Question 1

For a corporation,the equity section is divided into two main accounts: Common Stock and Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 2

If a company records prepayment of expenses in an asset account,the adjusting entry would:

Accepted Answer

A) Result in a debit to an expense and a credit to an asset account 
B) Cause an adjustment to prior expense to be overstated and assets to be understated 
C) Cause an accrued liability account to exist 
D) Result in a debit to a liability and a credit to an asset account 
E) Decrease cash 
A) Result in a debit to an expense and a credit to an asset account 
B) Cause an adjustment to prior expense to be overstated and assets to be understated 
C) Cause an accrued liability account to exist 
D) Result in a debit to a liability and a credit to an asset account 
E) Decrease cash

Question 3

On December 31,Connelly Company had performed $5,000 of management services for clients that had not yet been billed.Prepare Connelly's adjusting entry to record these fees earned.

Accepted Answer

\[\begin{array} { | l | l | c

Question 4

The time period principle assumes that an organization's activities can be divided into specific time periods.

Accepted Answer

A) True 
 B)False

Question 5

Western Company has an annual reporting period that runs from July 1st through
June 30th.Based on this information which of the following is a true statement?

Accepted Answer

A) Western probably has little seasonal variation in their sales 
B) Western has violated the time period principle 
C) Western must prepare financial statements as of December 31 each year 
D) Western has adopted a fiscal year 
E) Western does not have an accountant 
A) Western probably has little seasonal variation in their sales 
B) Western has violated the time period principle 
C) Western must prepare financial statements as of December 31 each year 
D) Western has adopted a fiscal year 
E) Western does not have an accountant

Question 6

The Retained Earnings account has a credit balance of $17,000 before closing entries are made.If total revenues for the period are $55,200,total expenses are $39,800 and dividends are $9,000,what is the ending balance in the Retained Earnings account after all closing entries are made?

Accepted Answer

A) $8,000 
B) $15,400 
C) $23,400 
D) $17,000 
E) $32,400 
A) $8,000 
B) $15,400 
C) $23,400 
D) $17,000 
E) $32,400

Question 7

Black Company's unadjusted and adjusted trial balances on December 31 of the current year are as follows
   
Present the four adjusting journal entries that were recorded by Black Company.

Accepted Answer

None

Question 8

A company's fiscal year must correspond with the calendar year.

Accepted Answer

A) True 
 B)False

Question 9

Unearned revenue is reported on the financial statements as:

Accepted Answer

A) A revenue on the balance sheet 
B) A liability on the balance sheet 
C) An unearned revenue on the income statement 
D) An asset on the balance sheet 
E) An operating activity on the statement of cash flows 
A) A revenue on the balance sheet 
B) A liability on the balance sheet 
C) An unearned revenue on the income statement 
D) An asset on the balance sheet 
E) An operating activity on the statement of cash flows

Question 10

A company issued financial statements for the year ended December 31,but failed to include the following adjusting entries:
A.Accrued service fees earned of $2,200
B.Depreciation expense of $8,000
C.Portion of office supplies (an asset)used,$3,100
D.Accrued salaries of $5,200
E.Revenues of $7,200,originally recorded as unearned,have been earned by the end of the year
Determine the correct amounts for the December 31 financial statements by completing the following table:
 $\begin{array}{|l|c|c|c|c|} 
\hline& \text { Assets } & \text { Liabilities } & \text { Equity } & \text { Net Income } \
\hline \text { Reported amounts } & \$ 350,000 & \$ 200,000 & \$ 150,000 & \$ 70,000 \
\hline \begin{array}{l}
\text { Add (subtract) to correct for } \
\text { item }
\end{array} & & & & \
\hline \text { A } & & & & \
\hline \text { B } & & & & \
\hline \text { C } & & & & \
\hline \text { D } & & & & \
\hline \text { E } & & & & \
\hline \text { Corrected amounts } & \$ & \$ & \$&\$ \
\hline
\end{array}$

