Question 1

Closing the temporary accounts at the end of each accounting period does all of the following except:

Accepted Answer

A) Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet. 
B) Prepares the dividends account for use in the next period. 
C) Brings the revenue and expense accounts to zero balances. 
D) Has no effect on the retained earnings account. 
E) Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends. 
A) Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet. 
B) Prepares the dividends account for use in the next period. 
C) Brings the revenue and expense accounts to zero balances. 
D) Has no effect on the retained earnings account. 
E) Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends.

Question 2

Temporary accounts include all of the following except:

Accepted Answer

A) Consulting revenue. 
B) Dividends. 
C) Rent expense. 
D) Prepaid rent. 
E) Income Summary. 
A) Consulting revenue. 
B) Dividends. 
C) Rent expense. 
D) Prepaid rent. 
E) Income Summary.

Question 3

Financial statements are typically prepared in the following order:

Accepted Answer

A) Balance sheet,statement of retained earnings,income statement. 
B) Statement of retained earnings,balance sheet,income statement. 
C) Income statement,balance sheet,statement of retained earnings. 
D) Income statement,statement of retained earnings,balance sheet. 
E) Balance sheet,income statement,statement of retained earnings. 
A) Balance sheet,statement of retained earnings,income statement. 
B) Statement of retained earnings,balance sheet,income statement. 
C) Income statement,balance sheet,statement of retained earnings. 
D) Income statement,statement of retained earnings,balance sheet. 
E) Balance sheet,income statement,statement of retained earnings.

Question 4

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

Accepted Answer

A) True 
 B)False

Question 5

Flagg records adjusting entries at its December 31 year-end.At December 31,employees had earned $12,000 of unpaid and unrecorded salaries.The next payday is January 3,at which time $30,000 will be paid.
-Prepare the journal entry on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

Accepted Answer

A) Debit Salaries expense $12,000; debit Salaries payable $18,000; credit Cash $30,000. 
B) Debit Salaries expense $30,000; credit Cash $30,000. 
C) Debit Salaries payable $30,000; credit Cash $30,000. 
D) Debit Salaries expense $18,000,debit Salaries payable $12,000; credit Cash $30,000. 
E) Debit Salaries expense $18,000; credit Cash $18,000. 
A) Debit Salaries expense $12,000; debit Salaries payable $18,000; credit Cash $30,000. 
B) Debit Salaries expense $30,000; credit Cash $30,000. 
C) Debit Salaries payable $30,000; credit Cash $30,000. 
D) Debit Salaries expense $18,000,debit Salaries payable $12,000; credit Cash $30,000. 
E) Debit Salaries expense $18,000; credit Cash $18,000.

Question 6

Harrod Company paid $4,800 for a 4-month insurance premium in advance on November 1,with coverage beginning on that date.The balance in the prepaid insurance account before adjustment at the end of the year is $4,800 and no adjustments had been made previously.The adjusting entry required on December 31 is:

Accepted Answer

A) Debit Insurance Expense,$2,400; credit Prepaid Insurance,$2,400. 
B) Debit Prepaid Insurance,$2,400; credit Insurance Expense,$2,400. 
C) Debit Insurance Expense,$1,200; credit Prepaid Insurance,$1,200. 
D) Debit Prepaid Insurance,$1,200; credit Insurance Expense,$1,200. 
E) Debit Cash,$4,800; Credit Prepaid Insurance,$4,800. 
A) Debit Insurance Expense,$2,400; credit Prepaid Insurance,$2,400. 
B) Debit Prepaid Insurance,$2,400; credit Insurance Expense,$2,400. 
C) Debit Insurance Expense,$1,200; credit Prepaid Insurance,$1,200. 
D) Debit Prepaid Insurance,$1,200; credit Insurance Expense,$1,200. 
E) Debit Cash,$4,800; Credit Prepaid Insurance,$4,800.

Question 7

Given the table below,indicate the impact of the following errors made during the adjusting entry process.Use a "+" followed by the amount for overstatements,a "-" followed by the amount for understatements,and a "0" for no effect.The first one is done as an example.
Ex.Failed to recognize that $600 of unearned revenues,previously recorded as liabilities,had been earned by year-end.
1.Failed to accrue interest expense of $200.
2.Forgot to record $7,700 of depreciation on machinery.
3.Failed to accrue $1,300 of revenue earned but not collected.

Accepted Answer

The answer of Given the table below,indicate the impact of...

Question 8

Discuss how accrual accounting enhances the usefulness of financial statements.

Accepted Answer

The accrual accounting method recognizes

Question 9

The entry to close the Income Summary account at the end of the year,after revenue and expense accounts have been closed,is:

Accepted Answer

A) Debit Retained earnings $297,000; credit Income Summary $297,000 
B) Debit Retained earnings $63,300; credit Income Summary $63,300 
C) Debit Income Summary $63,300; credit Retained earnings $63,300 
D) Debit Income Summary $81,300,credit Retained earnings $81,300 
E) Debit Retained earnings $81,300; credit Income Summary $81,300 
A) Debit Retained earnings $297,000; credit Income Summary $297,000 
B) Debit Retained earnings $63,300; credit Income Summary $63,300 
C) Debit Income Summary $63,300; credit Retained earnings $63,300 
D) Debit Income Summary $81,300,credit Retained earnings $81,300 
E) Debit Retained earnings $81,300; credit Income Summary $81,300

Question 10

The aim of a post-closing trial balance is to verify that (1)total debits equal total credits for temporary accounts,and (2)all temporary accounts have zero balances.

