Financial Accounting ACCT 2401
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Date Created: 10/11/15
Chapter 1 110 11 11 114 11 1 2 U1 Businesses can take the following forms A Sole Proprietorship B Common stock C Partnership D A and C only E All of the above A corporation A Is a legal entity separate and distinct from its owners B Is controlled by the FASB C Has shareholders who have unlimited liability for the acts for the acts of the corporation D Is the same as a limited liability partnership E All of the above The rules adopted by the accounting profession as guides in preparing financial statements are A Comprised of both general and specific principles B Known as generally accepted accounting principles C Abbreviated as GAAP D Intended to make information in financial statements relevant reliable and comparable E All of the above The private board that currently has the authority to establish generally accepted accounting principles is the A APB B FASB C AAA D AICPA E SEC The principle that requires every business to be accounted for separately and distinctly from its owner or owners is known as the A Objectivity principle B Business entity principle C Goingconcern principle D Revenue recognition principle E Cost principle 118 If a parcel of land that was originally purchased for 85000 is offered for sale at 150000 is assessed for tax purposes at 95000 is recognized by its purchasers as easily being worth 140000 and is purchased for 137000 the land should be recorded in the purchaser s books at A 95000 B 137000 C 138500 D 140000 E 150000 119 To include the personal assets and transactions of a business s owner in the records and reports of the 126 128 business would be in conflict with the A Objectivity principle B Realization principle C Business entity principle D Goingconcern principle E Revenue recognition principle The Maximum Experience Company acquired a building for 500000 Maximum Experience had an appraisal done and found that the building was easily worth 575000 The seller had paid 300000 for the building 6 years ago Which accounting principle would require Maximum Experience to record the building on its records at 500000 A Monetary unit principle B Goingconcern principle C Cost principle D Business entity principle E Revenue recognition principle Marian Mosely is the owner of Mosely Accounting Services Which accounting principle requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services A Monetary unit principle B Goingconcern principle C Cost principle D Business entity principle E None of these Since Marian is a sole proprietor she is not required to separate her personal financial information from the financial information of Mosely Accounting Services 133 144 1 4 U1 146 147 Which of the following accounting principles would requires that all goods and services purchased be recorded at cost A Goingconcern principle B Continuingconcern principle C Cost principle D Business entity principle E Consideration principle Net Income A Decreases equity B Represents the amount of assets owners put into a business C Equals assets minus liabilities D Is the excess of revenues over expenses E Represents owners claims against assets If equity is 300000 and liabilities are 192000 then assets equal A 108000 B 192000 C 300000 D 492000 E 792000 Resources owned or controlled by a company that are expected to yield benefits are A Assets B Revenues C Liabilities D Owner s equity E Expenses Gross increases in equity from a company s earnings activities are A Assets B Revenues C Liabilities D Owner s Equity E Expenses 148 152 153 154 155 156 Net income is A Assets minus liabilities B The excess of revenues over expenses C An asset D The same as revenue E The excess of expenses over equity The description of the relation between a company s assets liabilities and equity which is expressed as Assets Liabilities Equity is known as the A Income statement equation B Accounting equation C Business equation D Return on equity ratio E Net income Assets Liabilities Equity is known as the A Income statement equation B Cost principle C Objectivity principle D Accounting equation E Transaction principle Expense A Increase equity B Are gross increases in equity from a company s earning activity C Are the costs of assets or services use to earn revenues D Occur when equity exceeds revenue E Are creditors claims on assets Net income A Occurs when revenues exceed expenses B Is the same as revenue C Equals resources owned or controlled by a company D Occurs when expenses exceed assets E Represents assets taken from a company for an owner s personal use Revenues are A The same as net income B The excess of expenses over assets C Resources owned or controlled by a company D The gross increase in equity from a company s earning activities E The costs of assets or services used 15 00 160 16 16 W 164 16 Equot If assets are 99000 and liabilities are 32000 then equity equals A 32000 B 67000 C 99000 D 131000 E 198000 The excess of expenses over revenues for a period is A Net assets B Equity C Net loss D Net income E A liability Which of the following statements is true about assets A They are economic resources owned or controlled by the