Question 1

Which of the following does not correctly describe the following adjusting journal entry? Rent expense
$\quad$Prepaid rent

Accepted Answer

A)  Total assets decrease. 
B)  Retained earnings are not affected. 
C) Stockholders' equity decreases. 
D) Net income decreases. 
A)  Total assets decrease. 
B)  Retained earnings are not affected. 
C) Stockholders' equity decreases. 
D) Net income decreases.

Question 2

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 3

On January 1, 2014 the balance in the prepaid insurance account was $2,500. On December 31, 2014, after the 2014 adjusting entries were made, the balance of the prepaid insurance account was $1,200. During 2014, cash payments for insurance premiums amounted to $5,000, which was debited to the prepaid insurance account. Prepare the adjusting entry, which must have been made at December 31, 2014.

Accepted Answer

The answer of On January 1, 2014 the balance in...

Question 4

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

Accepted Answer

A) True 
 B)False

Question 5

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Accepted Answer

A)  Net income is overstated and stockholders' equity is understated. 
B)  Expenses are understated and stockholders' equity is understated. 
C) Expenses are understated and liabilities are overstated. 
D) Net income is overstated and assets are overstateD.Failure to record depreciation results in expenses being too low, net income being overstated and assets being overstated. Not recording depreciation expense fails to increase accumulated depreciation that, as a contra-asset, fails to decrease assets. 
A)  Net income is overstated and stockholders' equity is understated. 
B)  Expenses are understated and stockholders' equity is understated. 
C) Expenses are understated and liabilities are overstated. 
D) Net income is overstated and assets are overstateD.Failure to record depreciation results in expenses being too low, net income being overstated and assets being overstated. Not recording depreciation expense fails to increase accumulated depreciation that, as a contra-asset, fails to decrease assets.

Question 6

Which of the following does not correctly describe the following journal entry? Supplies
$\quad$Cash

Accepted Answer

A)  Total assets do not change. 
B)  The transaction is an example of a deferral. 
C) Stockholders' equity decreases. 
D) Net income is not affecteD.This journal entry increases and decreases two different asset accounts; there is no impact on stockholders' equity. 
A)  Total assets do not change. 
B)  The transaction is an example of a deferral. 
C) Stockholders' equity decreases. 
D) Net income is not affecteD.This journal entry increases and decreases two different asset accounts; there is no impact on stockholders' equity.

Question 7

On November 1, 2014, Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date. Bug credited unearned rent revenue for $6,000. The books are adjusted only at year-end.
Required:
Prepare the adjusting entry required on December 31, 2014.

Accepted Answer

($6,000 ÷ 3) = $2,00

Question 8

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

Accepted Answer

A) True 
 B)False

Question 9

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

Accepted Answer

A) True 
 B)False

Question 10

The year-end closing process transfers net income to retained earnings.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes the difference between an unadjusted trial balance and an adjusted trial balance?

Accepted Answer

A)  An unadjusted trial balance is prepared at the start of the accounting period and is not provided to external decision makers, while an adjusted trial balance is prepared at the end of the period and is provided to external decision makers. 
B)  An unadjusted trial balance is prepared by companies that make adjusting entries, while an adjusted trial balance is prepared by companies that do not make adjusting entries. 
C) An unadjusted trial balance is prepared before the adjusting entries have been made, while an adjusted trial balance is prepared after the adjusting entries have been made. 
D) An unadjusted trial balance is prepared after the post-closing trial balance. 
A)  An unadjusted trial balance is prepared at the start of the accounting period and is not provided to external decision makers, while an adjusted trial balance is prepared at the end of the period and is provided to external decision makers. 
B)  An unadjusted trial balance is prepared by companies that make adjusting entries, while an adjusted trial balance is prepared by companies that do not make adjusting entries. 
C) An unadjusted trial balance is prepared before the adjusting entries have been made, while an adjusted trial balance is prepared after the adjusting entries have been made. 
D) An unadjusted trial balance is prepared after the post-closing trial balance.

Question 12

Earnings per share are calculated by dividing net income by the average number of shares of common stock outstanding.

Accepted Answer

A) True 
 B)False

Question 13

Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following accounts would not be closed at the end of the accounting year?

Accepted Answer

A)  Utilities expense. 
B)  Sales revenue. 
C) Prepaid rent expense. 
D) Wages expense. 
A)  Utilities expense. 
B)  Sales revenue. 
C) Prepaid rent expense. 
D) Wages expense.

Question 15

The total asset turnover ratio measures sales dollars generated per dollar of assets and is a measure of efficient management of assets.

Accepted Answer

A) True 
 B)False

Question 16

Below are two related transactions for Golden Corporation. The annual accounting period ends December 31. The books are adjusted only at year-end.
A. October 1, 2014: Golden Corporation borrowed $100,000 and signed a note providing for 8% interest. The principal and interest are due in one year on September 30, 2015.
B. December 31, 2014: End of the annual accounting period.
Required:
Prepare the required journal entry at October 31 and December 31, 2014 for each of the above items.

Accepted Answer

The answer of Below are two related transactions for Golden...

Question 17

Which of the following accounts would not be included in the closing process at year-end?

