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- The balance sheet presents a company’s:
- Results of operations for a period of time
- Results of operations at a moment of time
- Financial position for a period of time
- Financial position at a moment in time
- None of the above
- The income statement represents a company’s
- Results of operations for a period of time
- Results of operations at a moment of time
- Financial position for a period of time
- Financial position at a moment in time
- None of the above
- The accrual method of accounting:
- States that revenue should be recognized in the period when cash is received
- Requires that revenue be recognized in the accounting period when it is earned
- Requires that events which make a difference to financial statement users be disclosed
- States that revenue should be recorded using a permanent account
- None of the above
- The practice of recording revenue in the same period in which expenses were incurred to generate the revenue is referred to as the:
- full disclosure principle
- installment method
- matching principle
- revenue recognition principle
- None of the above
- The principle of conservatism states:
- Do not overstate revenues and expenses, and do not understate assets
- Do not understate revenue and expenses, and do not overstate assets
- Do not overstate assets and revenue, and do not understate expenses
- Do not understate assets and revenue, and do not overstate expenses
- None of the above.
- 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:
- 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?
- 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:
- 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.
- The journal entry would include a debit to which account?
- Retained earnings
- Revenue
- Salaries payable
- Salary expense
- Cash
- The journal entry would include a credit to which account?
- Retained earnings
- Revenue
- Salaries payable
- Salary expense
- Cash
Use the following information to answer the two questions that follow.
Fred Company declared and paid a cash dividend to its stockholders.
- The journal entry would include a debit to which account?
- Revenue
- Dividends
- Common stock
- Cash
- Accounts payable
- The journal entry would include a credit to which account?
- Revenue
- Dividends
- Common stock
- Cash
- Accounts payable
Use the following information to answer the two questions that follow.
Frank Company purchased computer equipment and paid $14,000 cash.
- The journal entry would include a debit to which account?
- Computer Equipment Expense
- Computer Equipment
- Cash
- Accounts payable
- Accumulated Depreciation – Computer Equipment
- The journal entry would include a credit to which account?
- Computer Equipment Expense
- Computer Equipment
- Cash
- Accounts payable
- 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.
- What account will Ochoa debit on January 6?
- Unearned Revenue
- Revenue
- Cash
- Account Payable
- Accounts Receivable
- What account will Ochoa credit on January 6?
- Unearned Revenue
- Revenue
- Cash
- Account Payable
- 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.
- The journal entry on April 1, 2007 would include a debit to which account?
- Retained Earnings
- Rent Expense
- Prepaid Rent
- Cash
- Accounts Payable
- The adjusting journal entry on December 31, 2007 would include a debit to which account?
- Retained Earnings
- Rent Expense
- Prepaid Rent
- Cash
- Accounts Payable
- The adjusting journal entry on December 31, 2007 would include a credit to which account?
- Retained Earnings
- Rent Expense
- Prepaid Rent
- Cash
- Accounts Payable
- The amount of the adjusting journal entry on December 31, 2007 is:
- 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?
- Debit Interest Expense and credit Cash for $12,000
- Debit Interest Expense and credit Interest Payable for $12,000.
- Debit Interest Expense and credit Interest Payable for $6,000
- Debit Interest Expense and credit Cash for $6,000
- None of the above
- 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:
- An understatement of net income and an overstatement of liabilities.
- An overstatement of net income and an understatement of liabilities.
- An understatement of net income and liabilities.
- An overstatement of net income and liabilities.
- None of the above.
- 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:
- An overstatement of equity and an understatement of assets.
- An understatement of equity and an overstatement of assets.
- An overstatement of equity and assets.
- An understatement of equity and assets.
- None of the above.
- 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:
- An overstatement of assets and an understatement of net income.
- An understatement of assets and an overstatement of net income.
- An understatement of assets and net income.
- An overstatement of assets and net income.
- None of the above
- Which adjusting entry will result in a decrease in assets?
- An adjusting entry to record interest that has been incurred
- An adjusting entry to record the expiration of rent
- An adjusting entry to record revenue that is earned
- All of the above
- None of the above
- 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
- 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:
- Total liabilities at 12/31/07 would be understated and total assets at 12/31/07 would be overstated.
- Total liabilities at 12/31/07 would be overstated and total assets at 12/31/07 would be understated.
- 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
- 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.
