CHAP 1

When cash is received from a customer in payment of an account receivable, how are the
elements of the accounting equation affected?
=> Increase assets (cash) and decrease assets (accounts receivable)

Which one of the following users of accounting information is considered to be an external

user of accounting information rather than an internal user of accounting information?
=> Company customers

Purchasing equipment on account (payment to be made in the future) will have what effect on
the elements of the accounting equation?
=> Increase in equipment (assets) and an increase in liabilities

Total assets and total liabilities of a company are reported on which of the following?
=> Statement of financial position

Owner's equity is decreased by

=> Expenses

Revenues would not result from

=> initial investment of cash by owner

A CPA owns a large home and she has divided the second floor into two separate units: one
used as her personal residence and the other rented out to local college students as an
apartment. On the first floor, she has her own CPA firm where she meets with and provides
accounting services to clients. If she wishes to keep separate records for each of these three
activities, the accounting principle to which she is adhering is?
=> Business entity principle

The primary accounting standard-setting body in the United States is the

=> Financial Accounting Standards Board

Collection of a $500 Accounts Receivable

=> increases an asset $500; decreases an asset $500

If at the end of the accounting period, the company's liabilities total $19,000 and its equity totals
$40,000, then what must be the total of assets?
=> $59,000

Which of the following financial statements refers to a specific date (point in time)?
=> Statement of financial position

The owner's investment of cash in the company will result in which of the following?
=> An increase in cash and an increase in equity

If during the current accounting period, the company's assets increased by $24,000 and equity
increased by $5,000, then how did liabilities change?
 => Increased by $19,000

A net loss will result during a time period when

=> expenses exceed revenues

If total liabilities decreased by $15,000 and owner’s equity increased by $5,000 during a period of
time, then total assets must change by what amount and direction during that same period?
=> $10,000 decrease

CHAP 2

Amelia Company received its telephone bill on February 15, 2011 in the amount of $325. This bill
covered the period from January 1, 2011 through January 31, 2011. Amelia paid this bill
immediately. The company uses a calendar year accounting period and prepares its financial
statements only once a year at the end of the year. The general journal entry to record this
transaction includes:
=> A debit to the Telephone Expense account for $325

Which of the following statements is false?

a.
Revenues are increased by debits

b.
Revenues have normal credit balances
c.
Revenues are a positive factor in the computation of net income
d.
Revenues increase owner's equity

Which of the following is incorrect regarding a trial balance?

=> It proves that the debits equal the credits after posting

Able Company pays its employees twice a month, on the 7th and the 21st. On June 21, Able
Company paid employee salaries of $4,000. This transaction would
=> decrease net income for the month by $4,000

Grayton Industries purchased supplies for $1,000. They paid $500 in cash and agreed to pay the
balance in 30 days. The journal entry to record this transaction would include a debit to an asset
account for $1,000, a credit to a liability account for $500. Which of the following would be the
correct way to complete the recording of the transaction?
=> Credit another asset account for $500

After journal entries are posted, the reference column => of the general ledger will show
journal page numbers
In the first month of operations, the total of the debit entries to the cash account amounted to
$900 and the total of the credit entries to the cash account amounted to $500. The cash account
has a(n)
=> $400 debit balance

A chart of accounts usually starts with

=> asset accounts

The usual sequence of steps in the transaction recording process is

=> analyze → journal → ledger

Meenen Company purchases equipment for $1,200 and supplies for $400 from Sanders Co. for
$1,600 cash. The entry for this transaction will include a
=> debit to Equipment $1,200 and a debit to Supplies $400 for Meenen

Posting of journal entries should be done in

=> chronological order

The procedure of transferring journal entries to the ledger accounts is called

=> posting

Which of the following statements is true?

a.An account shows increases and decreases and an account balance

b.

Debit entries are entries involving the right-hand side on an account

c.

Journalizing entries occurs after posting entries

d.