Accepted Answer

A) True 
 B)False

Question 11

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

Accepted Answer

A) True 
 B)False

Question 12

A balance sheet that places the assets above the liabilities and equity is called a(n):

Accepted Answer

A) Report form balance sheet. 
B) Account form balance sheet. 
C) Classified balance sheet. 
D) Unadjusted balance sheet. 
E) Unclassified balance sheet. 
A) Report form balance sheet. 
B) Account form balance sheet. 
C) Classified balance sheet. 
D) Unadjusted balance sheet. 
E) Unclassified balance sheet.

Question 13

The last four steps in the accounting cycle include preparing the adjusted trial balance,preparing financial statements,and recording closing and adjusting entries.

Accepted Answer

A) True 
 B)False

Question 14

On April 1,a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date.What amount of the insurance expense will be reported on the annual income statement for the first year ended December 31?

Accepted Answer

A) $1,350.00. 
B) $450.00. 
C) $1,012.50. 
D) $337.50. 
E) $37.50. 
A) $1,350.00. 
B) $450.00. 
C) $1,012.50. 
D) $337.50. 
E) $37.50.

Question 15

The current ratio:

Accepted Answer

A) Is used to measure a company's profitability. 
B) Is used to measure the relation between assets and long-term debt. 
C) Measures the effect of operating income on profit. 
D) Is used to help assess a company's ability to pay its debts in the near future. 
E) Is calculated by dividing current assets by equity. 
A) Is used to measure a company's profitability. 
B) Is used to measure the relation between assets and long-term debt. 
C) Measures the effect of operating income on profit. 
D) Is used to help assess a company's ability to pay its debts in the near future. 
E) Is calculated by dividing current assets by equity.

Question 16

Which of the following statements is incorrect?

Accepted Answer

A) Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. 
B) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. 
C) Adjusting entries can be used to record both accrued expenses and accrued revenues. 
D) Prepaid expenses,depreciation,and unearned revenues often require adjusting entries to record the effects of the passage of time. 
E) Adjusting entries affect only balance sheet accounts. 
A) Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. 
B) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. 
C) Adjusting entries can be used to record both accrued expenses and accrued revenues. 
D) Prepaid expenses,depreciation,and unearned revenues often require adjusting entries to record the effects of the passage of time. 
E) Adjusting entries affect only balance sheet accounts.

Question 17

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Accepted Answer

A) True 
 B)False

Question 18

Castillo Services paid K.Castillo,the sole shareholder of Castillo Services,$5,700 in dividends during the current year.The entry to close the dividends account at the end of the year is:

Accepted Answer

A) Debit Dividends $5,700; credit Cash,$5,700 
B) Debit Retained earnings $5,700; credit Dividends $5,700 
C) Debit Dividends $5,700; credit Retained earnings $5,700 
D) Debit Retained earnings $5,700,credit Salary Expense $5,700 
E) Debit Income Summary $5,700; credit Retained earnings $5,700 
A) Debit Dividends $5,700; credit Cash,$5,700 
B) Debit Retained earnings $5,700; credit Dividends $5,700 
C) Debit Dividends $5,700; credit Retained earnings $5,700 
D) Debit Retained earnings $5,700,credit Salary Expense $5,700 
E) Debit Income Summary $5,700; credit Retained earnings $5,700

Question 19

If all columns of a completed work sheet balance,you can be sure that no errors were made in its preparation.

Accepted Answer

A) True 
 B)False

Question 20

In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column.The Balance Sheet columns will balance on completing the work sheet but with the wrong net income,if the amount sorted in error is:

Accepted Answer

A) An expense amount placed in the Balance Sheet Credit column. 
B) A revenue amount placed in the Balance Sheet Debit column. 
C) A liability amount placed in the Income Statement Credit column. 
D) An asset amount placed in the Balance Sheet Credit column. 
E) A liability amount placed in the Balance Sheet Debit column. 
A) An expense amount placed in the Balance Sheet Credit column. 
B) A revenue amount placed in the Balance Sheet Debit column. 
C) A liability amount placed in the Income Statement Credit column. 
D) An asset amount placed in the Balance Sheet Credit column. 
E) A liability amount placed in the Balance Sheet Debit column.

Exam 3: Adjusting Accounts for Financial Statements

Closing the temporary accounts at the end of each accounting period does all of the following except:

Temporary accounts include all of the following except:

Financial statements are typically prepared in the following order:

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

Discuss how accrual accounting enhances the usefulness of financial statements.

The entry to close the Income Summary account at the end of the year,after revenue and expense accounts have been closed,is:

The aim of a post-closing trial balance is to verify that (1)total debits equal total credits for temporary accounts,and (2)all temporary accounts have zero balances.

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

A balance sheet that places the assets above the liabilities and equity is called a(n):

The last four steps in the accounting cycle include preparing the adjusted trial balance,preparing financial statements,and recording closing and adjusting entries.

On April 1,a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date.What amount of the insurance expense will be reported on the annual income statement for the first year ended December 31?

The current ratio:

Which of the following statements is incorrect?

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Castillo Services paid K.Castillo,the sole shareholder of Castillo Services,$5,700 in dividends during the current year.The entry to close the dividends account at the end of the year is:

If all columns of a completed work sheet balance,you can be sure that no errors were made in its preparation.

In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column.The Balance Sheet columns will balance on completing the work sheet but with the wrong net income,if the amount sorted in error is:

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