business B They are expected to provide future benefits to the business C They appear on the balance sheet D Claims on them are shared between creditors and owners E All of the above Distributions of earnings by a corporation to its stockholders are called A Dividends B Expenses C Assets D Retained Earnings E Net Income The balance sheet equation is A Revenues minus expenses equal net income B Debits equal credits C The bookkeeping phase of accounting D Another name for the accounting equation E Assets minus liabilities and equity The assets of a company total 700000 the liabilities 200000 What are the claims of the owners A 900000 B 700000 C 500000 D 200000 E It is impossible to determine unless the amount of this owners investment is known 166 167 169 170 171 On June 30 of the current year the assets and liabilities of Phoenix Phildell are as follows Cash 20500 Accounts Receivable 7250 Supplies 650 Equipment 12000 Accounts Payable 9300 What is the amount of stockholders equity as ofJuly 1 of the current year A 8300 B 13050 C 20500 D 31100 E 40400 Assets created by selling goods and services on credit are A Accounts payable B accounts receivable C Liabilities D Expenses E Equity Photometer Company paid off 30000 of its accounts payable in cash What would be the effects of this transaction on the accounting equation A Assets 30000 increase liabilities no effects equity 30000 increase B Assets 30000 decrease liabilities 30000 decrease equity no effects C Assets 30000 decrease liabilities 30000 increase equity no effects D Assets no effects liabilities 30000 decrease equity 30000 increase E Assets 30000 decrease liabilities no effects equity 30000 decrease How would the accounting equation of Boston Company be affected by the billing of a client for 10000 of consulting work completed A 10000 accounts receivable 10000 accounts payable B 10000 accounts receivable 10000 accounts payable C 10000 accounts receivable 10000 cash D 10000 accounts receivable 10000 revenue E 10000 accounts receivable 10000 revenue Zion Company has assets of 500000 liabilities of 250000 and equity of 250000 t buys office equipment on credit for 75000 The effects of this transaction include A Assets increase by 75000 and expenses increase by 75000 B Assets increase by 75000 and expenses decrease by 75000 C Liabilities increase by 75000 and expenses decrease by 75000 D Assets decrease by 75000 and expenses decrease by 75000 E Assets increase by 75000 and liabilities increase by 75000 17 N 17 W 174 17 U1 176 Viscount Company collected 42000 cash on its accounts receivable The effects of this transaction as reflected in the account equation are A Total assets decrease and equity increases B Both total assets and equity decrease C Total assets total liabilities and equity are unchanged D Both total assets and equity are unchanged and liabilities increase E Total assets increase and equity decreases If the liabilities of a business increased 75000 during a period of time and the owner s equity in the business decrease 30000 during the same period the assets of the business must have A Decreased 105000 B Decreased 45000 C Increased 30000 D Increased 45000 E Increased 105000 If the assets of a business increased 89000 during a period of time and its liabilities increased 67000 during the same period equity in the business must have A Increased 22000 B Decreased 22000 C Increased 89000 D Decreased 156000 E Increased 156000 If the liabilities of a company increased 74000 during a period of time and equity in the company decreased 19000 during the same period what was the effect on the assets A Assets would have increased 55000 B Assets would have decreased 55000 C Assets would have increase 19000 D Assets would have decreased 19000 E None of the above If a company paid 38000 of its accounts payable in cash what was the effect on the assets liabilities and equity A Assets would decrease 38000 liabilities would decrease 38000 and equity would decrease 38000 B Assets would decrease 38000 liabilities would decrease 38000 and equity would increase 38000 C Assets would decrease 38000 liabilities would decrease 42000 and equity would not change D There would be no effect on the accounts because the accounts are affected by the same amount E None of the above 17 l 189 190 191 195 If assets are 365000 and equity is 120000 then liabilities are A 120000 B 245000 C 365000 D 485000 E 610000 The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called A A balance sheet B A statement of owner s equity C A statement of cash flows D An income statement E A statement of financial position A balance sheet lists A The types and amounts of the revenues and expenses of a business B Only the information about what happened to equity during a time period C The types and amounts of assets liabilities and equity of a business as of a specific date D The inflows and outflows of cash during the period E The assets and liabilities of a company but not the owner s equity A financial statement providing information that helps users understand a company s financial status and which lists the types and amounts of assets liabilities and equity as of a specific date is called an A Balance sheet B Income