Revenue accounts are increased by debit entries

On March 1, 2011, a company collected a $500 deposit from a customer for the installation
of a home-theater system. The installation is scheduled for May 5, 2011. How should the
company record this entry on March 1, 2011?
=> The Unearned Sales Revenue account is credited for $500

A company which sells and services medical insurance policies received one payment of
$14,000 cash from a customer for insurance coverage for the next two years. Recording the
receipt of this cash when it is received will require which of the following?
=> An asset to be debited, a liability to be credited
CHAP 3

Expenses paid and recorded as assets before they are used are called
=> prepaid expenses

At the end of the accounting period, the business had $5,000 of office supplies on hand. At the
beginning of the period, the amount of supplies on hand was $2,000. If the business purchased
$12,000 of office supplies during the year, what amount of office supplies were used during the
year?
=> $ 9,000

Clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1.
The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the
end of September is
=> $60

Although it is possible to find an exception to the following statement, the vast majority of
adjusting entries follow which pattern described below?
=> One of the accounts debited or credited is an income statement account while the
second account debited or credited is a balance sheet account.

If the adjusting entry for depreciation is not made,

=> expenses will be understated.

A company adopts the accounting practice whereby all external transactions involving prepaid
expenses, such as prepaid insurance, prepaid rent, and office supplies are initially debited to the
asset account when acquired. If the company fails to adjust any one of these accounts for the
current year, what will be the effect on (1) the current year's total expenses, (2) total revenues,
(3) net income, and (4) ending owner's equity?
=> Understated, no effect, overstated, and overstated

At the end of the fiscal year, an adjusting entry was made for accrued salaries of $2,000. The
salaries for one week, $4,250, were paid on the first Friday of the new fiscal period. When the
weekly salaries are paid on the first Friday of the new accounting period, what will be the general
journal entry?
=> Salary Expense, debit, $2,250; Salaries Payable, debit, $2,000; Cash, credit, $4,250

Employees at B Corporation are paid $5,000 cash every Friday for working Monday through
Friday. The calendar year accounting period ends on Wednesday, December 31. How much
salary expense should be recorded two days later on January 2?
=> $2,000
Financial statements are prepared directly from the:
=> adjusted trial balance
A company purchased a two-year fire insurance policy on May 1, 2011. It paid the $2,400
premium in cash on the same date and recorded the entry with a debit to Prepaid Insurance for
$2,400. The company has adopted a 12-month accounting period ending on January 31 of each
year. If the company uses the accrual basis of accounting, how much insurance expense will be
recorded for the periods ended January 31, 2012, and January 31, 2013, respectively?
=> .$900 and $1,200

Failure to prepare an adjusting entry at the end of the period to record an accrued expense
would cause
=> an understatement of expenses and an understatement of liabilities.

A tenant rented space in your company's office building on October 1 at $1,800 per month,
paying seven months' rent in advance. The bookkeeper recognized a current liability of $12,600.
How much of this amount remains unearned as of December 31?
=> $7,200

The revenue recognition principle dictates that revenue be recognized in the accounting period
=> in which it is earned.

Which of the statements below is not true?

a.

An adjusted trial balance can be used to prepare financial statements.

b.

An adjusted trial balance should show ledger account balances.

c. An adjusted trial balance is prepared before all transactions have been journalized.

d. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger.

For prepaid expense adjusting entries

=> the adjusting entry results in a debit to an expense account and a credit to an asset
account.

CHAP 4

Closing entries are made:

=> in order to transfer net income (or loss) and dividends to the owner's capital account

It is not true that current assets are assets that a company expects to
=> acquire within one year.
As described in the textbook, in what order should the temporary accounts be closed?
=> (1) revenues, (2) expenses, (3) income summary, and (4) dividends.

A post-closing trial balance should be prepared

=> after closing entries are posted to the ledger accounts.

Which of the following sets of accounts are both considered to be temporary accounts which
must be closed at the end of the accounting period?
=> Depreciation Expense and Interest Revenue

Income Summary has a credit balance of $12,000 in J. Sawyer Co. after closing revenues and
expenses. The entry to close Income Summary is:
=> debit Income Summary $12,000, credit J. Sawyer, Capital $12,000.

The most efficient way to accomplish closing entries is to

=> credit the income summary account for total revenues and debit the income summary
account for total expenses

What are the main purposes of the post-closing trial balance?

To verify that only real accounts continue to have a balance in them and that the sum of
all the debit balances in the real accounts is equal to the sum of all the credit balances in
the real accounts. + To verify that all the temporary or nominal accounts have zero balances.
(BOTH ARE CORRECT)

Which one of the following statements concerning the accounting cycle is incorrect?
=> The accounting cycle includes only one optional step.

Intangible assets are

=> noncurrent resources.

CHAP 5
During the quarter, Happy Shop’s inventory increased by $15,000. If the company’s purchases
for the quarter were $530,000, cost of sales must have been
=> $515,000.

