Question 1

For a given year,beginning and ending total liabilities were $8,400 and $10,000,respectively.At year-end,owners' equity was $26,000 and total assets were $2,000 larger than at the beginning of the year.If new capital stock issued exceeded dividends by $2,400,net income (loss)for the year was apparently

Accepted Answer

A)  ($2,800). 
B)  ($2,000). 
C)  $400. 
D)  $2,800.

Question 2

The balance in a deferred revenue account represents an amount that is Earned Collected

Accepted Answer

A)  Yes Yes 
B)  Yes No 
C)  No Yes 
D)  No No

Question 3

An example of a nominal account would be

Accepted Answer

A)  Allowance for Doubtful Accounts. 
B)  Notes Payable. 
C)  Prepaid Expense. 
D)  Cost of Goods Sold.

Question 4

Sky Company collected $12,350 in interest during 2013.Sky showed $1,850 in interest receivable on its December 31,2013,balance sheet and $5,300 on December 31,2012.The interest revenue on the income statement for 2013 was

Accepted Answer

A)  $3,450. 
B)  $8,900. 
C)  $12,350. 
D)  $14,200.

Question 5

Which of the following criteria must be met before an event should be recorded for accounting purposes?

Accepted Answer

A)  The event must be an arm's-length transaction. 
B)  The event must be repeatable in a future period. 
C)  The event must be measurable in financial terms. 
D)  The event must be disclosed in the reported footnotes.

Question 6

Account balances taken from the ledger of Middler Company on December 31,2013,are as follows:
  Adjustments on December 31,2013,are required as follows:

Accepted Answer

The answer of Account balances taken from the ledger of...

Question 7

If an expense has been incurred but not yet recorded,then the end-of-period adjusting entry would involve

Accepted Answer

A)  a liability account and an asset account. 
B)  a liability account and a revenue account. 
C)  a liability and an expense account. 
D)  a receivable account and a revenue account.

Question 8

Kite Company paid $24,900 in insurance premiums during 2013.Kite showed $3,600 in prepaid insurance on its December 31,2013,balance sheet and $4,500 on December 31,2012.The insurance expense on the income statement for 2013 was

Accepted Answer

A)  $16,800. 
B)  $24,000. 
C)  $25,800. 
D)  $33,000.

Question 9

The basic financial statements are listed below:  In which of the following sequences does the accountant ordinarily prepare the statements?

Accepted Answer

A)  1,4,3,2 
B)  2,1,3,4 
C)  3,2,1,4 
D)  3,2,4,1

Question 10

Ryan Company purchased a machine on July 1,2013.The machine cost $250,000 and has a salvage value of $10,000 and a useful life of eight years.The adjusting entry for the year ending December 31,2014,would include a debit to Depreciation Expense of

Accepted Answer

A)  $30,000. 
B)  $15,000. 
C)  $31,250. 
D)  $15,625.

Question 11

Winston Company sells magazine subscriptions for one- to three-year subscription periods.Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance,and this account had a balance of $9,600,000 at December 31,2013,before year-end adjustment.Outstanding subscriptions at December 31,2013,expire as follows:  In its December 31,2013,balance sheet,what amount should Winston report as the balance for magazine subscriptions collected in advance?

Accepted Answer

A)  $2,000,000 
B)  $3,800,000 
C)  $7,600,000 
D)  $9,600,000

Question 12

A bond issued June 1,2013,by a calendar-year company pays interest on April 1 and October 1.A bond is a financial security issued by a corporation in return for cash borrowed from investors.Bonds typically pay interest twice per year.The investor makes the investment on the date the bond is issued.Interest expense for 2013 is recognized on these bonds by the issuer for a period of

Accepted Answer

A)  Seven months. 
B)  Six months. 
C)  Four months. 
D)  Three months.

Question 13

Total net income over the life of an enterprise is

Accepted Answer

A)  higher under the cash basis than under the accrual basis. 
B)  lower under the cash basis than under the accrual basis. 
C)  the same under the cash basis as under the accrual basis. 
D)  not susceptible to measurement.

Question 14

In November and December 2013,Bee Company,a newly organized newspaper publisher,received $72,000 for 1,000 three-year subscriptions at $24 per year,starting with the January 2,2014,issue of the newspaper.How much should Bee report in its 2013 income statement for subscription revenue?

Accepted Answer

A)  $0 
B)  $12,000 
C)  $24,000 
D)  $72,000

Question 15

Iowa Cattle Company uses a perpetual inventory system.Iowa purchased cattle from Big D Ranch at a cost of $19,500,payable at time of delivery.The entry to record the delivery would be

Accepted Answer

A)  Purchases ...........................19,500
Accounts Payable ..................19,500 
B)  Inventory ...........................19,500
Accounts Payable ..................19,500 
C)  Purchases ...........................19,500
Cash ..............................19,500 
D)  Inventory ...........................19,500
Cash ..............................19,500

Question 16

An adjusting entry will not take the format of which one of the following entries?

Accepted Answer

A)  A debit to an expense account and a credit to an asset account 
B)  A debit to an expense account and a credit to a revenue account 
C)  A debit to an asset account and a credit to a revenue account 
D)  A debit to a liability account and a credit to a revenue account

Question 17

On September 1,2012,Star Corp.issued a note payable to Federal Bank in the amount of $450,000.The note had an interest rate of 12 percent and called for three equal annual principal payments of $150,000.The first payment for interest and principal was made on September 1,2013.At December 31,2013,Star should record accrued interest payable of

Accepted Answer

A)  $11,000. 
B)  $12,000. 
C)  $16,500. 
D)  $18,000.

Question 18

If an inventory account is understated at year end,the effect will be to overstate the

Accepted Answer

A)  net purchases. 
B)  gross margin. 
C)  cost of goods available for sale. 
D)  cost of goods sold.

Exam 2: A Review of the Accounting Cycle