statement C Statement of cash flows D Statement of owner s equity E Financial Status Statement Accounts payable appear on which of the following statements A Balance sheet B Income statement C Statement of owner s equity D Statement of cash flows E Transaction statement 196 19 l 198 205 The income statement reports all of the following except A Revenues earned by a business B Expenses incurred by a business C Assets owned by a business D Net income or loss earned by a business E The time period over which the earnings occurred Use the following information as of December 31 to determine equity Liabilities 141000 Cash 57000 39 39 206000 Rllilrlincc 175000 A 57000 B 141000 C 297000 D 438000 E 579000 Determine the net income of a company for which the following information is available for the month of May Employee salaries expense 180000 Interest expense 10000 Rent expense Consulting revenue 190000 210000 230000 D 610000 9323 A company s balance sheet shows cash 22000 account receivable 16000 office equipment 50000 and accounts payable 17000 What is the amount of stockholder s equity A 17000 B 29000 C 71000 D 88000 E 105000 Chapter 1 Answer Key 110 D 111 A 112 E 114 B 115 B 118 B 119 C 129 3 122 A 126 C 128 D 133 C 135 3 1 36 A 131 9 144 D 145 D 146 A 147 B 148 B 152 153 154 155 156 158 160 161 163 164 165 166 167 WUOUJgtITIOUUJgtOUU 1 wOJgtJgtUOITIUw Chapter 3 CLOSING ENTRIES 66 68 70 73 74 Revenues expenses and dividend accounts which are closed at the end of each accounting period are A Real accounts B Temporary accounts C Closing accounts D Permanent accounts E Balance sheet accounts Assets liabilities and equity accounts are not closed these accounts are called A Nominal accounts B Temporary accounts C Permanent accounts D Contra accounts E Accrued accounts Journal entries recorded at the end of each accounting period to prepare the revenue expense and dividend accounts for the upcoming period and to update the retained earnings account for the events of the period just finished are referred to as A Adjusting entries B Closing entries C Final entries D Work sheet entries E Updating entries The recurring steps performed each accounting period starting with analyzing and recording transaction in the journal and continuing through the postclosing trial balance is referred to as the A Accounting period B Operating cycle C Accounting cycle D Closing cycle E Natural business year Which of the following is the usual final step in the accounting cycle A Journalizing transactions B Preparing an adjusted trial balance C Preparing a postclosing trial balance D Preparing the financial statement E Preparing a work sheet 97 A company had Service Revenues of 75000 and Utilities Expense of 63000 for the accounting 107 period Which of the following entries would be an appropriate closing entry 1 3 000 13000 A Retained Earnings Common Stock B Retained Earnings 75000 Service Revenues 75000 C Service Revenues Retained Earnings D Utilities Expense 63000 Retained Earnings 75000 63000 The following information is available for the Travis Travel Agency Inc After these closing entries what will be the balance in the Retained Earnings account Total Rpupnllpc 125000 Total Expenses 60000 Retained Earnings 80000 Dividends 15000 A 65000 B 80000 C 130000 D 145000 E 280000 The Retained Earnings account has a credit balance or 17000 before closing entries are made If total revenues for the period are 55200 total expenses are 39800 and dividends are 9000 what is the ending balance in the retained earnings account after all closing entries are made A 8000 B 15400 C 23400 D 17000 E 32400 A trial balance prepared after the closing entries have been journalized and posted is the A Unadjusted trial balance B Postclosing trial balance C General ledger D Adjusted trial balance E Work sheet 108 An error is indicated if the following account has a balance appearing on the postclosing trial balance A Office Equipment B quot 39 39Dr quot Office39I39 C Depreciation ExpenseOffice Equipment D Common Stock E Salaries Payable 131 The following are the steps in the accounting cycle List them in the order in which they are completed Prepare adjusted trial balance Post transactions Prepare an adjusted trial balance Journalize entries Prepare the financial statements Close the temporary accounts Adjust the ledger accounts Prepare a postclosing trial balance Analyze transactions ANSWER KEY CHAPTER 3 CLOSING ENTRIES 66 B 68 C 70 B 73 C 74 C 97 C 98 C 99 C 107 B 108 C 131 1 Analyze transactions 2 Journalize entries 3 Post transactions 4 Prepare an unadjusted trial balance 5 Adjust the ledger accounts 6 Prepare adjusted trial balance 7 Prepare the financial statements 8 Close the temporary accounts 9 Prepare a postclosing trial balance CHAPTER 1 TEST PREP Circle the letter ofthe best response 1 Which of the following statements is FALSE A The proprietorship form of business organization protects the personal assets of the owners from creditors of the business B A proprietorship has a single owner C Accounting is the information system that measures business activities processes that information into reports and communicates the results to decision makers D The FASB determines how