Accepted Answer

None

Question 11

The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

Accepted Answer

A) True 
 B)False

Question 12

Presented below are the year-end balances at December 31 of Laura's Laundry Service.(All accounts have normal balances.)
 \(\begin{array}{|l|r|}
\hline\text { Accounts receivable } & \$ 12,000 \
\hline \text { Accounts payable } & 25,000 \
\hline \text { Accumulated depreciation - Catering equipment } & 30,000 \
\hline \text { Advertising expense } & 4,000 \
\hline \text { Cash } & 42,000 \
\hline \text { Depreciation expense - Catering equipment } & 12,000 \
\hline \text { Insurance expense } & 3,000 \
\hline \text { Catering equipment } & 125,000 \
\hline \text { Catering servicerevenue } & 200,000 \
\hline \text { Notes payable } & 65,000 \
\hline \text { Common stock } & 3,000 \
\hline \text { Retained earnings } & 14,000 \
\hline \text { Dividends } & 18,000 \
\hline \text { Prepaid insurance } & 1,500 \
\hline \text { Salaries payable } & 4,000 \
\hline \text { Salary expense } & 97,000\
\hline \text { Supplies } & 1,500 \
\hline \text { Supplies expense } & 9,000 \
\hline \text { Repair expense } & 7,000 \
\hline \text { Unearned catering servicerevenues } & 500 \
\hline \text { Utilities expense } & 9,500\ 
\hline 
\end{array}\)
 
a. Prepare the necessary closing entries at December 31.
b. Prepare a post-closing trial balance at December 31.

Accepted Answer

None

Question 13

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Which of the following entries could not be a closing entry?

Accepted Answer

A) 
$$\begin{array} { | c | r | r | } 
\hline \text { Income Summary } & 13,000 & \
\hline \text { Retained earnings } & & 13,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | c | } 
\hline \text { Income Summary } & 75,000 & \
\hline \text { Revenues } & & 75,000 \
\hline
\end{array}$$ 
C) 
$\begin{array}{|l|r|r|}
\hline \text { Revenues } & 75,000 & \
\hline \text { Income Summary } & & 75,000 \
\hline
\end{array}$ 
D) 
$\begin{array}{|c|r|r|}
\hline \text { Expenses } & 62,000 & \
\hline \text { Income Summary } & & 62,000\
\hline
\end{array}$ 
E) All of the above are possible closing entries 
A) 
$$\begin{array} { | c | r | r | } 
\hline \text { Income Summary } & 13,000 & \
\hline \text { Retained earnings } & & 13,000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | c | c | c | } 
\hline \text { Income Summary } & 75,000 & \
\hline \text { Revenues } & & 75,000 \
\hline
\end{array}$$ 
C) 
$\begin{array}{|l|r|r|}
\hline \text { Revenues } & 75,000 & \
\hline \text { Income Summary } & & 75,000 \
\hline
\end{array}$ 
D) 
$\begin{array}{|c|r|r|}
\hline \text { Expenses } & 62,000 & \
\hline \text { Income Summary } & & 62,000\
\hline
\end{array}$ 
E) All of the above are possible closing entries

Question 14

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

Accepted Answer

A) True 
 B)False

Question 15

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accepted Answer

A) Cash basis accounting 
B) The matching principle 
C) The time period principle 
D) Accrual basis accounting 
E) Revenue basis accounting 
A) Cash basis accounting 
B) The matching principle 
C) The time period principle 
D) Accrual basis accounting 
E) Revenue basis accounting

Question 16

On May 1,2011,Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30,2012.The cash receipt was recorded as unearned fees.At December 31,2011,$500 of the fees had been earned.The adjusting entry on December 31,2011 should include:

Accepted Answer

A) A debit to Unearned Fees for $500 
B) A credit to Unearned Fees for $500 
C) A credit to Earned Fees for $1,000 
D) A debit to Earned Fees for $1,000 
E) A debit to Earned Fees for $500 
A) A debit to Unearned Fees for $500 
B) A credit to Unearned Fees for $500 
C) A credit to Earned Fees for $1,000 
D) A debit to Earned Fees for $1,000 
E) A debit to Earned Fees for $500

Question 17

Which of the following statements is incorrect?

