Question 1

The purchase of equipment on credit is recorded by a:

Accepted Answer

A)  Debit to Equipment and a credit to Accounts Payable. 
B)  Debit to Accounts Payable and a credit to Equipment. 
C)  Debit to Equipment and a debit to Accounts Payable. 
D)  Credit to Equipment and a credit to Accounts Payable. 
A)  Debit to Equipment and a credit to Accounts Payable. 
B)  Debit to Accounts Payable and a credit to Equipment. 
C)  Debit to Equipment and a debit to Accounts Payable. 
D)  Credit to Equipment and a credit to Accounts Payable.

Question 2

Clinton prepares monthly financial statements. Which of the following violates the matching principle?

Accepted Answer

A)  A portion of the salary payments made this month are not recognized as expense because some of the work was done by employees last month. 
B)  The premium on a six-month insurance policy is charged immediately to expense. 
C)  Expenses for the period exceed revenues. 
D)  The cost of advertising done during the month is charged to expense even though no payment is due for 60 days. 
A)  A portion of the salary payments made this month are not recognized as expense because some of the work was done by employees last month. 
B)  The premium on a six-month insurance policy is charged immediately to expense. 
C)  Expenses for the period exceed revenues. 
D)  The cost of advertising done during the month is charged to expense even though no payment is due for 60 days.

Question 3

Matching principle
In April, Grinnel Paving, Inc. acquired a large quantity of crushed stone on account with payment due in 90 days. The stone was used in May when Grinnel Paving, Inc. completed a large parking lot for a local shopping center. In early July, Grinnel Paving, Inc. paid the supplier from which the crushed stone had been purchased. In which month should Grinnel Paving, Inc. recognize the cost of the crushed stone as an expense? What accounting principle provides the justification for the answer?

Accepted Answer

Grinnel Paving, Inc. must recognize the

Question 4

The following transactions occurred during March, the first month of operations for Quality Galleries, Inc.
* Capital stock was issued in exchange for $360,000 cash.
* Purchased $180,000 of equipment by making a $60,000 cash down payment and signing a note payable for the balance.
* Made a $35,000 cash payment on the note payable from the purchase of equipment.
* Sold a piece of equipment for cash of $18,000. The equipment was sold at cost, so there is no gain or loss on the sale.
-What is the balance in the Cash account at the end of March?

Accepted Answer

A)  $283,000. 
B)  $343,000. 
C)  $318,000. 
D)  $378,000. 
A)  $283,000. 
B)  $343,000. 
C)  $318,000. 
D)  $378,000.

Question 5

Which of the following accounts normally has a debit balance?

Accepted Answer

A)  Accounts payable. 
B)  Retained earnings. 
C)  Accounts receivable. 
D)  Service revenue. 
A)  Accounts payable. 
B)  Retained earnings. 
C)  Accounts receivable. 
D)  Service revenue.

Question 6

Indirect Oil Co. reports these account balances at December 31, 2011
On January 2, 2012, Indirect Oil collected $25,000 of its accounts receivable and paid $20,000 of its accounts payable.
 $$\begin{array} { | l | l | } 
\hline \text { Accounts Payable } & \$ 55,000 \
\hline \text { Land } & \$ 100,00 \
& 0 \
\hline \text { Notes Payable } & \$ 130,00 \
& 0 \
\hline \text { Equipment } & \$ 80,000 \
\hline \text { Cash } & \$ 40,000 \
\hline \text { Accounts Receivable } & \$ 50,000 \
\hline \text { Buildings } & \$ 120,00 \
& 0 \
\hline \text { Capital Stock } & \$ 170,00 \
\hline \text { Retained Earnings } & 0 \
\hline
\end{array}$$
-In a trial balance prepared at December 31, 2011 the total of the debit column is:

Accepted Answer

A)  $805,000. 
B)  $780,000. 
C)  $415,000. 
D)  $390,000. 
A)  $805,000. 
B)  $780,000. 
C)  $415,000. 
D)  $390,000.

