. When comparing a retail business to a of the following best describes the logical
service business, the financial statement that order of this process
changes the most is the a. Preparation of adjustments, adjusted trial
a. Balance Sheet balance, financial statements
b. Income Statement b. Preparation of Income Statement, adjusted trial
c. Statement of Retained Earnings balance, Balance Sheet
d. Statement of Cash Flow c. Preparation of adjusted trial balance, cross-
78. When comparing a retail business to a referencing, journalizing
service business, the financial statement that d. Preparation of adjustments, adjusted trial
changes the least is the balance, posting
a. Balance Sheet 83. What is the major difference between the
b. Income Statement Unadjusted Trial Balance and the Adjusted
c. Statement of Retained Earnings Trial Balance?
d. Statement of Cash Flow a. The Adjusted Trial Balance will show the net
79. A company purchases a one-year income (loss) as an additional account.
insurance policy on June 1 for $1,260. The b. Both will need to be in balance in order to
adjusting entry on December 31 is continue with the end-of-period processing
a. debit Insurance Expense, $630 and credit c. The Adjusted Trial Balance includes the
Prepaid Insurance, $630. postings of the adjustments for the period in the
b. debit Insurance Expense, $525 and credit balance of the accounts.
Prepaid Insurance, $525. d. The Unadjusted Trial Balance will be used to
record the adjustments for the period.
84. Which of the following is not true about $62,705. What does this information mean to
closing entries? the accountant?
a. There are four closing entries that update the a. Net income of $6,905
owner’s equity account. b. Net loss of $6,905
b. After the second closing entry, the income c. The accounts are out of balance, indicating an
summary account is equal to the net income or error has been made.
(loss) for the period. d. The accounts have not been updated.
c. All real accounts are closed at the end of the 89. The following accounts were taken from
period. the Adjusted Trial Balance columns of the
d. By closing nominal accounts at the end of the work sheet:
period to zero, it is possible to isolate next Accumulated Depreciation $ 2,000
period’s information correctly. Fees Earned 15,000
85. The balance in the office supplies account Depreciation Expense 1,000
on June 1 was $6,300, supplies purchased Insurance Expense 500
during June were $3,100, and the supplies on Prepaid Insurance 4,500
hand at June 30 were $2,500. The amount to Supplies 1,200
be used for the appropriate adjusting entry is Supplies Expenses 3,500
a. $3,700 Net income for the period is
b. $11,900 a. $2,300
c. $5,700 b. $10,000
d. $6,900 c. $4,300
86. The following accounts were taken from d. $5,000
the Adjusted Trial Balance columns of the 90. A summary of selected ledger accounts
work sheet: appear below for Ted's Auto Services for the
Accumulated Depreciation $ 2,300 2007 calendar year end.
Fees Earned 14,700 Net income for the period is
Depreciation Expense 1,300 a. $17,000
Insurance Expense 200 b. $22,000
Prepaid Insurance 4,800 c. $7,000
Supplies 900 d. $15,000
Supplies Expense 3,800 91. Red Rock Stone purchased a one-year
Net income for the period is liability insurance policy on January 1st of
a. $1,400 this year for $3,600 and recorded it as a
b. $9,400 prepaid expense. From the selections of a.
c. $14,700 through d., select the value that would be
d. $7,100 utilized in the closing entry for insurance
87. After all of the account balances have expense and prepaid insurance during the
been extended to the Balance Sheet columns closing process at the
of the work sheet, the totals of the debit and end of the first fiscal period on January 31st.
credit columns show debits of $36,678 and the a. $3,600.
credits of $41,101. This indicates that b. $360.
a. neither net income or loss can be calculated c. $300.
because it is found on the income statement d. $360.
