611266

1. The balance sheet presents a company’s:
   1. Results of operations for a period of time
   2. Results of operations at a moment of time
   3. Financial position for a period of time
   4. Financial position at a moment in time
   5. None of the above

2. The income statement represents a company’s
   1. Results of operations for a period of time
   2. Results of operations at a moment of time
   3. Financial position for a period of time
   4. Financial position at a moment in time
   5. None of the above

3. The accrual method of accounting:
   1. States that revenue should be recognized in the period when cash is received
   2. Requires that revenue be recognized in the accounting period when it is earned
   3. Requires that events which make a difference to financial statement users be disclosed
   4. States that revenue should be recorded using a permanent account
   5. None of the above

4. The practice of recording revenue in the same period in which expenses were incurred to generate the revenue is referred to as the:
   1. full disclosure principle
   2. installment method
   3. matching principle
   4. revenue recognition principle
   5. None of the above

5. The principle of conservatism states:
   1. Do not overstate revenues and expenses, and do not understate assets
   2. Do not understate revenue and expenses, and do not overstate assets
   3. Do not overstate assets and revenue, and do not understate expenses
   4. Do not understate assets and revenue, and do not overstate expenses
   5. None of the above.

6. At January 1, 2008, Kobe Enterprises reported accounts receivable totaling $3,500. During the month, the company had credit sales of $5,000 and collected cash on accounts of $6,000.  At the end of January, the balance in accounts receivable is:

7. At January 1, 2009, KA Enterprises reported an accounts payable of $5,000. During the month, KA made purchase on account from vendors totaling $7,000. At the end of January, the balance in accounts payable is $8,000. What amount did KA pay vendors during January?

8. At January 1, 2007, Burton Industries reported Retained Earnings of $130,000. During 2007, Burton had a net loss of $30,000 and paid dividends to the stockholders of $20,000.  At December 31, 2007, the balance in Retained Earnings is:

9. Fisher Enterprises assets increased from $7,000 to $9,000, and liabilities decreased from $3,000 to $1,500. Assuming no additional owners’ equity transactions took place, if expenses totaled $3,000, what was Fisher’s revenue for the year?

Use the following information to answer the two questions that follow.

Edith Inc. paid employees for a month’s work.

10. The journal entry would include a debit to which account?
    1. Retained earnings
    2. Revenue
    3. Salaries payable
    4. Salary expense
    5. Cash

11. The journal entry would include a credit to which account?
    1. Retained earnings
    2. Revenue
    3. Salaries payable
    4. Salary expense
    5. Cash

Use the following information to answer the two questions that follow.

Fred Company declared and paid a cash dividend to its stockholders.

12. The journal entry would include a debit to which account?
    1. Revenue
    2. Dividends
    3. Common stock
    4. Cash
    5. Accounts payable

13. The journal entry would include a credit to which account?
    1. Revenue
    2. Dividends
    3. Common stock
    4. Cash
    5. Accounts payable

Use the following information to answer the two questions that follow.

Frank Company purchased computer equipment and paid $14,000 cash.

14. The journal entry would include a debit to which account?
    1. Computer Equipment Expense
    2. Computer Equipment
    3. Cash
    4. Accounts payable
    5. Accumulated Depreciation – Computer Equipment

15. The journal entry would include a credit to which account?
    1. Computer Equipment Expense
    2. Computer Equipment
    3. Cash
    4. Accounts payable
    5. Accumulated Depreciation – Computer Equipment

Use the following information to answer the two questions that follow.

On January 6, Ochoa Company performed services for one of its client and billed the client for the amount due.

16. What account will Ochoa debit on January 6?
17. Unearned Revenue
18. Revenue
19. Cash
20. Account Payable
21. Accounts Receivable

17. What account will Ochoa credit on January 6?
    1. Unearned Revenue
    2. Revenue
    3. Cash
    4. Account Payable
    5. Accounts Receivable

Use the following information to answer the four questions that follow.

On April 1, 2007, KA Company paid $36,000 to lease office space for the next twelve months.  KA Company debited a temporary account on April 1, 2007 when the cash was paid. KA Company adjusts its books on December 31 each year.