Question 7

The following transactions occurred during May, the first month of operations for Hunter Products, Inc:
* Issued 50,000 shares of capital stock to the owners of the corporation in exchange for $600,000 cash.
* Purchased a piece of land for $400,000, making a $150,000 cash down payment and signing a note payable for the balance.
* Made a $60,000 cash payment on the note payable from the purchase of land.
* Purchased equipment on credit from BBW, Inc. for $63,000.
-What is the total owners' equity at the end of May?

Accepted Answer

A)  $810,000. 
B)  $600,000. 
C)  $790,000. 
D)  $660,000. 
A)  $810,000. 
B)  $600,000. 
C)  $790,000. 
D)  $660,000.

Question 8

The reason that both expenses and dividends are recorded by debit entries is that:

Accepted Answer

A)  All dividend and expense transactions involve offsetting credit entries to the Cash account. 
B)  Both expenses and dividends are offset against revenues in the income statement. 
C)  Both expenses and dividends reduce owners' equity. 
D)  The statement is untrue-expenses are recorded by debits, but dividends are recorded by credits to the owners' equity account. 
A)  All dividend and expense transactions involve offsetting credit entries to the Cash account. 
B)  Both expenses and dividends are offset against revenues in the income statement. 
C)  Both expenses and dividends reduce owners' equity. 
D)  The statement is untrue-expenses are recorded by debits, but dividends are recorded by credits to the owners' equity account.

Question 9

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.

Accepted Answer

A) True 
 B)False

Question 10

The following transactions occurred during March, the first month of operations for Quality Galleries, Inc.
* Capital stock was issued in exchange for $360,000 cash.
* Purchased $180,000 of equipment by making a $60,000 cash down payment and signing a note payable for the balance.
* Made a $35,000 cash payment on the note payable from the purchase of equipment.
* Sold a piece of equipment for cash of $18,000. The equipment was sold at cost, so there is no gain or loss on the sale.
-What are total assets of Quality Galleries at the end of March?

Accepted Answer

A)  $283,000. 
B)  $162,000. 
C)  $445,000. 
D)  $480,000. 
A)  $283,000. 
B)  $162,000. 
C)  $445,000. 
D)  $480,000.

Question 11

A journal entry to recognize an expense could include each of the following, except:

Accepted Answer

A)  A debit to an expense account. 
B)  A credit to Accounts Payable. 
C)  A debit to a liability account. 
D)  A credit to Cash. 
A)  A debit to an expense account. 
B)  A credit to Accounts Payable. 
C)  A debit to a liability account. 
D)  A credit to Cash.

Question 12

A trial balance proves that equal amounts of debits and credits were posted to the ledger.

Accepted Answer

A) True 
 B)False

Question 13

A journal entry to recognize an expense must include:

Accepted Answer

A)  A credit to Accounts Payable. 
B)  A credit to an expense account. 
C)  A credit to Cash. 
D)  A debit to an expense account. 
A)  A credit to Accounts Payable. 
B)  A credit to an expense account. 
C)  A credit to Cash. 
D)  A debit to an expense account.

Question 14

In accounting, the terms debit and credit indicate, respectively:

Accepted Answer

A)  Increase and decrease. 
B)  Left and right. 
C)  Decrease and increase. 
D)  Right and left. 
A)  Increase and decrease. 
B)  Left and right. 
C)  Decrease and increase. 
D)  Right and left.

Question 15

The following transactions occurred during May, the first month of operations for Hunter Products, Inc:
* Issued 50,000 shares of capital stock to the owners of the corporation in exchange for $600,000 cash.
* Purchased a piece of land for $400,000, making a $150,000 cash down payment and signing a note payable for the balance.
* Made a $60,000 cash payment on the note payable from the purchase of land.
* Purchased equipment on credit from BBW, Inc. for $63,000.
-What is the total of Hunter Products' liabilities at the end of May?