b. the company has a net loss of $4,423 for the 92. The journal entry to close the Fees Earned,
period $100, and Rent Revenue, $25, accounts on
c. the company has a net income of $4,423 for December 31st during the closing process
the period would be:
d. The amounts are out of balance and need to a. Dec 31 Fees Earned 100
be corrected Rent Revenue 25
88. The income statement columns in the Income Summary 125
worksheet show that debits are equal to b. Dec 31 Income Summary 125
$55,800 and credits are Fees Earned 100
Rent Revenue 25
c. Dec 31 Revenues 125 b. $25,000
Income Summary 125 c. $4,000
d. Dec 31 Income Summary 125 d. $1,000
Revenues 125 98. Determine the net income (loss) for the
93. The journal entry to close revenues would period.
be: a. Net Income 26,500
a. debit Income Summary $47,000, credit Fees b. Net Loss 870
Earned $47,000 c. Net Loss 3,550
b. debit Retained Earnings $47,000, credit Fees d. Net Income 3,550
Earned $47,000 99. Determine the stockholders’ equity ending
c. debit Fees Earned $47,000; credit Income balance for the period.
Summary $47,000 a. $14,680
d. credit Fees Earned $47,000; credit Capital b. $11,130
Stock $47,000 c. $15,550
94. Based on the preceding trial balance, the d. $2,680
entry to close expenses would be: 100. Determine total assets.
a. Wages Expense $21,000 a. $26,500
Rent Expense 6,000 b. $15,380
Depreciation Expense 5,000 c. $21,380
Income Summary 32,000 d. $22,580
b. Expenses 32,000 101. Determine the current assets.
Income Summary 32,000 a. $22,580
c. Wages Expense $21,000 b. $9,180
Rent Expense 6,000 c. $21,380
Depreciation Expense 5,000 d. $26,500
Retained Earnings 32,000 102. Determine the total liabilities for the
d. Income Summary 32,000 period.
Wages Expense $21,000 a. $6,700
Rent Expense 6,000 b. $1,700
Depreciation Expense 5,000 c. $5,000
95. Based on the preceding trial balance, the d. $18,700
entry to close income summary would be: 103. The work sheet at the end of September
a. debit Income Summary $15,000; credit has $4,000 in the Balance Sheet credit column
Retained Earnings $4,000 for Accumulated Depreciation. The work sheet
b. debit Income Summary $47,000; credit at the end of October has $4,750 in the
Retained Earnings $47,000 Balance Sheet credit column for Accumulated
c. debit Income Summary $15,000, credit Depreciation. What was the amount of the
Retained Earnings $15,000 depreciation expense adjustment for the
d. debit Retained Earnings $4,000; credit Income month of October?
Summary $4,000 a. amount can not be determined
96. Based on the preceding trial balance, the b. $4,750
entry to close the dividends would be: c. $4,000
a. debit Retained Earnings $1,000, credit d. $750
Dividends $1,000 104. After all of the account balances have
b. debit Retained Earnings $4,000, credit been extended to the Balance Sheet columns
Dividends $4,000 of the worksheet, the totals of the debit and
c. debit Dividends $1,000; credit Retained credit columns are $25,250 and $21,825,
Earnings $1,000 respectively. What is the amount of net
d. debit Dividends $4,000; credit Retained income or net loss for the period?
Earnings $4,000 a. $3,425 net income
97. Based on the preceding trial balance, the b. $25,250 net loss
ending balance in Retained Earnings is: c. $3,425 net loss
a. $0 d. $21,825 net income
105. After all of the account balances have 110. Gross profit is equal to:
been extended to the Income Statement a. sales plus (sales discounts and sales returns
columns of the and allowances) plus cost of merchandise sold
work sheet, the totals of the debit and credit b. sales plus sales returns and allowances less
columns are $87,500 and $98,300, sales discounts less cost of merchandise sold
respectively. What is the amount of the net c. sales plus sales discounts less sales returns
income or net loss for the period? and allowances less cost of merchandise sold
a. $10,800 net income d. sales less (sales discounts and sales returns
b. $10,800 net loss and allowances) less cost of merchandise sold
c. $98,300 net income 111. Using the following information, what is
d. $87,500 net loss the amount of cost of merchandise sold?