Cole Company has sales revenue of $52,000, cost of goods sold of $35,000 and operating
expenses of $12,000 for the year ended December 31. Cole's gross profit is
=> $17,000
The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300; Sales Discounts 6,600; Sales 165,000; Cost of Goods Sold 73,700. Gross
profit is:
=> $70,400.

If a firm is given credit terms of 1/15, n/45, it means that the firm
=> pays within the discount period and recognize a savings.

The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300, Sales Discounts 6,600; Sales 176,000; Cost of Goods Sold 84,700. Net
sales is:
=> $155,100

Which of the following expressions is correct?

=> Sales – cost of goods sold – operating expenses = net income

Happy Home firm purchased inventory from Mary firm. The shipping costs were $500 and the
terms of the shipment were FOB shipping point. Happy Home firm would have the following entry
regarding the shipping charges:
=>Dr. Inventory 500; Cr. Cash 500

Net sales is measured by sales minus

=> sales discounts and sales returns and allowances.

The records for Uptown Pet Shop showed the following: Sales Revenue, $225,000; Beginning
Merchandise Inventory, $43,000; purchases of Merchandise Inventory during the period,
$144,000; and, Cost of Goods Sold, $172,000. What is the amount of the ending Merchandise
Inventory?
=> $15,000

The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300; Sales Discounts 6,600; Sales 176,000; Cost of Goods Sold 84,700. Net
income is:
=> $20,900.

During the quarter, Happy Shop’s inventory decreased by $22,000. If the company’s cost of
goods sold for the quarter was $330,000, purchases must have been

=> $308,000.
Woolworth firm made a purchase of merchandise on credit from Fairy firm on October 3, for
$6,000, terms 2/10, n/45. On October 30, Woolworth firm makes the appropriate payment to
Fairy firm. The entry on October 30 for Woolworth firm is

=> Dr. Accounts Payable 6,000; Cr. Cash 6,000

On November 10, 2021, Happy Home firm had credit sales transactions of $5,700 from
merchandise having cost $3,800. The entries to record the day's credit transactions include a

=> Credit of $5,700 to Sales.

When merchandise is purchased for resale, the Inventory account would be debited for such
acquisition costs as the cost of the item itself and any freight charges for which the purchaser is
responsible. This procedure is an application of which accounting principle?

=> Historical cost principle

During the current year, 2020, a company decides to carry a brand new item in its inventory. It
purchases 25 new items for $100 each for a total of $2,500. It sells 18 items during 2020 and has
7 items on hand at the end of the year. In 2021, it buys 6 more items for the same price and only
sells 7 items during the entire year. What is the computed amount of Cost of Goods Sold for
each year?

=> $1,800 and $700

CHAP 6

Two companies report the same cost of goods available for sale but each employs a different
inventory costing method. If the price of goods has increased during the period, then the
company using

=> FIFO will have the highest ending inventory.

Which of the following items will increase inventoriable costs for the buyer of goods?
=> Freight charges paid by the purchaser

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the average
cost method (perpetual system). The average cost per unit for July is
=> $7.50

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the average
cost method (perpetual system). The value of ABC’s inventory at July 31, 2021 is
=> $750.

M&M Company uses the perpetual inventory system and the moving-average method to value
inventories. On July 1, there were 10,000 units valued at $40,000 in the beginning inventory. On
July 10, 20,000 units were purchased for $8 per unit. On July 15, 24,000 units were sold for $16
per unit. The amount charged to cost of goods sold on July 15 was
=> $160,000.

For consigned goods, the

=> consignor has ownership until goods are sold to a customer.

Inventory is
=> reported as a current asset on the statement of financial position.

XYZ company beginning in business purchased three merchandise inventory items at the
following prices. First purchase $80; Second purchase $95; Third purchase $85. If XYZ sold two
units for a total of $240 and used FIFO costing (perpetual system), the gross profit for the period
would be
=> $65.

Shoes Company's goods in transit at December 31 include: purchases made: (1) FOB
destination, (2) FOB shipping point; and sales made: (3) FOB destination, (4) FOB shipping
point. Which items should be included in Shoes's inventory at December 31?
=> 2) and (3)

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
method (perpetual system). The value of ABC’s inventory at July 31, 2021 is
=> $800.
Vinfa uses the specific identification method of costing inventory. During June, Vinfa purchased
three cars for $6,000, $7,500, and $9,750, respectively. During June, two cars are sold for
$9,000 each. Vinfa determines that at June 30, the $9,750 car is still on hand. What is Vinfa’s
gross profit for June?
=> $4,500.

