Question 1

An account that is always deducted from a related account is known as a:

Accepted Answer

A)  contra account. 
B)  temporary account. 
C)  carrying account. 
D)  negative account. 
A)  contra account. 
B)  temporary account. 
C)  carrying account. 
D)  negative account.

Question 2

On 1 May 2018, Dress in Style received a $2000 advance payment from a customer for the design and making of a formal gown. The gown is expected to be completed by the end of August 2018. The correct accounting entry to initially record the $2000 is:

Accepted Answer

A)  DR Bank $2000; CR Unearned income $2000 
B)  DR Unearned income $2000; CR Bank $2000 
C)  DR Bank $2000; CR Accounts payable $2000 
D)  DR Income earned $2000; CR Bank $2000 
A)  DR Bank $2000; CR Unearned income $2000 
B)  DR Unearned income $2000; CR Bank $2000 
C)  DR Bank $2000; CR Accounts payable $2000 
D)  DR Income earned $2000; CR Bank $2000

Question 3

The accrual approach to profit measurement is underpinned by which two main accounting assumptions?

Accepted Answer

A)  going concern and historical cost. 
B)  historical cost and accounting period. 
C)  accounting period and entity period. 
D)  accounting period and going concern. 
A)  going concern and historical cost. 
B)  historical cost and accounting period. 
C)  accounting period and entity period. 
D)  accounting period and going concern.

Question 4

The wages expense account for Ray's Plumbing showed the following entries for the month of May. What was the portion of wages that was treated as an expense in April but was not paid until May?
Wages expense
$$\begin{array} { | l | l | r | r | r | } 
\hline \text { Date }  &  \text { Particulars }   \text { DR }  & \text { CR }  & \text { Balance }  \
\hline & & \mathbf { \$ } & \$ & \mathbf { \$ }  \
\text { May 1 } & \text { Beginning balance } & 34000 & & \mathbf { 3 4 0 0 0 \mathrm { Dr } } \
\text { May 1 } & \text { Accrued expenses } & & 2200 & 31800 \mathrm { Dr } \
\text { May 1-31 } & \text { Various cash payments } & 15400 & & 47200 \mathrm { Dr } \
\text { May 31 } & \text { Accrued expenses } & 3700 & & 50900 \mathrm { Dr } \
\hline
\end{array}$$

Accepted Answer

A)  $ 3 700 
B)  $15 400 
C)  $ 2 200 
D)  $34 000 
A)  $ 3 700 
B)  $15 400 
C)  $ 2 200 
D)  $34 000

Question 5

Profit for a financial period is measured as:

Accepted Answer

A)  Income less expenses. 
B)  Assets less liabilities. 
C)  Current assets less current liabilities. 
D)  DRs less CRs. 
A)  Income less expenses. 
B)  Assets less liabilities. 
C)  Current assets less current liabilities. 
D)  DRs less CRs.

Question 6

On 1 November 2018 the publishers of 'Home' magazine received $198 (including GST) in advance for a 12-month subscription to their monthly issue. At the end of the financial year on 30 June 2019 the adjusting entry will be:

Accepted Answer

A)  DR Unearned subscriptions (liability) $120; CR Subscriptions income $120 
B)  DR Cash $120; CR Subscriptions income $120 
C)  DR Cash $198; CR GST payable $18; CR Unearned subscriptions (liability) $180 
D)  DR Unearned subscriptions (liability) $132; CR Subscriptions income $120; CR GST payable $12 
A)  DR Unearned subscriptions (liability) $120; CR Subscriptions income $120 
B)  DR Cash $120; CR Subscriptions income $120 
C)  DR Cash $198; CR GST payable $18; CR Unearned subscriptions (liability) $180 
D)  DR Unearned subscriptions (liability) $132; CR Subscriptions income $120; CR GST payable $12

Question 7

Which of these is not a name for the original cost of an asset less its accumulated depreciation (if any)?

Accepted Answer

A)  Carrying amount 
B)  Depreciable amount 
C)  Book value 
D)  Written down value 
A)  Carrying amount 
B)  Depreciable amount 
C)  Book value 
D)  Written down value

Question 8

Accrued salaries is a/an:

Accepted Answer

A)  contra asset account. 
B)  asset account. 
C)  liability account. 
D)  equity account. 
A)  contra asset account. 
B)  asset account. 
C)  liability account. 
D)  equity account.