106. After totaling all of the columns in the Purchases $28,000
work sheet, the Balance Sheet show debits of Purchases discounts $800
$35,678 and the credits of $39,901. This Merchandise inventory April 1 6,500
indicates that Merchandise inventory April 30 7,800
a. neither net income or loss can be calculated Sales returns and allowances 750
because that is found on the income statement Sales 57,000
b. the company recorded a net loss of $4,223 Purchases returns and allowances 1,000
c. the company recorded a net income of $4,223 Transportation In 880
d. The amounts are out of balance and need to a. 25,780
be corrected b. 23,270
107. The column of the income statement c. 31,220
show the debits are equal to $56,899 and d. 24,020
credits are $60,333. What do this information 112. Using the following information, what is
mean to the accountant? the amount of gross profit?
a. Net income of $3,434 Purchases $28,000
b. Net loss of $3,434 Purchases discounts $800
c. the accounts are out of balance Merchandise inventory April 1 6,500
d. None are correct. Merchandise inventory April 30 7,800
108. A company, using the periodic inventory Sales returns and allowances 750
system, has merchandise inventory costing Sales 57,000
$140 on hand at the beginning of the period. Purchases returns and allowances 1,000
During the period, merchandise costing $400 Transportation In 880
is purchased. At year-end, merchandise a. 31,970
inventory costing $180 is on hand. The cost of b. 30,470
merchandise sold for the year is c. 25,780
a. $720 d. 56,250
b. $550 113. Using the following information, what is
c. $360 the amount of net sales?
d. $140 Purchases $28,000
109. A company using the periodic inventory Purchases discounts $800
system has the following account balances: Merchandise inventory April 1 6,500
Merchandise Inventory at the beginning of the Merchandise inventory April 30 7,800
year, $4,000; Transportation-In, $450; Sales returns and allowances 750
Purchases, $12,000; Purchases Returns and Sales 57,000
Allowances, $2,300; Purchases Discounts, Purchases returns and allowances 1,000
$220. The cost of merchandise purchased is Transportation In 880
equal to a. 25,780
a. $13,930 b. 57,000
b. $9,930 c. 57,750
c. $9,489 d. 56,250
d. $14520 114. Silver Co. sold merchandise to Bronze
Co. on account, $23,000, terms 2/15, net 45.
The cost of the merchandise sold is $18,500. 119. Based on the following information, what
Silver Co. issued a credit memorandum for would be recorded as the cash payment if the
$2,500 for merchandise returned that invoice is paid within the discount period?
originally cost $1,900. The Bronze Co. paid the 1. $5,000 of merchandise inventory was ordered
invoice within the discount period. What is on April 2, 2007
amount of net sales from the above 2. $2,000 of this merchandise was received on
transactions? April 5, 2007
a. $20,090 3. On April 6, 2007, an invoice dated April 4,
b. $20,500 2007, with terms of 2/10, net 30 for $2,150
c. $3,490 which included a $150 prepaid freight cost, was
d. $23,000 received.
115. Sales to customers who use bank credit 4. On April 10, 2007, $500 of the merchandise
cards such as MasterCard and Visa are was returned to the seller.
usually recorded by a a. $1,470
a. debit to Bank Credit Card Sales, debit to Credit b. $1,520
Card Expense, and a credit to Sales c. $2,150
b. debit to Cash and a credit to Sales d. $1,620
c. debit to Cash, credit to Credit Card Expense, 120. If the merchandise costs $4,000,
and a credit to Sales insurance in transit costs $200, tariff costs
d. debit to Sales, debit to Credit Card Expense, $50, processing the purchase order by the
and a credit to Cash purchasing department costs $35, and the
116. Merchandise subject to terms 1/10, n/30, company receiving dock personnel cost $15,
FOB shipping point, is sold on account to a what is the total cost charged to the
customer for $15,000. The seller paid merchandise?