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
method (perpetual system). ABC’s gross profit for the month of July is
=> $2,300.

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the average
cost method (perpetual system). ABC’s gross profit for the month of July is
=> $2,250.

ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
method (perpetual system). The value of ABC’s COGS in July 2021 is
=> $3,700

Which of the statements below is true with inventories?

a.

It is generally good business management to sell the most recently acquired goods first.

b.

The first in first out method assumes that the costs of the earliest goods acquired are the last to
be sold.

c.

Under first in first out, the ending inventory is based on the latest units purchased.

d.

First in first out seldom coincides with the actual physical flow of inventory

MIDTERM
1.Under the perpetual system, cash freight costs incurred by the buyer for the
transporting of goods is recorded in which account?

a. Freight Expense

b. Freight-Out

c. Inventory

d. Freight-In

2.Which of the following statements about the post-closing trial balance is true?

a. If the post-closing trial balance is in balance, then no journalizing or posting errors have been
made.

b. The post-closing trial balance lists all accounts with a non-zero balance.

c. The post-closing trial balance lists the same accounts and amounts as the trial balance; the
post-closing trial balance is created later than the trial balance.

d.

]The retained earnings account balance on the trial balance is the same as the retained earnings
account balance on the post-closing trial balance

3.Which of the following is an example of a contra revenue account?

a. accounts payable

b. sales

c. sales discounts

d. merchandise inventory

4.On June 1 ABC company paid $24,000 to Acme Realty for 6 months rent beginning
June 1. Prepaid Rent was debited for the full amount. If financial statements are
prepared on June 30, the adjusting entry to be made by ABC company is:

a. debit Rent Expense, $24,000; credit Prepaid Rent, $4,000.

b. debit Prepaid Rent, $4,000; credit Rent Expense, $4,000.

c. debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.

d. debit Rent Expense, $24,000; credit Prepaid Rent, $20,000.

5.Which of the following is NOT a characteristic of FOB Shipping Point?

a. The buyer owns goods in transit.

b. The point of transfer is when the goods leave the seller’s place of business.

c.The point of transfer is when the goods arrive at the buyer’s place of business.

d. The buyer pays for shipping.

6.The primary purpose of the trial balance is to

a. prove the equality of the debit and credit amounts after posting.

b. disclose the complete effect of a transaction in one place.

c. transfer journal entries to the ledger accounts.

d. make sure a journal entry is not posted twice

7.Accounts with balances that are carried over to future years:

a. permanent accounts

b. expense accounts

c. temporary accounts

d. dividend account

8.Which of the following is NOT a characteristic of FOB Destination?

a. The seller owns goods in transit.

b. The point of transfer is when the goods arrive at the buyer’s place of business.

c. The seller pays for shipping.

d. The point of transfer is when the goods leave the seller’s place of business
9. At September 1, 20XX, ABC Inc. had an Accounts Receivable balance of
$200,000. During the month, the company made sales on account of $300,000. In
addition, ABC Inc. collected $400,000 from customers that owed them money. At
September 30, 20XX, the Accounts Receivable balance is:

a. $100,000 debit

b. $300,000 credit

c. $500,000 debit

d. $100,000 credit

10.The proper journal entry to record $1,000 of Dividends paid by Myer’s Corporation
is:

a. Dr. Dividends Expense 1,000/ Cr. Service Revenue 1,000

b. Dr. Accounts Payable 1,000/ Cr. Cash 1,000

c. Dr. Dividends Expense 1,000/ Cr. Cash 1,000

d. Dr. Dividends 1,000/ Cr. Cash 1,000

11.Which of the following statements about an account is true?

a. There are separate accounts for specific assets and liabilities but only one account for
stockholders equity items.

b. The right side of an account is the debit, or increase side.

c. The left side of an account is the credit, or decrease side.

d. An account is an individual accounting record of increases and decreases in specific

assets, liability, and stockholders equity items

12.Which of the following is NOT shown in the heading of the balance sheet?

a. the title of the report

b. the name of the enterprise

c. all of the above are shown in the heading

d. the period covered by the report

13. Jane invested land valued at $5,000 in her business. This transaction would be
recorded by:

a. Dr. Land 5,000/ Cr. Service Revenue 5,000

b. Dr. Land 5,000/ Cr. Share Capital 5,000

c. Dr. Cash 1,000/ Cr. Share Capital 5,000

d. Dr. Share Capital 5,000/ Cr. Land 5,000

14.During September, ABC company had sales of $148,000, which made a gross
profit of $40,000. Purchases amounted to $100,000 and opening inventory was
$34,000. The value of closing inventory was?

a.