18. The journal entry on April 1, 2007 would include a debit to which account?
    1. Retained Earnings
    2. Rent Expense
    3. Prepaid Rent
    4. Cash
    5. Accounts Payable

19. The adjusting journal entry on December 31, 2007 would include a debit to which account?
    1. Retained Earnings
    2. Rent Expense
    3. Prepaid Rent
    4. Cash
    5. Accounts Payable

20. The adjusting journal entry on December 31, 2007 would include a credit to which account?
    1. Retained Earnings
    2. Rent Expense
    3. Prepaid Rent
    4. Cash
    5. Accounts Payable

21. The amount of the adjusting journal entry on December 31, 2007 is:

22. On October 1, 2007, ABC Company loaned $100,000 in cash to XYZ Company at an interest rate of 12% per year. The note matures in 6 months. What journal entry must XYZ record on December 31, 2007?
    1. Debit Interest Expense and credit Cash for $12,000
    2. Debit Interest Expense and credit Interest Payable for $12,000.
    3. Debit Interest Expense and credit Interest Payable for $6,000
    4. Debit Interest Expense and credit Cash for $6,000
    5. None of the above

23. The accountant for the Times Company forgot to make an adjusting entry to record salaries earned but not paid to employees. The effect of this error would be:
24. An understatement of net income and an overstatement of liabilities.
25. An overstatement of net income and an understatement of liabilities.
26. An understatement of net income and liabilities.
27. An overstatement of net income and liabilities.
28. None of the above.

24. The accountant for the Herald Company forgot to make an adjusting entry to record depreciation expense for the year. The effect of this error would be:
25. An overstatement of equity and an understatement of assets.
26. An understatement of equity and an overstatement of assets.
27. An overstatement of equity and assets.
28. An understatement of equity and assets.
29. None of the above.

25. At the end of the year, the accountant for Metro Inc. failed to record fees earned by the company during the year. The effect of this error would be:
    1. An overstatement of assets and an understatement of net income.
    2. An understatement of assets and an overstatement of net income.
    3. An understatement of assets and net income.
    4. An overstatement of assets and net income.
    5. None of the above

26. Which adjusting entry will result in a decrease in assets?
    1. An adjusting entry to record interest that has been incurred
    2. An adjusting entry to record the expiration of rent
    3. An adjusting entry to record revenue that is earned
    4. All of the above
    5. None of the above

27. JB Company had net income of $100,000 for the year before adjusting entries. If the following adjustments are necessary, what amount will JB report for net income?

• Office supplies used, $1,000
• Services performed for clients but not recorded, $2,000
• Interest accrued on a note payable, $7,000
• Insurance expired, $3,000
• Two-thirds of a $6,000 cash advance for future services was earned during the year

28. Jane Company collected $5,000 cash in advance on December 1, 2007 for services to be performed in December 2007 and the remainder in 2008. A temporary account was credited to record the December 1, 2007 transaction. Jane prepares financial statements as of December 31. If an adjusting entry was not made at end of December, 2007:
    1. Total liabilities at 12/31/07 would be understated and total assets at 12/31/07 would be overstated.
    2. Total liabilities at 12/31/07 would be overstated and total assets at 12/31/07 would be understated.
    3. Total liabilities at 12/31/07 would be overstated, total revenue at 12/31/07 would be understated and total revenue at 12/31/08 would be overstated
    4. Total liabilities at 12/31/07 would be understated, total revenue at 12/31/07 would be overstated and total revenue at 12/31/08 would be understated.
    5. None of the above.

Use the following to answer the 9 questions that follow:

Presented below is the trial balance for ABC, Inc. as of December 31, 2008, before adjusting entries:

ABC , INC.

Trial Balance

December 31, 2008

29. At December 31, there were $400 of supplies on hand. The adjusting entry on December 31, 2008 is a:
    1. debit to Supplies and a credit to Cash
    2. debit to Supplies and a credit to Supplies Expense
    3. debit to Supplies Expense and a credit to Cash
    4. debit to Supplies Expense and a credit to Supplies
    5. None of the above

30. Refer to the previous question. The amount of the entry is:

31. The Equipment was purchased on September 1, 2007. It has a useful life of ten years and an estimated salvage value of $1,000.   ABC uses the straight-line method of depreciation. The adjusting entry at December 31, 2008 would include a:
    800. credit to Accumulated Depreciation –Equipment for $800.
    801. credit to Accumulated Depreciation –Equipment for $2,400.
    802. debit to Depreciation Expense –Equipment for $800.
    803. credit to Equipment for $2,400.
    804. none of the above

32. Refer to the previous question. The adjusted balance in Accumulated Depreciation–Equipment on December 31, 2008, after the adjusting entry is:

33. Refer to question #31. At what amount will the Equipment be reported on the financial statements for the year ended December 31, 2008?