transportation costs of $1,000 and issued a a. $4,250
credit memorandum for $5,000 prior to b. $4,285
payment. What is the amount of the cash c. $4,300
discount allowable? d. $4,000
a. $160
b. $150 Fundamentals of Accounting
c. $140 Part 1. True or False
d. $100 Write A if the statement is True and write B if the
117. Merchandise is sold for cash. The selling statement is False.
price of the merchandise is $2,000 and the ___ 1. The role of accounting is to provide many
sale is subject to a 5% state sales tax. The different users with financial information to make
journal entry to record the sale would include economic decisions.
a. A debit to Cash for $2,000. ___ 2. Accounts are records of increases and
b. A credit to Sales for $2,100. decreases in individual financial statement items.
c. A credit to Sales Tax Payable for $100. ___ 3. Proprietorships are owned by one owner
d. None of the above. and provide only services to their customers.
118. Apple Co sells merchandise on credit to ___ 4. A business stakeholder is a person or
Zea Co in the amount of $8,000. The invoice is entity that has an economic interest in the
dated on September 15 with terms of 1/15, net company.
45. What is the amount of the discount and up ___ 5. The primary role of accounting is to
to what date must the invoice be paid in order determine the amount of taxes a business will be
for the buyer to take advantage of the required to
discount? pay to taxing entities.
a. $160, September 30 ___ 6. Stakeholders use only accounting reports
b. $160, September 25 as the source of information to base all of their
c. $80, September 30 business
d. $80, September 25 decisions.
___ 7. Manufacturing and merchandising Part 2. Multiple Choices
companies are similar because they purchase 1. Which of the following best describes
products from accounting?
other companies to sell to their customers. a.records economic data but does not
___ 8. Large corporations such as Wal-Mart, communicate the data to users according to any
Coca-Cola, and Nike operate as manufacturing specific rules
businesses. b. is an information system that provides reports
___ 9. A corporation is a business that is legally to stakeholders
separate and distinct from its owners. c. is of no use by individuals outside of the
___ 10. A business is an organization that business
provides goods or services to their customers in d. is used only for filling out tax returns and for
exchange for financial statements for various type of
money or other items of value. governmental reporting requirements
___ 11. Manufacturing and merchandising 2. Which of the following is not a role of
companies are similar because they purchase accounting in business?
products from a. To provide reports to stakeholders about the
other companies to sell to their customers. economic activities and conditions of a business.
___ 12. Adjusting entries are made at the end of b. To personally guarantee loans of the business.
an accounting period to adjust accounts on the c. To provide information for managers to use in
balance operating the business.
sheet. d. To assess the various informational needs of
___ 13. Journalizing a transaction with both the stakeholders and design its accounting system to
debit and the credit for $69 instead of $96 will meet those needs.
cause the e. To provide information to other stakeholders to
trial balance to be out of balance. use in assessing the economic performance and
___ 14. The erroneous arrangement of digits, condition of the business.
such as writing $45 as $54, is called a slide. 3. The business entity concept means that
___ 15. The difference between deferred revenue a. the owner is part of the business entity
and accrued revenue is that accrued revenue has b. an entity is organized according to state or
been federal statutes
recorded and needs adjusting and deferred c. an entity is organized according to the rules set
revenue has never been recorded. by the FASB
___ 16. The accounting equation can be d. the entity is an individual economic unit for
expressed as Assets - Liabilities = Stockholders' which data are recorded, analyzed, and reported
Equity. 4. ____ are considered to be product or service
___ 17. If the assets owned by a business total market stakeholders.
$100,000 and liabilities total $50,000, the total for a. Employees and customers
stockholders' equity is $150,000. b. Customers and vendors
___ 18. If net income for a corporation was c. Owners and managers
$175,000, dividends were $40,000 in cash, and d. Government and banks
the 5. Which of the following would not normally
stockholders made no additional investment, the operate as a service business?
stockholders’ equity increased $215,000. a. Pet Groomers
___ 19. The excess of revenue over the b. Restaurant
expenses incurred in earning the revenue is c. Video Rentals
called capital. d. Styling Salon
___ 20. If the adjustment for depreciation for the 6. Which of the following is not a characteristic of
year is inadvertently omitted, the assets on the a corporation?
balance sheet at the end of the period will be a. Corporations are organized as a separate legal
understated. taxable entity
b. Ownership is divided into shares of stock.
c. Corporations experience an ease in obtaining
large amounts of resources by issuing stock.
d. A corporation’s resources are limited to their (3) record journal entries
individual owners’ resources. (4) prepare a trial balance
e. Corporations make up 20% of all businesses. What is the proper order of these steps?