Question 9

ABC Rentals collects rent from several properties. Prior to recording adjusting entries, assume the rent income account has a credit balance of $4 000. Two adjustments are to be made at the end of the financial year:
(1) an accrual for accrued rent income of $800; and
(2) the unearned rent income account is to be decreased by $200.
After processing these adjusting entries the amount of rent income to be shown in the income statement is:

Accepted Answer

A)  $5 000. 
B)  $4 600. 
C)  $3 400. 
D)  $3 000. 
A)  $5 000. 
B)  $4 600. 
C)  $3 400. 
D)  $3 000.

Question 10

The period of time over which a non-current asset, such as furniture, is expected to be used by the entity is known as its:

Accepted Answer

A)  carrying life. 
B)  useful life. 
C)  working life. 
D)  book life. 
A)  carrying life. 
B)  useful life. 
C)  working life. 
D)  book life.

Question 11

If a company has earned income which has not been received in cash at the end of the accounting period an adjustment should be made which will:

Accepted Answer

A)  DR an expense account and CR cash. 
B)  DR an income account and CR an asset account. 
C)  DR cash and CR a liability account. 
D)  DR an asset account and CR an income account. 
A)  DR an expense account and CR cash. 
B)  DR an income account and CR an asset account. 
C)  DR cash and CR a liability account. 
D)  DR an asset account and CR an income account.

Question 12

The office supplies stock account is a/an:

Accepted Answer

A)  liability. 
B)  asset. 
C)  income. 
D)  expense. 
A)  liability. 
B)  asset. 
C)  income. 
D)  expense.

Question 13

On the first day of the year Major Renos purchased scaffolding for $25 000 which is to be depreciated over 10 years with a zero residual value. At the end of the first year:

Accepted Answer

A)  Depreciation in the income statement is $1250 and the carrying value of the scaffolding in the balance sheet is $23 750. 
B)  Depreciation in the income statement is $5 000 and the carrying value of the scaffolding in the balance sheet is $20 000. 
C)  Depreciation in the income statement is $2 500 and the carrying value of the scaffolding in the balance sheet is $22 500. 
D)  Depreciation in the income statement is $0 and the carrying value of the scaffolding in the balance sheet is $25 000. 
A)  Depreciation in the income statement is $1250 and the carrying value of the scaffolding in the balance sheet is $23 750. 
B)  Depreciation in the income statement is $5 000 and the carrying value of the scaffolding in the balance sheet is $20 000. 
C)  Depreciation in the income statement is $2 500 and the carrying value of the scaffolding in the balance sheet is $22 500. 
D)  Depreciation in the income statement is $0 and the carrying value of the scaffolding in the balance sheet is $25 000.

Question 14

Obligations of the entity that can be paid over a period of more than one year from the balance sheet date are classified as:

Accepted Answer

A)  non-current assets. 
B)  current liabilities. 
C)  non-current liabilities. 
D)  long-standing obligations. 
A)  non-current assets. 
B)  current liabilities. 
C)  non-current liabilities. 
D)  long-standing obligations.

Question 15

Preparing adjusting entries at the end of the financial year is necessary:

Accepted Answer

A)  to prepare the ledger for the next accounting period. 
B)  to close the accounts. 
C)  to correct any errors made during the period. 
D)  to calculate the profit or loss as accurately as possible. 
A)  to prepare the ledger for the next accounting period. 
B)  to close the accounts. 
C)  to correct any errors made during the period. 
D)  to calculate the profit or loss as accurately as possible.

Question 16

_________________refers to the excess of current assets over current liabilities.

Accepted Answer

A)  Working capital. 
B)  Tangible assets. 
C)  Net assets. 
D)  Current capital. 
A)  Working capital. 
B)  Tangible assets. 
C)  Net assets. 
D)  Current capital.

Question 17

Which of the following statements concerning accrual accounting is correct?

Accepted Answer

A)  Expenses are recognised in the period in which the consumption of costs can be measured in a faithful, verifiable manner. 
B)  Profit is the excess of cash inflows from income over cash outflows for expenses. 
C)  Income from sales is recognised in the period when the cheque is cashed. 
D)  For most businesses the cash approach gives a better measure of economic performance than does the accrual approach. 
A)  Expenses are recognised in the period in which the consumption of costs can be measured in a faithful, verifiable manner. 
B)  Profit is the excess of cash inflows from income over cash outflows for expenses. 
C)  Income from sales is recognised in the period when the cheque is cashed. 
D)  For most businesses the cash approach gives a better measure of economic performance than does the accrual approach.