$54,000

b. $26,000

c. $42,000

d. $24,000

15.If a business has received cash in advance of services performed and credits a
liability account, the adjusting entry needed after the services are performed will be:

a. debit Unearned Service Revenue and credit Cash.

b. debit Unearned Service Revenue and credit Accounts Receivable.

c. debit Unearned Service Revenue and credit Prepaid Expense.

d. debit Unearned Service Revenue and credit Service Revenue.

16.Which of the following is not an adjusting entry?

a. Debit insurance expense; credit pre-paid insurance.

b. Debit unearned revenue; credit revenue.

c. Debit cash; credit unearned revenue.

d. Debit wages expense; credit wages payable.

17. Which of the following users assesses the attractiveness of investing in a

business?

a. Tax authorities

b. Employees

c. Shareholders

d. Bank

18. At the beginning of the year, ABC Co. had an inventory of $200,000. During the
year, the company purchased goods costing $900,000. ABC Co reported ending
inventory of $300,000 at the end of the year. Their cost of goods sold is

a. $1,000,000

b. $800,000

c. $400,000

d. $1,400,000

19. ABC Company purchased equipment for $15,000 on December 1. It is estimated

that annual depreciation on the computer will be $3,000. If financial statements are
to be prepared on December 31, the company should make the following adjusting
entry:

a. debit Depreciation Expense, $250; credit Accumulated Depreciation, $250.

b. debit Depreciation Expense, $3,000; credit Accumulated Depreciation, $3,000.

c. debit Depreciation Expense, $12,000; credit Accumulated Depreciation, $12,000.

d. debit Equipment, $15,000; credit Accumulated Depreciation, $15,000.

20.Jane earned a salary of $600 for the last week of December. She will be paid on
January 1. The adjusting entry for Jane’s employer at December 31 is:

a. Dr Salaries and Wages Payable $600/Cr Cash $600

b. Dr Salaries and Wages Expense $600/Cr Cash $600

c. No entry is required

d. Dr. Salaries and Wages Expense $600/Cr. Salaries and Wages Payable $600

21. The final step of the accounting cycle is

a. Creating the financial statements.

b. Posting to the general journal.

c. Identification and analysis of the transactions.

d. Closing the books.

22. ABC Company uses the perpetual inventory system and the moving-average
method to value inventories. On August 1, there were 10,000 units valued at $40,000
in the beginning inventory. On August 10, 20,000 units were purchased for $8 per
unit. On August 15, 24,000 units were sold for $16 per unit. The inventory balance
on August 15 was

a. $8,000.

b. $40,000.

c. $160,000.

d. $56,000.

23. How does failure to record accrued revenue distort the financial reports?
a. It understates current assets and overstates stockholders’ equity

b. It understates revenue, net income, and current assets

c. It overstates revenue, stockholders’ equity, and current liabilities

d. It understates net income, stockholders’ equity, and current liabilities

24. ABC Company uses the perpetual inventory system and the FIFO method to
value inventories. On August 1, there were 10,000 units valued at $40,000 in the
beginning inventory. On August 10, 20,000 units were purchased for $8 per unit. On
August 15, 24,000 units were sold for $16 per unit. The amount charged to cost of
goods sold on August 15 was

a. $160,000.

b. $144,000.

c. $152,000.

d. $512,000.

25. Which of the following describes the classification and normal balance of the
Unearned Rent Revenue account?

a. Liability, credit

b. Revenues, credit

c. Asset, debit

d. Expense, debit

26. The elements of the accounting equation are: (I). Assets; (II). Liabilities; (III). Trial
Balance; (IV). Capital:

a. I, II and IV

b. I, II and III
c. I, III and IV

d. II, III and IV

27.ABC Company uses the perpetual inventory system and the moving-average
method to value inventories. On August 1, there were 10,000 units valued at $40,000
in the beginning inventory. On August 10, 20,000 units were purchased for $8 per
unit. On August 15, 24,000 units were sold for $16 per unit. The amount charged to
cost of goods sold on August 15 was

a. $144,000.

b. $40,000.

c. $160,000.

d. $192,000.