Accepted Answer

A) An income statement reports revenues earned less expenses incurred 
B) An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments 
C) Interim financial reports can be based on one-month or three-month accounting periods 
D) The fiscal year is any 12 consecutive months (or 52 weeks)used by a business as its annual accounting period 
E) Property,plant and equipment are referred to as plant assets 
A) An income statement reports revenues earned less expenses incurred 
B) An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments 
C) Interim financial reports can be based on one-month or three-month accounting periods 
D) The fiscal year is any 12 consecutive months (or 52 weeks)used by a business as its annual accounting period 
E) Property,plant and equipment are referred to as plant assets

Question 18

On December 31,2009,a company forgot to record $7,000 of depreciation on office equipment.What would be the effect on the assets,net income and equity when it comes to the 2009 financial statements?

Accepted Answer

1 Assets are overstated by $7,

Question 19

Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services.

Accepted Answer

A) True 
 B)False

Question 20

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

Accepted Answer

A) True 
 B)False

For a corporation,the equity section is divided into two main accounts: Common Stock and Retained Earnings.

If a company records prepayment of expenses in an asset account,the adjusting entry would:

On December 31,Connelly Company had performed $5,000 of management services for clients that had not yet been billed.Prepare Connelly's adjusting entry to record these fees earned.

The time period principle assumes that an organization's activities can be divided into specific time periods.

Western Company has an annual reporting period that runs from July 1^st through June 30^th.Based on this information which of the following is a true statement?

The Retained Earnings account has a credit balance of $17,000 before closing entries are made.If total revenues for the period are $55,200,total expenses are $39,800 and dividends are $9,000,what is the ending balance in the Retained Earnings account after all closing entries are made?

Black Company's unadjusted and adjusted trial balances on December 31 of the current year are as follows Present the four adjusting journal entries that were recorded by Black Company.

A company's fiscal year must correspond with the calendar year.

Unearned revenue is reported on the financial statements as:

The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Which of the following entries could not be a closing entry?

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

On May 1,2011,Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30,2012.The cash receipt was recorded as unearned fees.At December 31,2011,$500 of the fees had been earned.The adjusting entry on December 31,2011 should include:

Which of the following statements is incorrect?

On December 31,2009,a company forgot to record $7,000 of depreciation on office equipment.What would be the effect on the assets,net income and equity when it comes to the 2009 financial statements?

Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services.

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

Introducing Accounting in Business

Analyzing and Recording Transactions

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Investments and International Operations

Reporting and Analyzing Partnerships

Reporting and Preparing Special Journals

Filters

Exam 3: Adjusting Accounts and Preparing Financial Statements

For a corporation,the equity section is divided into two main accounts: Common Stock and Retained Earnings.

If a company records prepayment of expenses in an asset account,the adjusting entry would:

On December 31,Connelly Company had performed $5,000 of management services for clients that had not yet been billed.Prepare Connelly's adjusting entry to record these fees earned.

The time period principle assumes that an organization's activities can be divided into specific time periods.

Western Company has an annual reporting period that runs from July 1st through June 30th.Based on this information which of the following is a true statement?

The Retained Earnings account has a credit balance of $17,000 before closing entries are made.If total revenues for the period are $55,200,total expenses are $39,800 and dividends are $9,000,what is the ending balance in the Retained Earnings account after all closing entries are made?

Black Company's unadjusted and adjusted trial balances on December 31 of the current year are as follows Present the four adjusting journal entries that were recorded by Black Company.

A company's fiscal year must correspond with the calendar year.

Unearned revenue is reported on the financial statements as:

The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Which of the following entries could not be a closing entry?

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

On May 1,2011,Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30,2012.The cash receipt was recorded as unearned fees.At December 31,2011,$500 of the fees had been earned.The adjusting entry on December 31,2011 should include:

Which of the following statements is incorrect?

On December 31,2009,a company forgot to record $7,000 of depreciation on office equipment.What would be the effect on the assets,net income and equity when it comes to the 2009 financial statements?

Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services.

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

Introducing Accounting in Business

Analyzing and Recording Transactions

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Investments and International Operations

Reporting and Analyzing Partnerships

Reporting and Preparing Special Journals

Filters

Western Company has an annual reporting period that runs from July 1^st through June 30^th.Based on this information which of the following is a true statement?