Question 18

Everything Bikes is owed $550 rent which has not been received by 3l December 2018, the last day of the accounting period. The adjusting entry on that date is:

Accepted Answer

A)  DR Bank $550; CR Rent income $550 
B)  DR Accounts receivable $550; CR Rent income $550 
C)  DR Rent income $550; CR Accounts receivable $550 
D)  DR Rent expense $550; CR Accrued Rent $550 
A)  DR Bank $550; CR Rent income $550 
B)  DR Accounts receivable $550; CR Rent income $550 
C)  DR Rent income $550; CR Accounts receivable $550 
D)  DR Rent expense $550; CR Accrued Rent $550

Question 19

Which of the following is correct in matching decisions with information in financial reports?

Accepted Answer

A)  Determine profitability using the balance sheet. 
B)  Determine solvency using the income statement. 
C)  Determine long-term borrowing using the statement of changes in equity. 
D)  Determine return on investment using both the income statement and balance sheet. 
A)  Determine profitability using the balance sheet. 
B)  Determine solvency using the income statement. 
C)  Determine long-term borrowing using the statement of changes in equity. 
D)  Determine return on investment using both the income statement and balance sheet.

Question 20

James Myers Ltd paid salaries and wages of $450 000 during the year ended 30 June 2018. The company owes $12 000 for work carried out during the last week of June but which is not due to be paid until 3 July. Assume there were no salaries and wages outstanding at the beginning of the financial year. After the adjusting entry for the year ended 30 June 2018:

Accepted Answer

A)  Salaries and wages in the income statement are $462 000 and accrued Salaries and wages in the balance sheet are $12 000. 
B)  Salaries and wages in the income statement are $450 000 and accrued Salaries and wages in the balance sheet are $12 000. 
C)  Salaries and wages in the income statement are $438 000 and accrued Salaries and wages in the balance sheet are $12 000. 
D)  Salaries and wages in the income statement are $462 000 and accrued Salaries and wages in the balance sheet are $0. 
A)  Salaries and wages in the income statement are $462 000 and accrued Salaries and wages in the balance sheet are $12 000. 
B)  Salaries and wages in the income statement are $450 000 and accrued Salaries and wages in the balance sheet are $12 000. 
C)  Salaries and wages in the income statement are $438 000 and accrued Salaries and wages in the balance sheet are $12 000. 
D)  Salaries and wages in the income statement are $462 000 and accrued Salaries and wages in the balance sheet are $0.

Exam 4: Adjusting the Accounts and Preparing Financial Statements

An account that is always deducted from a related account is known as a:

On 1 May 2018, Dress in Style received a $2000 advance payment from a customer for the design and making of a formal gown. The gown is expected to be completed by the end of August 2018. The correct accounting entry to initially record the $2000 is:

The accrual approach to profit measurement is underpinned by which two main accounting assumptions?

Profit for a financial period is measured as:

On 1 November 2018 the publishers of 'Home' magazine received $198 (including GST) in advance for a 12-month subscription to their monthly issue. At the end of the financial year on 30 June 2019 the adjusting entry will be:

Which of these is not a name for the original cost of an asset less its accumulated depreciation (if any)?

Accrued salaries is a/an:

The period of time over which a non-current asset, such as furniture, is expected to be used by the entity is known as its:

If a company has earned income which has not been received in cash at the end of the accounting period an adjustment should be made which will:

The office supplies stock account is a/an:

On the first day of the year Major Renos purchased scaffolding for $25 000 which is to be depreciated over 10 years with a zero residual value. At the end of the first year:

Obligations of the entity that can be paid over a period of more than one year from the balance sheet date are classified as:

Preparing adjusting entries at the end of the financial year is necessary:

_________________refers to the excess of current assets over current liabilities.

Which of the following statements concerning accrual accounting is correct?

Everything Bikes is owed $550 rent which has not been received by 3l December 2018, the last day of the accounting period. The adjusting entry on that date is:

Which of the following is correct in matching decisions with information in financial reports?

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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