28.During the process of closing its books at the end of the year, a company's
accountant closed revenue accounts totalling $500,000 and expense accounts
d.totalling $450,000. The company paid dividend $30,000 for shareholders. Which of
the following statements is true?

a. The company's Capital increased by $50,000 during the year.

b. The company's Capital increased by $80,000 during the year.

c. The company's Capital increased by $20,000 during the year

d. The company's net income for the year was $20,000.

29. The inventories are recorded at the latest price but COGS is changed old cost
price?

a. Average

b. Both FIFO & Average

c. None of them
d. FIFO

30. Which two accounts are used to recognize shipping charges for a buyer,
assuming the buyer pays for cash and the terms are FOB Shipping Point?

a. inventory, cash

b. inventory, accounts payable

c. delivery expense, cash

d. the buyer does not record anything for shipping since it is FOB Shipping Point.

31. ABC company received a cash advance of $700 from a customer. As a result of
this event:

a. both assets and equity increased by $700 (Debited and Credited).

b. assets increased by $700 (Debited).

c. equity increased by $700 (Credited).

d. liabilities decreased by $700 (Debited).

32.Income statement starts with:

a. None of these

b. Net income

c. Net loss

d. Gross profit

33. The owner withdraws inventory for his own use from the business. To which
financial statement assumption does this relate?

a. relevance

b. accounting entity
c. materiality

d. monetary

34.The primary source used in the preparation of the financial statements is the:

a. general trial balance.

b. trial balance.

c. post-closing trial balance.

d. adjusted trial balance.

35.If a company fails to adjust an Unearned Service Revenue account for rent that
has been recognized, what effect will this have on that month’s financial statements?

a. Assets will be understated and revenues will be understated.

b. Assets will be overstated and revenues will be understated.

c. Liabilities will be overstated and revenues will be understated.

d. Liabilities will be understated and revenues will be understated.

36.The Income Summary account:

a. Is a contra-asset account.

b. Appears on a post-closing trial balance.

c. Remains open from one accounting period to the next accounting period.

d. Is used during the process of closing the books.

37.Under the perpetual inventory system, in addition to making the entry to record a
sale, a company would
a. debit Inventory and credit Cost of Goods Sold.
b. debit Cost of Goods Sold and credit Inventory.

c. debit Cost of Goods Sold and credit Purchases.

d. make no additional entry until the end of the period.

38.The income statement of a merchandising company contain the following unique

features:

a. Sales revenue, work in process, and operating expenses.

b. Sales revenue, work in process and gross profit.

c. Sales revenue, finished goods, and net income.

d. Sales revenue, cost of goods sold, and gross profit.

39. On August 7, 20XX, A&B company received cash $2,400 for services rendered.
The entry to record this transaction will include:
a. a debit to Service Revenue of $2,400.

b. a credit to Accounts Payable of $2,400.

c. a debit to Cash of $2,400.

d. a credit to Accounts Receivable of $2,400.

40. The entry to record a sale of $3,500 with terms of 2/10, n/30 will include a

a. debit to Sales Revenue for $3,430.

b. credit to Sales Revenue for $3,500.

c. credit to Accounts Receivable for $3,500.

d. debit to Sales Discounts for $70

KAHOOT

1. A basic assumption of accounting requires activities of an entity be kept separate from

its owner is referred to as
 => The economic entity assumption

2. debit to an asset account indicates

=> an increase in the asset
3. A firm has sales $39,000, COGS $24,000 & operating expenses $9,000 for the year
ended Dec 31. Gross profit is
=> 15000
4. A firm has sales $39,000, COGS $24,000 & operating expenses $9,000 for the year
ended Dec 31. Net income is
=> 6000
5. A trial balance is a listing of
=> general ledger accounts and balances
6. Accountants refer to an economic event as a
=> transaction
7. Accounts often need to be adjusted because
=> many transactions affect more than one period
8. Adjusting entries are required
=> as some costs expire with the passage of time and not yet journalized
9. All of the following are property, plant, and equipment except
=> supplies
10. All of the following statements about the post- closing trial balance are correct except it
=> prove that all transactions have been recorded
11. An account is an individual accounting record of increases and decreases in specific
=> assets. liabilities and owner’s equity items
12. An accountant debited an asset account $1000 & credited a liability account $500. What
is done to complete transaction?
=> credit a different asset account for 500