- 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
| | DR | | CR |
| Cash | $ 28,400 | | |
| Accounts Receivable | 12,500 | | |
| Prepaid Insurance | 7,200 | | |
| Equipment | 25,000 | | |
| Accumulated Depreciation – Equipment | | | $ 800 |
| Unearned Revenue | | | 6,000 |
| Notes Payable | | | 7,950 |
| Retained Earnings | | | 5,000 |
| Common Stock | | | 29,000 |
| Fee Revenue | | | 39,000 |
| Salaries Expense | 13,200 | | |
| Supplies Expense | 950 | | |
| Interest Expense | 500 | | |
| | $ 87,750 | | $ 87,750 |
- At December 31, there were $400 of supplies on hand. The adjusting entry on December 31, 2008 is a:
- debit to Supplies and a credit to Cash
- debit to Supplies and a credit to Supplies Expense
- debit to Supplies Expense and a credit to Cash
- debit to Supplies Expense and a credit to Supplies
- None of the above
- Refer to the previous question. The amount of the entry is:
- 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:
- credit to Accumulated Depreciation –Equipment for $800.
- credit to Accumulated Depreciation –Equipment for $2,400.
- debit to Depreciation Expense –Equipment for $800.
- credit to Equipment for $2,400.
- none of the above
- Refer to the previous question. The adjusted balance in Accumulated Depreciation–Equipment on December 31, 2008, after the adjusting entry is:
- Refer to question #31. At what amount will the Equipment be reported on the financial statements for the year ended December 31, 2008?
- 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:
- debit to Insurance Expense and a credit to Cash
- debit to Insurance Expense and a credit to Prepaid Insurance
- debit to Prepaid Insurance and a credit to Cash
- debit to Prepaid Insurance and a credit to Insurance Expense
- none of the above
- Refer to the previous question. The amount of the entry is:
- 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:
- debit to Cash and a credit to Unearned Revenue
- debit to Fee Revenue and a credit to Unearned Revenue
- debit to Unearned Revenue and a credit to Cash
- debit to Unearned Revenue and a credit to Fee Revenue
- None of the above
- 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
- NET INCOME for the year is:
- TOTAL CURRENT ASSETS reported on the December 31, 2008 balance sheet is:
- TOTAL PROPERTY, PLANT, AND EQUIPMENT reported on the December 31, 2008 balance sheet is:
- TOTAL ASSETS reported on the December 31, 2008 balance sheet is:
- TOTAL CURRENT LIABILITIES reported on the December 31, 2008 balance sheet is:
- TOTAL LONG-TERM LIABILITIES reported on the December 31, 2008 balance sheet is:
- TOTAL LIABILITIES reported on the December 31, 2008 balance sheet is:
- After all the necessary closing entries are made, the ending balance in RETAINED EARNINGS is:
- TOTAL OWNERS’ EQUITY reported on the December 31, 2008 balance sheet is:
- The journal entry to close the revenue accounts is:
- Debit all revenue accounts, Credit Dividends
- Debit all revenue accounts, Credit Income Summary
- Debit Income Summary, Credit all revenue accounts
- Debit Income Summary, Credit Retained Earnings
- None of the above
- Refer to the previous question. The amount of the entry is:
- The journal entry to close the expense accounts is:
- Debit all expense accounts, Credit Dividends
- Debit all expense accounts, Credit Income Summary
- Debit Income Summary, Credit all expense accounts
- Debit Income Summary, Credit Retained Earnings
- None of the above
- Refer to the previous question. The amount of the entry is:
- The journal entry to close Income Summary is:
- Debit Cash, credit Retained Earnings
- Debit Income Summary, credit Cash
- Debit Income Summary, credit Retained Earnings
- Debit Retained Earnings, credit Income Summary
- None of the above
- Refer to the previous question. The amount of the entry is:
- The journal entry to close Dividends is:
- Debit Income Summary, credit Dividends
- Debit Dividends, credit Income Summary
- Debit Dividends, credit Retained Earnings
- Debit Retained Earnings, credit Dividends
- None of the above
- After all closing entries are made, the post-closing trial balance would have a credit balance of:
- The purpose of closing entries is:
- To close the net income for the period to the Retained Earnings account.
- To close Dividends to the Retained Earnings account.
- To close all temporary accounts for the period
- All of the above
- None of the above