7. An entity that is organized according to state or a. (3), (2), (4), (1)
federal statutes and in which ownership is divided b. (2), (3), (4), (1)
into shares of stock is a c. (3), (2), (1), (4)
a. proprietorship d. (4), (3), (2), (1)
b. corporation 14. An account is said to have a debit balance if
c. partnership a. the amount of the debits exceeds the amount
d. governmental unit of the credits
8. Which of the following is not true about a b. there are more entries on the debit side than
manufacturing business? on the credit side
a. They change inputs to products which are sold c. its normal balance is debit without regard to the
to their customers. amounts or number of entries on the debit side
b. Their primary goal is to maximize profits. d. the first entry of the accounting period was
c. Only large business can be considered a posted on the debit side
manufacturing business. 15. Which statement(s) concerning cash is (are)
d. All are true. true?
9. Select the type of business that is most likely to a. cash will always have more debits than credits
obtain large amounts of resources by issuing b. cash will never have a credit balance
stock. c. cash is increased by debiting
a. Partnership d. all of the above
b. Corporation 16. Which of the following applications of the
c. Proprietorship rules of debit and credit is true?
d. None are correct. a. decrease Prepaid Insurance with a credit and
10. For accounting purposes, the business entity the normal balance is a credit
should be considered separate from its owners if b. increase Accounts Payable with a credit and
the entity is the normal balance is a debit
a. a corporation c. increase Supplies Expense with a debit and the
b. a proprietorship normal balance is a debit
c. a partnership d. decrease Cash with a debit and the normal
d. all of the above balance is a credit
11. Which of the following is not a true statement 17. Which of the following describes the
about the accounting equation and its elements? classification and normal balance of the fees
a. The accounting equation is Assets = Liabilities earned account?
- Stockholders’ Equity. a. asset, credit
b. Assets are the resources a business b. liability, credit
possesses. c. stockholders' equity, debit
c. Liabilities represent debts of a business. d. revenue, credit
d. Examples of assets are cash, land, buildings, 18. A credit balance in which of the following
and equipment. accounts would indicate a likely error?
e. Stockholders’ equity are the rights of the a. Fees Earned
stockholders. b. Salary Expense
12. Which of the following is not a business c. Capital Stock
transaction? d. Accounts Payable
a. make a sales offer 19. Which of the following entries records the
b. sell goods for cash investment of cash by Tito to the Tito Corporation
c. receive cash for services to be rendered later in exchange for capital stock?
d. pay for supplies a. debit Capital Stock; credit Accounts Receivable
13. Randomly listed below are the steps in the b. debit Cash; credit Capital Stock
accounting cycle: c. debit Dividends; credit Cash
(1) prepare the financial statements d. debit Cash; credit Dividends
(2) post the journal entries to the ledger
20. Which of the following entries records the d. Accounts Receivable
receipt of a utility bill from the water company? 27. Which account would normally not require an
a. debit Utilities Expense; credit Accounts adjusting entry?
