Question 1

Profit margin reflects the percent of profit in each dollar of revenue.

Accepted Answer

A) True 
 B)False  True

Question 2

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $125,000; and Retained Earnings = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, dividends for the year totaled $20,000. Assuming no other changes to retained earnings, the balance in the retained earnings account at the end of the year would be:

Accepted Answer

A)  $116,000.
B)  $136,000.
C)  $24,000.
D)  $96,000.
E)  $104,000. D

Question 3

Which of the following assets is not depreciated?

Accepted Answer

A)  Store fixtures.
B)  Computers.
C)  Land.
D)  Buildings.
E)  Equipment. C

Question 4

A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

Accepted Answer

A) True 
 B)False

Question 5

When closing entries are made:

Accepted Answer

A)  All ledger accounts are closed to start the new accounting period.
B)  All temporary accounts are closed but permanent accounts are not closed.
C)  All real accounts are closed but nominal accounts are not closed.
D)  All permanent accounts are closed but nominal accounts are not closed.
E)  All balance sheet accounts are closed.

Question 6

Closing entries are necessary so that retained earnings will begin each period with a zero balance.

Accepted Answer

A) True 
 B)False

Question 7

Profit margin is defined as:

Accepted Answer

A)  Revenues divided by net sales.
B)  Net sales divided by assets.
C)  Net income divided by net sales.
D)  Net income divided by assets.
E)  Net sales divided by net income.

Question 8

The ___________________ account is a temporary account used only in the closing process.

Accepted Answer

The answer of The ___________________ account is a temporary account...

Question 9

A current ratio of 2.1 suggests that a company has ____________ current assets to cover current liabilities.

Accepted Answer

The answer of A current ratio of 2.1 suggests that...

Question 10

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Accepted Answer

A)  Land.
B)  Dividends.
C)  Accounts Payable.
D)  Unearned Revenue.
E)  Prepaid Insurance.

Question 11

Show the December 31 adjusting entry to record $750 of earned but unpaid salaries of employees at the end of the current accounting period.

Accepted Answer

The answer of Show the December 31 adjusting entry to...

Question 12

Temporary accounts include all of the following except:

Accepted Answer

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

Question 13

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Accepted Answer

A) True 
 B)False

Question 14

Explain the difference between temporary and permanent accounts.

Accepted Answer

The answer of Explain the difference between temporary and permanent...

Question 15

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

Accepted Answer

A)  Debit Dividends $33,000; credit Income Summary $33,000.
B)  Debit Income Summary $33,000; credit Dividends $33,000.
C)  Debit Income Summary $33,000; credit Retained Earnings $33,000.
D)  Debit Retained Earnings $33,000; credit Income Summary $33,000.
E)  Credit Retained Earnings $33,000; debit Dividends $33,000.

Question 16

The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Retained Earnings; (4) close Dividends to Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 17

Intangible assets are long-term resources that benefit business operations that usually lack physical form and have uncertain benefits.

Accepted Answer

A) True 
 B)False

Question 18

The accounting principle that requires revenue to be recorded when earned is the:

Accepted Answer

A)  Matching principle.
B)  Revenue recognition principle.
C)  Time period assumption.
D)  Accrual reporting principle.
E)  Going-concern assumption.

Question 19

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

Accepted Answer

A)  Debit Salaries Payable and credit Salaries Expense.
B)  Debit Salaries Expense and credit Cash.
C)  Debit Accrued Salaries and credit Salaries Payable.
D)  Debit Cash and credit Salaries Expense.
E)  Debit Salaries Expense and credit Salaries Payable.

Question 20

On December 1, Milton Company borrowed $300,000, at 8% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?

Accepted Answer

A)  debit Interest Payable, $2,000; credit Interest Expense, $2,000
B)  debit Interest Expense, $2,000; credit Interest Payable, $2,000
C)  debit Interest Expense, $2,000; credit Cash, $2,000
D)  debit Interest Expense, $4,000; credit Interest Payable, $4,000
E)  debit Interest Expense, $24,000; credit Interest Payable, $24,000

Exam 3: Adjusting Accounts for Financial Statements

Profit margin reflects the percent of profit in each dollar of revenue.

Which of the following assets is not depreciated?

A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

When closing entries are made:

Closing entries are necessary so that retained earnings will begin each period with a zero balance.

Profit margin is defined as:

The ___________________ account is a temporary account used only in the closing process.

A current ratio of 2.1 suggests that a company has ____________ current assets to cover current liabilities.

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

Show the December 31 adjusting entry to record $750 of earned but unpaid salaries of employees at the end of the current accounting period.

Temporary accounts include all of the following except:

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Explain the difference between temporary and permanent accounts.

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Retained Earnings; (4) close Dividends to Retained Earnings.

Intangible assets are long-term resources that benefit business operations that usually lack physical form and have uncertain benefits.

The accounting principle that requires revenue to be recorded when earned is the:

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

On December 1, Milton Company borrowed $300,000, at 8% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?