Question 1

Which of the following statements regarding financial statement preparation is false?

Accepted Answer

A) Financial statements can be prepared from information in the adjusted trial balance 
B) The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company 
C) It makes sense to prepare the balance sheet first because it contains information needed on the income statement 
D) When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger 
E) The income statement is prepared first. 
A) Financial statements can be prepared from information in the adjusted trial balance 
B) The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company 
C) It makes sense to prepare the balance sheet first because it contains information needed on the income statement 
D) When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger 
E) The income statement is prepared first.

Question 2

The adjusted trial balance of the Thomas Company follows:
 $\begin{array}{c}
 \text {Thomas Company }\
 \text {Adjusted Trial Balance}\
 \text { December 31}\\begin{array}{|l|r|r|}
\hline &\text { Debit } & \text { Credit } \
\hline \text { Cash } & 8,000 \
\hline \text { Prepaid insurance } & 2,400 \
\hline \text { Equipment } & 18,000 \
\hline \text { Accumulated depreciation - Equipment } &&3,600 \
\hline \text { Salaries payable } &&2,000 \
\hline \text { Unearned repair fees } &&1,200 \
\hline \text { Common stock } &&4,000\
\hline\text { Retained earnings } &&7,400 \
\hline \text { Dividends } & 4,000 \
\hline \text { Repair fees earned } &&27,500 \
\hline \text { Salaries expense } & 10,000 \
\hline \text { Depreciation expense } & 1,800 \
\hline \text { Insurance expense } & \underline{1,500} \
\hline \text { Totals } & 45,700& 45,700\
\hline
\end{array}\end{array}$
 
Prepare the closing entries for Thomas Company.

Accepted Answer

None

Question 3

Match the following terms with the appropriate definition.
-     Cash basis accounting

Accepted Answer

A)  The expense created by allocating the cost of plant and equipment to the periods in which they are used 
B)  The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses 
C)  Items paid for in advance of receiving their benefits 
D)  Allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life 
E)  The accounting system that recognizes revenues when earned and expenses when incurred 
F) A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years 
G) Revenues earned in a period that are both unrecorded and not yet received in cash or other assets 
H) Net income divided by net sales 
I) The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid 
A)  The expense created by allocating the cost of plant and equipment to the periods in which they are used 
B)  The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses 
C)  Items paid for in advance of receiving their benefits 
D)  Allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life 
E)  The accounting system that recognizes revenues when earned and expenses when incurred 
F) A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years 
G) Revenues earned in a period that are both unrecorded and not yet received in cash or other assets 
H) Net income divided by net sales 
I) The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid

Question 4

Which of the following identifies the proper order of the accounting cycle?

Accepted Answer

A) Analyze,Journalize,Unadjusted Trial Balance 
B) Analyze,Post,Unadjusted Trial Balance 
C) Journalize,Post,Adjusted Trial Balance 
D) Unadjusted Trial Balance,Adjusted Trial Balance,Close 
E) Adjusted Trial Balance,Adjustments,Financial Statements 
A) Analyze,Journalize,Unadjusted Trial Balance 
B) Analyze,Post,Unadjusted Trial Balance 
C) Journalize,Post,Adjusted Trial Balance 
D) Unadjusted Trial Balance,Adjusted Trial Balance,Close 
E) Adjusted Trial Balance,Adjustments,Financial Statements

Question 5

Based on the following information,determine the current assets,assuming all accounts have a normal balance?
$\begin{array}{lrlr}
\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \
\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,71 \
\text { Office supplies } & 2,625 & \text { Rent expense } & 3,67 \
\text { Land } & 37,153 & \text { Salaries expense } & 6,64 \
\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \
\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \
\text { Common stock } & 54,490 & \text { Retained Earnings } & ?
\end{array}$

Accepted Answer

A) $74,800 
B) $37,647 
C) $60,265 
D) $23,112 
E) $60,953 
A) $74,800 
B) $37,647 
C) $60,265 
D) $23,112 
E) $60,953

Question 6

If a company forgot to record depreciation on office equipment at the end of an accounting period,the financial statements prepared at that time would show:

Accepted Answer

A) Assets overstated and equity understated 
B) Assets and equity both understated 
C) Assets overstated,net income understated and equity overstated 
D) Assets,net income and equity understated 
E) Assets,net income and equity overstated 
A) Assets overstated and equity understated 
B) Assets and equity both understated 
C) Assets overstated,net income understated and equity overstated 
D) Assets,net income and equity understated 
E) Assets,net income and equity overstated

Question 7

The ________________________________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

Accepted Answer

The answer of The ________________________________ depreciation method allocates equal amounts...

Question 8

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below.What amount will be posted to Retained Earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)
$\begin{array}{|l|r|}
\hline \text { Retained earnings } & \$ 7,000 \
\hline \text { Dividends } & 9,600 \
\hline \text { Revenue } & 29,000 \
\hline \text { Rent expense } & 3,600 \
\hline \text { Salaries expense } & 7,200 \
\hline \text { Insurance expense } & 920 \
\hline \text { Depr. Expense - equipment } & 500 \
\hline \text { Accum depr. - equipment } & 1,500\
\hline
\end{array}$

Accepted Answer

A) $16,780 debit 
B) $7,180 credit 
C) $16,780 credit 
D) $18,280 credit 
E) $23,780 credit 
A) $16,780 debit 
B) $7,180 credit 
C) $16,780 credit 
D) $18,280 credit 
E) $23,780 credit

Question 9

Complete the following by filling in the blanks:
(1)The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently,the income statement for the year must have shown $______________ of insurance expense.
(2)The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset,office supplies,at $225; consequently,if all supplies were accounted for,$____________ of office supplies must have been purchased during the year.