accounting is practiced in the United States Financial accounting is the process of presenting information in an ethical manner providing information useful to managers in making daily decisions measuring and communicating information to the federal government recognizing measuring recording and communicating information about business s transaction cowgt Wilbur Corp operates a fishing tackle shop The company needs to borrow money to expand therefore it prepared nancial statements to present to the banker Wilbur Corp obtained appraisals of all the assets of the business to ensure that the balance sheet would re ect the most current value of the assets Wilbur Corp has violated which of the following principles or concepts A Reliability principle B Cost principle C Goingconcem principle D Stablemonetaryunit concept Which of the following statements is FALSE A Assets are economic resources that are expected to bene t future periods B Expenses are decreases in stockholders equity that result from delivering goods and services to customers C Revenues are assets that represent economic bene ts D Liabilities are economic obligations to outsiders A payment on account decreases assets increases liabilities increases stockholders equity increases assets cowgt Which of the following transactions increases stockholders equity A Collection of an account receivable B Issuance of common stock for cash C Payment of salaries D Cash purchase of land A balance sheet reports the assets liabilities and stockholders equity on a particular date difference between revenues and expenses during the period change in the retained earnings during the period cash receipts and cash payments during the period U0wgt If assets increase 40000 during the period and liabilities decrease 8000 during the period stockholders equity must have A increased 32000 B decreased 48000 C decreased 32000 D increased 48000 The following information about the assets and liabilities at the end of 2009 and 2010 is given below 2009 2010 Assets 75000 90000 Liabilities 36000 45000 If net income was 1500 and there were no dividends how much did equity increase from new stock issuances A 40500 B 45000 0 6000 D 4500 In what order should the financial statements be prepared A Income statement cash ow statement balance sheet statement of retained earnings B Balance sheet statement of retained earnings income statement statement of cash ow C Income statement statement of retained earnings balance sheet statement of cash ows D Statement of cash ows income statement balance sheet statement of retained earnings Answer Key to Chapter 1 BADDC 619w ADBCA 14345 Chapter 3 ADJUSTING ENTRIES 74 The accounting principle that requires revenue to be reported when earned is the A B C D E Matching principle Revenue recognition principle Time period principle Accrual reporting principle Goingconcern principle 75 Adjusting entries A B C D E Affect only income statement accounts Affect only balance sheet accounts Affect both income statement and balance sheet accounts Affect only cash flow statement accounts Affect only equity accounts 77 The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the A B C D E Recognition principle Cost principle Cash basis of accounting Matching principle Time period principle 78 The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called A B E Accrual basis accounting Operating cycle accounting Cash basis accounting Revenue recognition accounting Current basis accounting 79 Adjusting entries are journal entries made at the end of an accounting period for the purpose of A B C D E Updating liability and asset accounts to their proper balances Assigning revenues to the periods in which they are earned Assigning expenses to the periods in which they are incurred Assuring that financial statements reflect the revenues earned and the expenses incurred All of the above Prepaid expenses depreciation accrued expenses unearned revenues and accrued revenues are all examples of A items that require contra accounts B items that require adjusting entries C asset and equity D asset accounts E Income statement accounts Which of the following statements is incorrect A Prepaid expenses depreciation and unearned revenues involve previously recorded assets and liabilities B Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded C Adjusting entries can be used to record both accrued expenses and accrued revenues D Prepaid expenses depreciation and unearned revenues often require adjusting entries to record the effects of the passage of time E Adjusting entries affect the cash account A company made no adjusting entry for accrued and unpaid employee wages of 28000 on December 31 This oversight would A Understate net income by 28000 B Overstate net income by 28000 C Have no effect on net income D Overstate assets by 28000 E Understate assets by 28000 If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period the financial statements prepared at that time would show 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 If a company failed to make the endofperiod adjustments to remove from the Unearned Management Fees account the amount of management fees that were earned this omission would cause