Financial Accounting Jeffrey Waybright 4th Edition Test Bank (1)

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Financial Accounting Jeffrey Waybright 4th Edition Test Bank (1)

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Financial Accounting, 4e (Kemp)
Chapter 3 Adjusting and Closing Entries

3.1 Understand the revenue recognition and matching principles

1) Under accrual accounting, the most important GAAP concepts to remember are the recognition principle for expenses and the matching principle for revenues.
Answer: FALSE
Diff: 1
Question Type: Concept

2) Accounts Receivable and Accounts Payable are examples of accruals.
Answer: TRUE
Diff: 1
Question Type: Concept

3) Because inventories are high, Target should end its fiscal year in either November or December.
Answer: FALSE
Diff: 1
Question Type: Application

4) It does not matter when a fiscal year starts as long as it is twelve consecutive months long.
Answer: TRUE
Diff: 1
Question Type: Concept

5) Accounting for revenue on an accrual basis means that no entry of revenue is made until the cash is actually received.
Answer: FALSE
Diff: 2
Question Type: Concept

6) When cash is paid prior to incurring an expense, it is a deferral.
Answer: TRUE
Diff: 2
Question Type: Concept

7) GAAP requires the use of accrual accounting.
Answer: TRUE
Diff: 1
Question Type: Concept

8) If revenues are recognized and recorded when earned, the company is using the:
A) cash basis of accounting.
B) accrual basis of accounting.
C) adjustment basis of accounting.
D) the expense basis of accounting.
Answer: B
Diff: 1
Question Type: Concept
9) If Crane company records revenue when cash is received, they are using the:
A) cash basis of accounting.
B) accrual basis of accounting.
C) adjustment basis of accounting.
D) expense basis of accounting.
Answer: A
Diff: 1
Question Type: Concept

10) If C&S, Inc. records expenses in the time period when incurred, they are using the:
A) cash basis of accounting.
B) accrual basis of accounting.
C) adjustment basis of accounting.
D) expense basis of accounting.
Answer: B
Diff: 1
Question Type: Concept

11) If a business records expenses when paid, the company is using the:
A) cash basis of accounting.
B) accrual basis of accounting.
C) adjustment basis of accounting.
D) the expense basis of accounting.
Answer: A
Diff: 1
Question Type: Concept

12) The matching principle in accounting requires the matching of:
A) revenue earned with the assets used to produce the revenue.
B) revenue earned with the assets used less the liabilities incurred.
C) revenue earned with the liabilities used to produce the revenue.
D) revenue earned with the expenses incurred to produce the revenue.
Answer: D
Diff: 1
Question Type: Concept

13) The revenue recognition principle states that revenues should be recognized
A) when cash is received.
B) when they are earned, if cash will be received within the year.
C) when they are earned.
D) within six months of receiving cash.
Answer: C
Diff: 1
Question Type: Concept
14) Part of accrual accounting depends upon recording ________ entries at the end of the accounting period.
A) expense
B) revenue
C) adjusting
D) debit
Answer: C
Diff: 1
Question Type: Concept

15) Item costs that have been incurred, but not yet paid, are called:
A) referrals.
B) deferrals.
C) accruals.
D) non-cash items.
Answer: C
Diff: 1
Question Type: Concept

16) Items for which we have received payment, but have not yet delivered the service, are called:
A) referrals.
B) deferrals.
C) accruals.
D) non-cash items.
Answer: B
Diff: 1
Question Type: Concept

17) The type of accounting required by GAAP is:
A) modified cash.
B) hybrid cash.
C) cash.
D) accrual.
Answer: D
Diff: 1
Question Type: Concept

18) The majority of businesses normally end their fiscal year on:
A) June 30.
B) September 30.
C) December 31.
D) some other date.
Answer: C
Diff: 1
Question Type: Concept
19) A period of time, such as a month or quarter, could be considered a(n):
A) fiscal year.
B) accounting period.
C) revenue period.
D) income period.
Answer: B
Diff: 1
Question Type: Concept

20) Hollys Holiday Shoppe would most likely end their fiscal year in which month?
A) June
B) November
C) December
D) Any of the above.
Answer: A
Diff: 1
Question Type: Application

3.2 Understand the four types of adjustments, and prepare adjusting entries

1) Adjusting entries are used to update accounts at the end of an accounting period.
Answer: TRUE
Diff: 1
Question Type: Concept

2) An example of a contra-account would be Accumulated Depreciation.
Answer: TRUE
Diff: 1
Question Type: Concept

3) Adjusting entries are made only for accrued revenues and accrued expenses.
Answer: FALSE
Diff: 1
Question Type: Concept