Accepted Answer

(1)$685 = $455 + $65

Question 10

Prior to recording adjusting entries on December 31,a company's Store Supplies account had an $880 debit balance.A physical count of the supplies showed $325 of unused supplies available as of December 31.Prepare the required adjusting entry.

Accepted Answer

None

Question 11

Match the following terms with the appropriate definition.
-     Matching principle

Accepted Answer

A)  The expense created by allocating the cost of plant and equipment to the periods in which they are used 
B)  The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses 
C)  Items paid for in advance of receiving their benefits 
D)  Allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life 
E)  The accounting system that recognizes revenues when earned and expenses when incurred 
F) A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years 
G) Revenues earned in a period that are both unrecorded and not yet received in cash or other assets 
H) Net income divided by net sales 
I) The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid 
A)  The expense created by allocating the cost of plant and equipment to the periods in which they are used 
B)  The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses 
C)  Items paid for in advance of receiving their benefits 
D)  Allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life 
E)  The accounting system that recognizes revenues when earned and expenses when incurred 
F) A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years 
G) Revenues earned in a period that are both unrecorded and not yet received in cash or other assets 
H) Net income divided by net sales 
I) The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid

Question 12

A post-closing trial balance includes:

Accepted Answer

A) All ledger accounts with balances,none of which can be temporary accounts 
B) All ledger accounts with balances,none of which can be permanent accounts 
C) All ledger accounts with balances,which include some temporary and some permanent accounts 
D) Only revenue and expense accounts 
E) Only asset accounts 
A) All ledger accounts with balances,none of which can be temporary accounts 
B) All ledger accounts with balances,none of which can be permanent accounts 
C) All ledger accounts with balances,which include some temporary and some permanent accounts 
D) Only revenue and expense accounts 
E) Only asset accounts

Question 13

The matching principle and the full closure principle are the two main accounting principles used in accrual accounting.

Accepted Answer

A) True 
 B)False

Question 14

If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _______________ and equity would be __________.

Accepted Answer

Overstated

Question 15

Accrual accounting and the adjusting process rely on two principles: the ___________________ principle and the ________________________ principle.

Accepted Answer

Revenue re

Question 16

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

Accepted Answer

A) 2% 
B) 20% 
C) 200% 
D) 500% 
E) $8,000 
A) 2% 
B) 20% 
C) 200% 
D) 500% 
E) $8,000

Question 17

Match between columns
                        Premises: Cash basis accounting 
Profit margin 
Prepaid expenses 
Accrual basis accounting 
Straight-line depreciation
Matching principle 
Depreciation 
Time period principle 
Accrued revenues

Accepted Answer

The Answer of Net income divided by net sales  is...

Question 18

The alternative method of accounting for prepayments

Accepted Answer

A) Initially records all prepaid expenses with debits to expense accounts 
B) Initially records all prepaid expenses with credits to expense accounts 
C) Requires an adjusting entry because expenses are understated 
D) Requires an adjusting entry if the prepaid is consumed during the period 
E) Requires an adjusting entry because net income is understated 
A) Initially records all prepaid expenses with debits to expense accounts 
B) Initially records all prepaid expenses with credits to expense accounts 
C) Requires an adjusting entry because expenses are understated 
D) Requires an adjusting entry if the prepaid is consumed during the period 
E) Requires an adjusting entry because net income is understated

Question 19

During the year,Able Co.purchased $23,750 worth of supplies,at the end of the year,the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account.What was the supplies balance at the beginning of the year?

Accepted Answer

X+23,750-2

Question 20

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 evaluate a company's ability to pay its short-term obligations 
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 evaluate a company's ability to pay its short-term obligations 
E) Is calculated by dividing current assets by equity

Which of the following statements regarding financial statement preparation is false?

Match the following terms with the appropriate definition. - Cash basis accounting

Which of the following identifies the proper order of the accounting cycle?

If a company forgot to record depreciation on office equipment at the end of an accounting period,the financial statements prepared at that time would show:

The ________________________________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

Prior to recording adjusting entries on December 31,a company's Store Supplies account had an $880 debit balance.A physical count of the supplies showed $325 of unused supplies available as of December 31.Prepare the required adjusting entry.

Match the following terms with the appropriate definition. - Matching principle

A post-closing trial balance includes:

The matching principle and the full closure principle are the two main accounting principles used in accrual accounting.

If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _____ and equity would be .

Accrual accounting and the adjusting process rely on two principles: the _ principle and the ______ principle.

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

The alternative method of accounting for prepayments

During the year,Able Co.purchased $23,750 worth of supplies,at the end of the year,the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account.What was the supplies balance at the beginning of the year?

The current ratio:

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

Which of the following statements regarding financial statement preparation is false?

Match the following terms with the appropriate definition. - Cash basis accounting

Which of the following identifies the proper order of the accounting cycle?

If a company forgot to record depreciation on office equipment at the end of an accounting period,the financial statements prepared at that time would show:

The ________________________________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

Prior to recording adjusting entries on December 31,a company's Store Supplies account had an $880 debit balance.A physical count of the supplies showed $325 of unused supplies available as of December 31.Prepare the required adjusting entry.

Match the following terms with the appropriate definition. - Matching principle

A post-closing trial balance includes:

The matching principle and the full closure principle are the two main accounting principles used in accrual accounting.

If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _______________ and equity would be __________.

Accrual accounting and the adjusting process rely on two principles: the ___________________ principle and the ________________________ principle.

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

The alternative method of accounting for prepayments

During the year,Able Co.purchased $23,750 worth of supplies,at the end of the year,the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account.What was the supplies balance at the beginning of the year?

The current ratio:

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

If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _____ and equity would be .

Accrual accounting and the adjusting process rely on two principles: the _ principle and the ______ principle.