34. On May 1, 2008, ABC Inc. paid for $7,200 for a one year insurance policy. The adjusting entry on December 31, 2008 is a:
35. debit to Insurance Expense and a credit to Cash
36. debit to Insurance Expense and a credit to Prepaid Insurance
37. debit to Prepaid Insurance and a credit to Cash
38. debit to Prepaid Insurance and a credit to Insurance Expense
39. none of the above

35. Refer to the previous question. The amount of the entry is:

36. On December 1, 2008, ABC received $6,000 in advance for services to be performed over the next 12 months. The adjusting entry on December 31, 2008 is a:
    1. debit to Cash and a credit to Unearned Revenue
    2. debit to Fee Revenue and a credit to Unearned Revenue
    3. debit to Unearned Revenue and a credit to Cash
    4. debit to Unearned Revenue and a credit to Fee Revenue
    5. None of the above

37. Refer to the previous question. The amount of the adjusting entry is:

Use the following information from the ADJUSTED TRIAL BALANCE of SAM Corp. for the fiscal year ended December 31, 2008 to answer the next 17 questions.

Unearned Service Revenue                                              1,000

Wages Payable                                                                  2,000

Wages Expense                                                               17,000

Service Revenue                                                             37,000

Rent Expense                                                                    3,000

Retained Earnings, 1/1/2008                                            6,000

Prepaid Rent                                                                      5,500

Notes Payable, Due 5/1/2020                                        20,000

Notes Payable, Due 5/1/2009                                          1,000

Land                                                                                 30,000

Interest Revenue                                                               3,000

Interest Payable                                                                 1,000

Interest Expense                                                                1,000

Equipment                                                                       15,000

Dividends                                                                          1,500

Depreciation Expense — Equipment                                3,500

Common Stock                                                               55,000

Cash                                                                                 40,000

Accumulated Depreciation – Equipment                        5,000

Accounts Receivable                                                      17,500

Accounts Payable                                                                            3,000

38. NET INCOME for the year is:

39. TOTAL CURRENT ASSETS reported on the December 31, 2008 balance sheet is:

40. TOTAL PROPERTY, PLANT, AND EQUIPMENT reported on the December 31, 2008 balance sheet is:

41. TOTAL ASSETS reported on the December 31, 2008 balance sheet is:

42. TOTAL CURRENT LIABILITIES reported on the December 31, 2008 balance sheet is:

43. TOTAL LONG-TERM LIABILITIES reported on the December 31, 2008 balance sheet is:

44. TOTAL LIABILITIES reported on the December 31, 2008 balance sheet is:

45. After all the necessary closing entries are made, the ending balance in RETAINED EARNINGS is:

46. TOTAL OWNERS’ EQUITY reported on the December 31, 2008 balance sheet is:

47. The journal entry to close the revenue accounts is:
    1. Debit all revenue accounts, Credit Dividends
    2. Debit all revenue accounts, Credit Income Summary
    3. Debit Income Summary, Credit all revenue accounts
    4. Debit Income Summary, Credit Retained Earnings
    5. None of the above

48. Refer to the previous question. The amount of the entry is:

49. The journal entry to close the expense accounts is:
    1. Debit all expense accounts, Credit Dividends
    2. Debit all expense accounts, Credit Income Summary
    3. Debit Income Summary, Credit all expense accounts
    4. Debit Income Summary, Credit Retained Earnings
    5. None of the above

50. Refer to the previous question. The amount of the entry is:

51. The journal entry to close Income Summary is:
    1. Debit Cash, credit Retained Earnings
    2. Debit Income Summary, credit Cash
    3. Debit Income Summary, credit Retained Earnings
    4. Debit Retained Earnings, credit Income Summary
    5. None of the above

52. Refer to the previous question. The amount of the entry is:

53. The journal entry to close Dividends is:
    1. Debit Income Summary, credit Dividends
    2. Debit Dividends, credit Income Summary
    3. Debit Dividends, credit Retained Earnings
    4. Debit Retained Earnings, credit Dividends
    5. None of the above

54. After all closing entries are made, the post-closing trial balance would have a credit balance of:

55. The purpose of closing entries is:
    1. To close the net income for the period to the Retained Earnings account.
    2. To close Dividends to the Retained Earnings account.
    3. To close all temporary accounts for the period
    4. All of the above
    5. None of the above