A An overstatement of net income B An overstatement of assets C an overstatement of liabilities D An overstatement of equity E An understatement of liabilities 88 A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees If the company fails to make the endofperiod adjusting entry to record the portion of these fees that has been earned one effect will be A an overstatement of equity B an understatement of equity C an understatement of assets D an understatement of liabilities E an overstatement of assets Use the following to answer questions 93 amp 94 On June 30 2007 Apricot Co paid 7500 cash for management services to be performed over a twoyear period Apricot follows a policy of recording all prepaid expenses to asset accounts at a time of cash payment 93 On June 30 2007 Apricot should record A a credit to an expense for 7500 B a debit to an expense for 7500 C a debit to a prepaid expense for 7500 D a credit to a prepaid expense for 7500 E a debit to cash for 7500 94 The adjusting entry on December 31 2007 for Apricot would include A a debit to expense for 5635 B a debit to a prepaid expense for 5635 C a debit to an expense for 1875 D a debit to a prepaid expense for 1875 E a credit to a liability for 1875 95 Accrued revenues A At the end of one accounting period often result in cash receipts from customers in the next period B At the end of one accounting period often result in cash payments in the next period C are also called unearned revenues D Are listed on the balance sheet as liabilities E Are recorded at the end of an accounting period because cash has already been received for revenues earned 10 O 101 An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is an A accrued expense B contra account C accrued revenue D intangible asset E adjunct account The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used representing the expense of using the assets is called A accumulated depreciation B a contra account C the matching principle D depreciation E an accrued account Prior to recording adjusting entries the office supplies account had a 359 debit balance A physical count of the supplies showed 105 of unused supplies available The required adjusting entry is A Debit office supplies 105 and credit office supplies expense 105 B debit office supplies expense 105 and credit office supplies 105 C debit office supplies expense 254 and credit office supplies 254 D debit office supplies 254 and credit office supplies expense 254 E debit office supplies 105 and credit supplies expense 254 If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees the endof period adjusting entry to record the portion of those fees that has been earned is A debit cash and credit legal fees earned B debit cash and credit unearned legal fees C debit unearned legal fees and credit legal fees earned D debit legal fees earned and credit unearned legal fees E debit unearned legal fees and credit accounts receivable On April 1 2007 a company paid the 1350 premium on a threeyear insurance policy with benefits beginning on that date What will be the insurance expense on the annual income statement for the year ended December 31 2007 A 1350 B 450 C 101250 D 33750 E 3750 102 103 104 105 106 A company had no office supplies available at the beginning of the year During the year the company purchased 250 worth of office supplies On December 31 75 worth of office supplies remained How much should the company report as office supplies expense for the year A 75 B 125 C 175 D 250 E 325 On January 1 a company purchased a fiveyear insurance policy for 1800 with coverage starting immediately If the purchase was recorded in the Prepaid Insurance account and the company records adjustment only at yearend the adjusting entry at the end of the first year is A debit prepaid insurance 1800 credit cash 1800 B debit prepaid insurance 1440 credit insurance expense 1440 C debit prepaid insurance 360 credit insurance expense 360 D debit insurance expense 360 credit prepaid insurance 360 E debit insurance expense 360 credit prepaid insurance 1440 Unearned revenue is reported in the financial statements as A a revenue on the balance sheet B a liability on the balance sheet C an unearned revenue on the income statement D an asset on the balance sheet E An operating activity on the statement of cash flows Which of the following assets is not depreciated A store fixtures B computers C land D buildings E all of the above are depreciated Which of the following does not require an adjusting entry at yearend A accrued interest on notes payable B supplies used during the period C Cash invested by the owner D accrued wages E Expired portion of prepaid insurance 108 109 11 O 111 PPW Co leased a portion of its store to another company for eight months beginning on October 1 2007 at a monthly rate of 800 This other company paid the entire 6400 cash on October 1 which PPW Co recorded as unearned revenue The journal entry made by PPW Co at yearend on December 31 2007 would include A a debit to rent earned for 2400 B a credit to unearned rent for 2400 C a debit to cash for 6400 D a credit to rent earned for 2400 E a debit to unearned rent to 4000 On May 1 2007 Giltus Advertising Company received 