13 An adjusting entry
=> affects a balance sheet account and an income statement account
14 An auto manufacturer would classify vehicles in various stages of production as Buyer
purchased merchandise from seller with
=> work in process
15 freight terms of FOB shipping point. The freight costs will be paid by the
=> buyer
16 Capital is
=> an owner’s permanent investment in the business
17 Closing entries are
=> journalize in the general journal
18 Closing entries are journalized and posted
=> after the financial statement are prepared
19 Collection of a $500 Accounts Receivable
=> increased an asset 500, decreased am asset 500
20 Expenses incurred but not yet paid or recorded are called
=> accrued expenses
21 Goods in transit should be included in the inventory of the buyer when the If a resource has
been consumed but a bill has
=> Term of sale are FOB shipping point
22 not been received at the end of the accounting period, then
=> an adjusting entry should be made recognizing the expense
23 expenses are paid in cash, then
=> assets will decrease
24 goods in transit are shipped FOB destination
=> the seller has legal title to the goods until they are delivered

25. If unearned revenues are initially recorded in accounts & not all earned at the end revenue
of the accounting period
=> will cause revenues to be overstate
26 business, inventory that is In a manufacturing ready for sale is called
=> finished goods inventory
27 In a period of rising prices, FIFO will have
=> lower cost of good sold than average cost
28 In a perpetual inventory system, cost of goods sold is recorded
=> with each sale
29 In preparing closing entries
=> each expense account will be credited
30 Income from operations will always result if
=> the cost of goods sold exceeds operating expenses
31 Intangible assets include each of the following except
=> land improvements
32 - Inventories affect
=> both the balance sheet and the income statement
33 Liabilities of a company would not include Nov1st Inventory 15units@$8; 8th
=> cash
34 Purchase60@$8.6; 17th Purchase30@$8.4; 25th Purchase45@$8.8; 27th Sold100
| (perpectual) Nov1st Inventory 15units@$8; 8th

35 Purchase60@$8.6; 17th Purchase30@$8.4; 25th Purchase45@$8.8; 27th Sold100 I

(perpetual) Nov1st Inventory 15units@$8; 8th

36 Purchase60@$8.6; 17th Purchase30@$8.4; 25th Purchase45@$8.8; 27th Sold100

(perpectual)

(Nov1st Inventory 15units@$8; 8th

(Purchase60@$8.6; 17th Purchase300@$8,4;
25th Purchase45@$8.8; 27th Sold100
(perpectual)

38 On a classified balance sheet, current assets are customarily listed

=> in the order of liquidity

39. On January 14, Franco Industries purchased supplies of $500 on account. The entry to
record the purchase will include
=> a debit to supplies and a credit to account payable

40 Sales revenues are usually considered earned when

=> goods have been transferred from the seller to the buyer

41 The accounting process is correctly sequenced as

=> identification, recording, communication

42 The accounts of a business before an adjusting entry is made to record an accrued revenue
reflect an
=> understated asset and an understated revenue

43 The adjusted trial balance is prepared

=> after adjusting entries have been journalized and posted

44 The balance in the income summary account before it is closed will be equal to
=> the net income or loss on the income statement

45 The balance sheet is frequently referred to as

=> the statement of financial position

46 The final closing entry to be journalized is typically the entry that closes the
=> dividends account

47 The income summary account

=> is a temporary account

48 The journal entry to record a credit sale is

=> dr. accounts receivable; cr. sales

49 The matching principle matches

=> expenses with revenues

50. The normal balance of any account is the

=> side which increases that account
51. The steps in preparing a trial balance include all of the following except The X Co. has five
plants cost $100 million, the
=> transferring journal amounts to ledger accounts
52 current market value $500 million. They will be reported as assets at
=> 100 million
53 Two categories of expenses for merchandising companies are
=> cost of good sold and operating expenses
54. Under a perpetual inventory system, acquisition of merchandise for resale is debited
to the
=> merchandise inventory account
55 Which of the following accounts is not closed to Income Summary?
=> inventory
56 Which of the following is an external user of accounting information?
=> finance directors
57 Which of the following is the correct sequence of steps in the recording process?
=> analyzing journalizing posting
58 Which of the following statements is not true?
=> expenses increase owner’s equity
59 Which of the following time periods would not be referred to as an interim period?
=> annually
60 Which one of the following is not a part of an account?
=> trial balance