Payable a. Wages Expense
b. debit Utilities Payable; credit Accounts b. Accounts Receivable
Receivable c. Accumulated Depreciation
c. debit Accounts Payable; credit Cash d. Capital Stock
d. debit Accounts Payable; credit Utilities Payable 28. The balance in the office supplies account on
21. Revenue should be recognized when June 1 was $5,200, supplies purchased during
a. cash is received June were $2,500, and the supplies on hand at
b. the service is performed June 30 were $2,000. The amount to be used for
c. the customer places an order the appropriate adjusting entry is
d. the customer charges an order a. $4,500
22. Using accrual accounting, revenue is b. $2,500
recorded and reported only c. $9,700
a. when cash is received without regard to when d. $5,700
the services are rendered 29. As time passes, fixed assets other than land
b. when the services are rendered without regard lose their capacity to provide useful services. To
to when cash is received account for this decrease in usefulness, the cost
c. when cash is received at the time services are of fixed assets is systematically allocated to
rendered expense through a process called
d. if cash is received after the services are a. equipment allocation
rendered b. depreciation
23. One of the accounting concepts upon which c. accumulation
deferrals and accruals are based is d. matching
a. matching 30. The type of account and normal balance of
b. cost Accumulated Depreciation is
c. price-level adjustment a. asset, credit
d. conservatism b. asset, debit
24. If the effect of the debit portion of an adjusting c. contra asset, credit
entry is to increase the balance of an expense d. contra asset, debit
account, which of the following describes the 31. Which of the following is an example of an
effect of the credit portion of the entry? accrued expense?
a. decreases the balance of an stockholders’ a. Salary owed but not yet paid
equity account b. Fees received but not yet earned
b. increases the balance of an liability account c. Supplies on hand
c. increases the balance of an asset account d. A two-year premium paid on a fire insurance
d. decreases the balance of an expense account policy
25. The revenue recognition concept 32. The balance in the supplies account, before
a. is in not in conflict with the cash method of adjustment at the end of the year is $625. The
accounting proper adjusting entry if the amount of supplies
b. determines when revenue is credited to a on hand at the end of the year is $325 would be
revenue account a. debit Cash $325, credit Supplies $325
c. states that revenue is not recorded until the b. debit Supplies Expense $300, credit Supplies
cash is received $300
d. controls all revenue reporting for the cash basis c. debit Supplies Expense$325, credit Supplies
of accounting $325
26. Which one of the following accounts below d. debit Supplies $300, credit Supplies Expense
would likely be included in a deferral adjusting $300
entry? 33. In the accounting cycle, the last step is
a. Interest Revenue a. preparing the financial statements
b. Unearned Revenue b. journalizing and posting the adjusting entries
c. Salaries Payable c. preparing a post-closing trial balance
d. journalizing and posting the closing entries 40. Balance sheet accounts
34. Prepaid insurance is reported on the balance a. represent amounts accumulated during a
sheet as a specific period of time
a. current asset b. are called real accounts
b. fixed asset c. have zero balances after the closing entries
c. current liability have been posted
d. long-term liability d. are equal to assets and liabilities
35. What is the major difference between the
Unadjusted Trial Balance and the Adjusted Trial
Balance?
a. The Adjusted Trial Balance will show the net
income (loss) as an additional account.
b. Both will need to be in balance in order to
continue with the end-of-period processing
c. The Adjusted Trial Balance includes the
postings of the adjustments for the period in the
balance
of the accounts.
d. The Unadjusted Trial Balance will be used to
record the adjustments for the period.
36. The stockholders’ equity is
a. added to assets and the two are equal to
liabilities
b. added to liabilities and the two are equal to
assets
c. subtracted from liabilities and the net amount is
equal to assets
d. subtracted from stockholders’ equity and the
net amount is equal to net income
37. The income summary account is also called
a. the closing account
b. the clearing account
c. the nominal account
d. the temporary account
38. Which of the following account groups are all
considered nominal accounts?
a. Cash, Fees Earned, Unearned Revenues
b. Prepaid Expenses, Unearned Revenues, Fees
Earned
c. Capital Stock, Dividends, Income Summary
d. Dividends, Fees Earned, Rent Expense
39. There are four closing entries. The first one is
to close ____, the second one is to close ____,
the third one is to close ____, and the last one is
to close ____.
a. Revenues, expenses, income summary,
dividends account
b. Expenses, assets, income summary, capital
stock account
c. Capital stock account, dividends account,
income summary, assets
d. Dividends account, income summary,
expenses, revenues