1500 from Julie Bee for advertising services to be completed April 30 2008 The cash receipt was recorded as unearned fees and at December 31 2007 1000 of the fees had been earned The adjusting entry on December 31 Year 1 should include A a debit to unearned fees for 500 B a credit to unearned fees for 500 C a credit to earned fees for 1000 D a debit to earned fees for 1000 E a debit to earned fees for 500 Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are A intangible expenses B prepaid expenses C unearned expenses D net expenses E accrued expenses The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is A debit unpaid salaries and credit salaries payable B debit salaries payable and credit salaries expense C debit salaries expense and credit cash D debit salaries expense and credit salaries payable E debit cash and credit salaries expense 112 A company pays each of its two office employees each Friday at the rate of 100 per day each for 11 W 11 U1 121 a fiveday week that begins on Monday If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday the monthend adjusting entry to record the salaries earned but unpaid is A debit unpaid salaries 600 and credit salaries payable 600 B debit salaries expense 400 and credit salaries payable 400 C debit salaries expense 600 and credit salaries payable 600 D debit salaries payable 400 and credit salaries expense 400 E debit salaries expense 400 and credit cash 400 On January 1 Southwest College received 1200000 in Unearned Tuition Revenue from its students for the spring semester which spans four months beginning on January 2 What amount of tuition revenue should the college recognize on January 31 A 300000 B 600000 C 800000 D 900000 E 1200000 The difference between the cost of an asset and the accumulated depreciation for that asset is called A Depreciation Expense B Unearned Depreciation C Prepaid Depreciation D Depreciation Value E Book Value On May 1 2007 Carter Advertising Company received 3600 from Kaitlyn Breanna for advertising services to be completed April 30 2008 The Cash receipt was recorded as unearned fees The adjusting entry on December 31 2008 should include A A debit to Earned Fees for 3600 B A debit to Unearned Fees for 1200 C A credit to Unearned Fees for 1200 D A debit to Earned Fees for 2400 E A credit to Earned Fees for 2400 122 12 125 127 128 S The balance in the prepaid insurance account before adjustment at the end of the year is 4800 which represents the insurance premiums for four months The premiums were paid on November 1 The adjusting entry required on December 31 is A Debit Insurance Expense 2400 credit Prepaid Insurance 2400 B Debit Prepaid Insurance 2400 credit Insurance Expense 2400 C Debit Insurance Expense 1200 credit Prepaid Insurance 1200 D Debit Prepaid Insurance 1200 credit Insurance Expense 1200 E Debit Cash 4800 credit Prepaid Insurance 4800 What is the proper adjusting entry at December 31 the end of the accounting period if the balance in the prepaid insurance account is 7750 before adjustment and the unexpired amount per analysis of policies is 3250 A Debit Insurance Expense 3250 credit Prepaid Insurance 3250 B Debit Insurance Expense 4500 credit Prepaid Insurance 4500 C Debit Prepaid Insurance 4500 credit Insurance Expense 4500 D Debit Insurance Expense 7750 credit Prepaid Insurance 7750 E Debit Cash 7750 credit Prepaid Insurance 7750 On March 31 2007 Phoenix Inc paid Melanie Publishing Company 15480 for a 3year subscription for five different magazines The subscriptions are starting immediately What is the adjusting entry that should be recorded by Melanie Publishing Company on December 31 2007 A Debit Unearned Fees 15480 credit Fees Earned 15480 B Debit Unearned Fees 5160 credit Fees Earned 5160 C Debit Unearned Fees 11610 credit Fees Earned 11610 D Debit Unearned Fees 1290 credit Fees Earned 1290 E Debit Unearned Fees 3870 credit Fees Earned 3870 A company made no adjusting entry for accrued and unpaid employee salaries of9000 on December 31 Which of the following statements is true A It will have no effect on income B It will overstate assets and liabilities by 9000 C It will understate net income by 9000 D It will understate assets by 9000 E It will understate expenses and overstate net income by 9000 A company made no adjusting entry for accrued and unpaid employee salaries of 9000 on December 31 The entry to record the adjusting entry should have been A Debit Salary Expense 9000 credit Cash 9000 B Debit Salary Expense 9000 credit Fees Earned 9000 C Debit Salary Expense 9000 credit Prepaid Salary 9000 D Debit Salary Expense 9000 credit Salaries Payable 9000 E Debit Salaries Payable 9000 credit Salary Expense 9000 132 A trial balance prepared after adjustments have been recorded is called an A Balance sheet B Adjusted trial balance C Unadjusted trial balance D Classified balance sheet E Unclassified balance sheet 133 A trial balance prepared before any adjustments have been recorded is A An adjusted trial balance B Used to prepare financial statements C An unadjusted trial balance D Correct with respect to proper balance sheet and income statement amounts E Only prepared once a year 134 The adjusted trial balance contains