Accepted Answer

A)  $253,000. 
B)  $190,000. 
C)  $63,000. 
D)  $313,000. 
A)  $253,000. 
B)  $190,000. 
C)  $63,000. 
D)  $313,000.

Question 16

Which of the following is provided by a trial balance in which total debits equal total credits?

Accepted Answer

A)  Proof that no transaction was completely omitted from the ledger during the posting process. 
B)  Proof that the correct debit or credit balance has been computed for each account. 
C)  Proof that the ledger is in balance. 
D)  Proof that transactions have been correctly analyzed and recorded in the proper accounts. 
A)  Proof that no transaction was completely omitted from the ledger during the posting process. 
B)  Proof that the correct debit or credit balance has been computed for each account. 
C)  Proof that the ledger is in balance. 
D)  Proof that transactions have been correctly analyzed and recorded in the proper accounts.

Question 17

Indicate all of the following statements that correctly describe net income. Net income:

Accepted Answer

A)  Is equal to revenue minus expenses. 
B)  Is equal to revenue minus the sum of expenses and dividends. 
C)  Increases owners' equity. 
D)  Is reported by a company for a period of time. 
A)  Is equal to revenue minus expenses. 
B)  Is equal to revenue minus the sum of expenses and dividends. 
C)  Increases owners' equity. 
D)  Is reported by a company for a period of time.

Question 18

If ledger accounts are maintained in three-column, running balance form, the journal should be maintained in the same format.

Accepted Answer

A) True 
 B)False

Question 19

A trial balance consists of:

Accepted Answer

A)  A two-column schedule of all debit and credit entries posted to ledger accounts. 
B)  A two-column financial statement intended for distribution to interested parties outside the business. 
C)  A two-column schedule showing the totals of all debits and of all credits made in journal entries. 
D)  A two-column schedule listing names and balances of all ledger accounts. 
A)  A two-column schedule of all debit and credit entries posted to ledger accounts. 
B)  A two-column financial statement intended for distribution to interested parties outside the business. 
C)  A two-column schedule showing the totals of all debits and of all credits made in journal entries. 
D)  A two-column schedule listing names and balances of all ledger accounts.

Question 20

The process of originally recording a business transaction in the accounting records is termed:

Accepted Answer

A)  Journalizing. 
B)  Footing. 
C)  Posting. 
D)  Balancing. 
A)  Journalizing. 
B)  Footing. 
C)  Posting. 
D)  Balancing.

The purchase of equipment on credit is recorded by a:

Clinton prepares monthly financial statements. Which of the following violates the matching principle?

Which of the following accounts normally has a debit balance?

The reason that both expenses and dividends are recorded by debit entries is that:

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.

A journal entry to recognize an expense could include each of the following, except:

A trial balance proves that equal amounts of debits and credits were posted to the ledger.

A journal entry to recognize an expense must include:

In accounting, the terms debit and credit indicate, respectively:

Which of the following is provided by a trial balance in which total debits equal total credits?

Indicate all of the following statements that correctly describe net income. Net income:

If ledger accounts are maintained in three-column, running balance form, the journal should be maintained in the same format.

A trial balance consists of:

The process of originally recording a business transaction in the accounting records is termed:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

The Time Value of Money

Filters

Exam 3: The Accounting Cycle: Capturing Economic Events

The purchase of equipment on credit is recorded by a:

Clinton prepares monthly financial statements. Which of the following violates the matching principle?

Which of the following accounts normally has a debit balance?

The reason that both expenses and dividends are recorded by debit entries is that:

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.

A journal entry to recognize an expense could include each of the following, except:

A trial balance proves that equal amounts of debits and credits were posted to the ledger.

A journal entry to recognize an expense must include:

In accounting, the terms debit and credit indicate, respectively:

Which of the following is provided by a trial balance in which total debits equal total credits?

Indicate all of the following statements that correctly describe net income. Net income:

If ledger accounts are maintained in three-column, running balance form, the journal should be maintained in the same format.

A trial balance consists of:

The process of originally recording a business transaction in the accounting records is termed:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

The Time Value of Money

Filters