Accepted Answer

A)  Rent expense. 
B)  Sales revenue. 
C) Additional paid-in capital. 
D) Cost of goods solD.Income statement accounts are closed. Balance sheet accounts remain open. Additional paid-in capital is a balance sheet account. 
A)  Rent expense. 
B)  Sales revenue. 
C) Additional paid-in capital. 
D) Cost of goods solD.Income statement accounts are closed. Balance sheet accounts remain open. Additional paid-in capital is a balance sheet account.

Question 18

Which of the following statements does not correctly describe the relationship between the income statement and the ending retained earnings balance?

Accepted Answer

A)  Net income increases the ending balance of retained earnings. 
B)  A net loss decreases the ending retained earnings balance. 
C) A net loss does not affect the ending retained earnings balance. 
D) Net income and net loss both affect the ending retained earnings balance. 
A)  Net income increases the ending balance of retained earnings. 
B)  A net loss decreases the ending retained earnings balance. 
C) A net loss does not affect the ending retained earnings balance. 
D) Net income and net loss both affect the ending retained earnings balance.

Question 19

Which of the following journal entries would not be used to record a deferral? A. Prepaid rent 
$\quad$Cash
B. Cash
$\quad$Service revenue
C. Supplies 
$\quad$Cash
D. Cash
$\quad$Unearned revenues

Accepted Answer

A)  Option A 
B)  Option B 
C) Option C 
D) Option D 
A)  Option A 
B)  Option B 
C) Option C 
D) Option D

Question 20

Determine the effect of the following errors on the financial statements. Code your answers as follows and do not leave any blank spaces:
O: If the error results in an overstatement of the financial statement component.
U: If the error results in an understatement of the financial statement component.
N. If the error does not affect the financial statement component.
Error 1: A company failed to adjust the prepaid insurance account for insurance that was used during the period.
Revenues_____
Expenses_____
Net income_____
Assets_____
Liabilities_____
Stockholders' equity_____
Error 2: A company failed to record depreciation expense at year-end.
Revenues_____
Expenses_____
Net income_____
Assets_____
Liabilities_____
Stockholders' equity_____
Error 3: A company did not adjust the unearned revenue account for revenue earned during the year.
Revenues_____
Expenses_____
Net income_____
Assets_____
Liabilities_____
Stockholders' equity_____

Accepted Answer

Error 1: A company failed to adjust the

Which of the following does not correctly describe the following adjusting journal entry? Rent expense $\quad$ Prepaid rent

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Which of the following does not correctly describe the following journal entry? Supplies $\quad$ Cash

On November 1, 2014, Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date. Bug credited unearned rent revenue for $6,000. The books are adjusted only at year-end. Required: Prepare the adjusting entry required on December 31, 2014.

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

The year-end closing process transfers net income to retained earnings.

Which of the following best describes the difference between an unadjusted trial balance and an adjusted trial balance?

Earnings per share are calculated by dividing net income by the average number of shares of common stock outstanding.

Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

Which one of the following accounts would not be closed at the end of the accounting year?

The total asset turnover ratio measures sales dollars generated per dollar of assets and is a measure of efficient management of assets.

Which of the following accounts would not be included in the closing process at year-end?

Which of the following statements does not correctly describe the relationship between the income statement and the ending retained earnings balance?

Which of the following journal entries would not be used to record a deferral? A. Prepaid rent $\quad$ Cash B. Cash $\quad$ Service revenue C. Supplies $\quad$ Cash D. Cash $\quad$ Unearned revenues

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Exam 4: Adjustments, Financial Statements, and the Quality of Earnings

Which of the following does not correctly describe the following adjusting journal entry? Rent expense \quad Prepaid rent

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Which of the following does not correctly describe the following journal entry? Supplies \quad Cash

On November 1, 2014, Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date. Bug credited unearned rent revenue for $6,000. The books are adjusted only at year-end. Required: Prepare the adjusting entry required on December 31, 2014.

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

The total asset turnover ratio is computed by dividing sales revenue by average total assets.

The year-end closing process transfers net income to retained earnings.

Which of the following best describes the difference between an unadjusted trial balance and an adjusted trial balance?

Earnings per share are calculated by dividing net income by the average number of shares of common stock outstanding.

Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

Which one of the following accounts would not be closed at the end of the accounting year?

The total asset turnover ratio measures sales dollars generated per dollar of assets and is a measure of efficient management of assets.

Which of the following accounts would not be included in the closing process at year-end?

Which of the following statements does not correctly describe the relationship between the income statement and the ending retained earnings balance?

Which of the following journal entries would not be used to record a deferral? A. Prepaid rent \quad Cash B. Cash \quad Service revenue C. Supplies \quad Cash D. Cash \quad Unearned revenues

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Which of the following does not correctly describe the following adjusting journal entry? Rent expense $\quad$ Prepaid rent

Which of the following does not correctly describe the following journal entry? Supplies $\quad$ Cash

Which of the following journal entries would not be used to record a deferral? A. Prepaid rent $\quad$ Cash B. Cash $\quad$ Service revenue C. Supplies $\quad$ Cash D. Cash $\quad$ Unearned revenues