4) Unearned Ticket Revenue must be adjusted to show how much of the deferred revenue has been earned during the period.
Answer: TRUE
Diff: 1
Question Type: Concept

5) The Supplies account must be adjusted to reflect the supplies that were used during the period.
Answer: TRUE
Diff: 1
Question Type: Concept

6) Land must be adjusted for depreciation at the end of the period.
Answer: FALSE
Diff: 1
Question Type: Concept
7) Wages that have been accrued need to be recorded so that the matching principle is reflected in Wages Expense.
Answer: TRUE
Diff: 1
Question Type: Concept

8) Accumulated Depreciation is recorded in the Liabilities section of the Balance Sheet.
Answer: FALSE
Diff: 1
Question Type: Concept

9) Adjusting entries always include a debit or credit to Cash.
Answer: FALSE
Diff: 1
Question Type: Concept

10) All fixed assets are subject to depreciation.
Answer: FALSE
Diff: 1
Question Type: Concept

11) The asset cost less accumulated depreciation equals salvage value.
Answer: FALSE
Diff: 1
Question Type: Concept

12) Recording Interest Receivable would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: D
Diff: 1
Question Type: Concept

13) Recording Income Taxes Payable would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: C
Diff: 1
Question Type: Concept

14) Recording Prepaid Rent would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: A
Diff: 1
Question Type: Concept
15) Recording Unearned Subscriptions Revenue would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: B
Diff: 1
Question Type: Concept

16) Recording Accounts Receivable would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: D
Diff: 1
Question Type: Concept

17) Recording Wages Payable would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: C
Diff: 1
Question Type: Concept

18) Recording Social Security Taxes Payable would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: C
Diff: 1
Question Type: Concept

19) Recording the collection of three months of advance rent from a client in an unearned account would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: B
Diff: 1
Question Type: Concept
20) Recording the purchase of supplies in a prepaid account would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: A
Diff: 1
Question Type: Concept

21) The recording of depreciation is related to a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: A
Diff: 1
Question Type: Concept

22) Recording season ticket monies received in advance as unearned revenue would be an example of a(n):
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: B
Diff: 1
Question Type: Concept

23) The value of an asset after all allowable depreciation has been taken is called:
A) depreciable value.
B) market value.
C) salvage value.
D) trade-in value.
Answer: C
Diff: 2
Question Type: Concept

24) At the beginning of the period, the Supplies account has a balance of $700. At the end of the period, the balance in the account was $475. The adjusting entry would be:
A) debit Supplies Expense, $475; credit Supplies, $475.
B) debit Supplies, $475; credit Supplies Expense, $475.
C) debit Supplies Expense, $225; credit Supplies, $225.
D) debit Supplies, $225; credit Supplies Expense, $225.
Answer: C
Diff: 2
Question Type: Application
25) A piece of equipment cost $700 and has a salvage value of $500. If it has an 5-year life, the annual depreciation expense under straight-line depreciation would be:
A) $140.
B) $40.
C) $500.
D) $200.
Answer: B
Diff: 2
Question Type: Application

26) Adjusting entries for Supplies and Prepaid Rent would be adjustments for:
A) deferred expense.
B) deferred revenue.
C) accrued expense.
D) accrued revenue.
Answer: A
Diff: 1
Question Type: Concept

27) During a recent week, incurred wages were $800. However, $480 of the wages had not been paid. Assume no other adjusting entries have been done this fiscal year. The adjusting entry for wages would be:
A) debit Wages Payable, $480; credit Wages Expense, $480.
B) debit Wages Expense, $480; credit Wages Payable, $480.
C) debit Wages Payable, $320; credit Wages Expense, $320.
D) debit Wages Expense, $320; credit Wages Payable, $320.
Answer: B
Diff: 2
Question Type: Application

28) Allied, Inc. bought a 3-year insurance policy on August 1 for $3,900. Assume no other adjusting entries have been done this fiscal year. The adjusting entry on December 31 would be:
A) debit Insurance Expense, $108; credit Prepaid Insurance, $108.
B) debit Prepaid Insurance, $108; credit Insurance Expense, $108.
C) debit Insurance Expense, $542; credit Prepaid Insurance, $542.
D) debit Prepaid Insurance, $542; credit Insurance Expense, $542.
Answer: C
Diff: 2
Question Type: Application