information pertaining to A Asset accounts only B Balance sheet accounts only C Income statement accounts only D All general ledger accounts E Revenue accounts only 135 Financial statements are typically prepared in the following order A Balance sheet statement of retained earnings income statement B Statement of retained earnings balance sheet income statement C Income statement balance sheet statement of retained earnings D Income statement statement of retained earnings balance sheet E Balance sheet income statement statement of retained earnings 142 Match the following types of accounts with a through d for each of the following transactions 1 through 4 a Prepaid expense b Unearned revenue c Accrued expense d Accrued revenue 1 Used to record wages owed but not paid 2 Used to record revenue earned but not received 3 Used to record expiration of prepaid insurance 4 Used to record revenue received in advance ANSWER KEY Chapter 3 ADJUSTING ENTRIES 74 B 75 C 1421c 2 d 3 a 4 B CHAPTER 3 TEN MINUTE QUIZ Circle the letter ofthe best response 1 During 2012 Bustamante Co incurred salary expense of 240000 Beginning and ending Salary Payable was 4000 and 8000 respectively In 2012 Bustamante paid salaries of A 248000 C 236000 B 240000 D 244000 On October 1 2012 the Jernigan Company paid 4800 for a oneyear insurance policy On December 31 2012 the adjusting entry would include a A debit to Insurance Expense 3600 B credit to Insurance Payable 1200 C credit to Prepaid Insurance 1200 D debit to Insurance Expense 4000 Failure to record an adjusting entry for an accrued expense will result in the following Liabilities Net Income A understated overstated B overstated understated C understated no effect D no effect understated An adjusting entry could contain all of the following EXCEPT a A debit to Uneamed Revenue B credit to Cash C debit to Interest Receivable D credit to Salary Payable The 2012 income statement showed Rent Expense of 6100 The related balance sheet account Prepaid Rent had a beginning balance of 1400 and an ending balance of 1200 The amount of cash paid for rent during 2012 is A 6100 B 1200 0 6300 D 5900 Table 3 1 Lemon Car Rental Inc Unadjusted Trial Balance December 31 2012 Cash 7450 Prepaid insurance 1600 Equipment 19000 Accumulated Depreciation 4200 Accounts Payable 5000 Common Stock 10000 Retained Earnings 5600 Dividends 6000 Rental Revenue 23400 Insurance Expense 7000 Salary Expense 4000 Repair Expense 3150 48 200 48200 Adjusting entries include 1 Prepaid insurance used 1600 2 Depreciation w 58 Refer to Table 31 The credit column of the adjusted trial balance should total A 45300 B 49300 0 49500 D 51100 Refer to Table 31 After posting adjusting entries net income A will be 6350 B will be 9250 C will be 7950 D cannot be determined from the given information Which of the following is a permanent account A Dividends B Prepaid Insurance C Insurance Expense D Service Revenue The entry required to close dividends at the end of the period should include a A debit to Retained earnings B credit to Retained earnings C credit to Cash D debit to Dividends 10 U39 eENNE UWDgtOO Which of the following groups of accounts correctly appear on the postclosing trial balance Rent Expense Prepaid Rent Retained Earnings Dividends Equipment Accumulated Depreciation Service Revenue Interest Receivable Note Payable Retained Earnings Cash Unearned Revenue cowgt Answer Key to Chapter 3 99 89 Ugtwgt0 0 ACCT 2401 Chapter 2 65 71 72 73 77 78 A record of the increases and decreases in a specific asset liability equity revenue or expense is an AJournal B Posting C Trail balance D Account E Chart of accounts A written promise to pay a definite sum of money on a specific future date is an A Unearned revenue B Prepaid expense C Credit account D Note payable E Account receivable A collection of all accounts and their balances used by a business is called a A Journal B Book of original entry C General column journal D Balance column journal E Ledger A ledger is A A record containing increases and decreases in a specific asset liability equity revenue or expense item B A journal in which transactions are first recorded C A collection of documents that describe transactions and events entering the accounting process D A list of all accounts with their debit balances at a point in time E A record containing all accounts and their balances used by a company The right side of a Taccount is an A Debit B Increase C Credit D Decrease E Account balance Which of the following statements is incorrect A The normal balance of accounts receivable is a debit B The normal balance of dividends is a debit C The normal balance of accounts payable is a credit D The normal balance of an expense account is a credit E The normal balance of capital stock is a credit 79 A credit is used it record A A decrease in an expense account B A decrease in an asset account C An increase in a liablitiy account D An increase in a revenue account E All of the above Which of the following statements is correct A The left side of a Taccount is the credit side B Debits decrease asset and expense accounts and increase liability equity and revenue accounts C The left side of the taccount is the debit side D Credits increase asset and expense accounts and decrease liability equity and revenue accounts E In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction An account balance is A The total of the credit side of the account B The total of the debit side of the account C The difference between the total debits and the total credits for an account including the beginning balance D Assets liabilities equity E Always a credit Of the following accounts the one that normally has a credit balance is A Cash B Office equipment C Sales Salaries Payable D Dividends E Sales Salaries Expense A debit is used to record A A decrease in an asset account B A decrease in an expense account C An increase in a revenue account D An increase in the balance of the common stock account E An increase in the balance of the dividends account A credit entry A Increases asset and expense accounts and decreases liability common stock and revenue accounts B Is always a decrease in an account C Decreases asset and expense accounts and increases liability common stock and revenue accounts D s recorded on the left side of a Taccount E s always an increase in an account Doubleentry accounting is an accounting system A That records each transaction twice B That records the effects of transactions and other events in at least two account with equal debits and credit C In which each transaction affects is recorded in two or more accounts but that couls include two debits and no credits D That may only be used if Taccounts are used E s always an increase in an account Rocky Industries received its telephone bill in the amount of300 and immediately paid it Rocky s general journal entry to record this transaction will include a A Debit to Telephone Expense for 300 B Credit to a Accounts Payable for 300 C Debit to Cash for 300 D Credit to Telephone Expense for 300 E Debit to Accounts Payable for 300 Wisconsin Rentals purchased office supplies on credit The general journal entry made by Winconsin Rentals will include a A Debit to Accounts Payable B Debit to Accounts Receivable C Credit to Cash D Credit to Accounts Payable E Credit to Common Stock Robert Haddon contributed 70000 in cash and some land worth 130000 to open a new business RH Consulting Inc Which of the following journal entries will RH Consulting make to record this transaction A Assets 200000 Common Stock 200000 B Cash and Land 200 00 Common Stock 200000 C Cash 70000 Land 130000 Common Stock 200000 D Common Stock 200000 Assets 200000 E Common Stock 200000 Assets 200000 On September 1 the Cash account of Value Company had a normal balance of 5000 During September the account was debited for a total of 12200 and credited for a total of 11500 What is the balance in the Cash account at the end of September A A 0 balance B A 4300 debit balance C A 4300 credit balance D A 5700 debit balance E A 5700 credit balance 94 On April 30 Holden Company had a Accounts Receivable balance of 18000 During the month of May 112 114 total credits to Accounts Receivables were 52000 from customer payments The May 31 Accounts Receivable balance was 13000 What was the amount of credit sales during May A 5000 B 47000 C 52000 D 57000 E 32000 Zed Bennett opened an art gallery and as a dealer completed these transactions 1 Started the gallery Artery by investing 40000 cash and equipment valued at 18000 2 Purchased 70 of office supplies on credit 3 Paid 1200 cash for the receptionist s salary 4 Sold a painting for an artist and collected a 4500 cash commission on the sale 5 Completed an art appraisal and billed the client 200 What was the balance of the cash account after these transactions were posted A 12230 B 12430 E 61430 The process of transferring general journal information to the ledger is A Doubleentry accounting B Posting C Balancing an account D Journalizing E Not required unless debits do not equal credits The record in which transactions are first recorded is the A Account balance B Ledger C Journal D Trial balance E Cash account 115 118 119 121 131 The general journal provides a place for recording A The transaction date B The names of the accounts involved C The amount of each debit and credit D An explanation of the transaction E All of the above A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is an A Account B Trail balance C Journal D Taccount E Balance column account A company had the following accounts and balances yearend Cash 30000 32000 Accounts receivable Accounts payable Fees earned Rent expense Insurance expense Supplies expense Common stock Dividends If all of the accounts have normal balances what are the totals for the trial balance A 45200 B 67000 C 104800 D 209600 E 186600 A report that lists accounts and their balances in which the total debit balances should equal the total credit balances is called an A Account balance B Trail balance C Ledger D Chart of accounts E General ledger Which of the following groups of accounts are not balance sheet accounts A Assets B Liabilities C Revenues D Equity accounts E All of the above are balance sheet accounts Chapter 2 Answer Key 65 71 72 73 77 78 ca Owomogtwnmmnmmommmoo quotPN39 mow 118 C 119 C 121 B 131 C
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