29) A machine with a salvage value of $2,000 and a cost of $40,000 was purchased on January 1, 2012. What is the depreciation expense for 2012 if the company uses straight-line depreciation for 10 years?
A) $40,000
B) $38,000
C) $4,000
D) $3,800
Answer: D
Diff: 2
Question Type: Application
30) Supplies on hand were $800 at the start of the year. At the end of the year, it was determined that $450 of supplies had been used. What is the adjusting entry for supplies?
A) debit Supplies, $450; credit Supplies Expense, $450
B) debit Supplies, $350; credit Supplies Expense, $350
C) debit Supplies Expense, $450; credit Supplies, $450
D) debit Supplies Expense, $350; credit Supplies, $350
Answer: C
Diff: 2
Question Type: Application

31) Which of the following accounts would NOT be debited or credited in an adjusting entry?
A) Supplies Expense
B) Office Equipment
C) Wages Expense
D) Wages Payable
Answer: B
Diff: 1
Question Type: Concept

32) Which of the following accounts would NOT be adjusted?
A) Accumulated Depreciation
B) Cash
C) Depreciation Expense
D) Wages
Answer: B
Diff: 1
Question Type: Concept

33) Fixed assets that are depreciated are sometimes called:
A) Accounts Payable.
B) current assets.
C) long-term assets.
D) long-term liabilities.
Answer: C
Diff: 1
Question Type: Concept

34) Which of the following accounts is NOT affected by an accrued expense?
A) Sales Tax Payable
B) Supplies
C) Interest Expense
D) Wages Payable
Answer: B
Diff: 1
Question Type: Concept
35) Which of the following accounts is NOT affected by an accrued revenue?
A) Accounts Receivable
B) Rent Revenue
C) Unearned Rent Revenue
D) Interest Receivable
Answer: C
Diff: 1
Question Type: Concept

36) The difference between the cost of office equipment and accumulated depreciationoffice equipment is called:
A) market value.
B) salvage value.
C) book value.
D) original value.
Answer: C
Diff: 1
Question Type: Concept

37) The total dollars in an Accumulated Depreciation account are:
A) added to the corresponding asset account.
B) divided into the corresponding asset account.
C) subtracted from the corresponding asset account.
D) subtracted from the corresponding liability account.
Answer: C
Diff: 1
Question Type: Concept

38) If a piece of equipment was purchased on September 1, it would have ________ months depreciation included in the adjusting entry for the calendar year.
A) 12
B) 8
C) 4
D) 6
Answer: C
Diff: 1
Question Type: Application

39) A 40-month insurance policy was purchased for $2,100 on May 1. How much insurance will be expensed on December 31?
A) $2,100
B) $53
C) $210
D) $420
Answer: D
Diff: 2
Question Type: Application

40) A machine with a cost of $20,000, a salvage value of $8,000 and expected life of 15 years was purchased on September 1. For a calendar year company, the journal entry to record depreciation expense for the first year would be to:
A) debit Depreciation Expense, $67; credit Accumulated Depreciation, $67.
B) debit Depreciation Expense, $333; credit Accumulated Depreciation, $333.
C) debit Depreciation Expense, $267; credit Accumulated Depreciation, $267.
D) debit Depreciation Expense, $200; credit Accumulated Depreciation, $200.
Answer: C
Diff: 2
Question Type: Application

41) Supplies on hand were $434 of the original $1,134. The adjusting amount for supplies for the year would be:
A) $1,134.
B) $434.
C) $700.
D) some other number.
Answer: C
Diff: 2
Question Type: Application

42) Another name for book value is:
A) Accumulated Depreciation.
B) carrying value.
C) market value.
D) Depreciation Expense.
Answer: B
Diff: 1
Question Type: Concept

43) A machine costing $49,000 has a life of 10 years. The salvage value is $10,000. It was purchased on February 1. The depreciation expense for the calendar year is: (Do not round any intermediary calculations. Round your final answer to the nearest dollar.)
A) $408.
B) $4,492.
C) $325.
D) $3,575.
Answer: D
Diff: 2
Question Type: Application

44) Salary expense is $1,175 per day, Monday through Friday, and the business pays employees each Friday. If December 31 falls on a Wednesday, the amount of the adjusting entry to record accrued salaries would be:
A) $3,525.
B) $1,175.
C) $2,350.
D) $5,875.
Answer: A
Diff: 2
Question Type: Application
45) The journal entry to record $2,750 of depreciation expense for the year would be to:
A) debit Depreciation Expense, $2,750; credit Equipment, $2,750.
B) debit Accumulated Depreciation, $2,750; credit Depreciation Expense, $2,750.
C) debit Accumulated Depreciation, $2,750; credit Equipment, $2,750.
D) debit Depreciation Expense, $2,750; credit Accumulated Depreciation, $2,750.
Answer: D
Diff: 1
Question Type: Application

46) Salary expense is $2,600 per day, Monday through Friday, and the business pays employees each Friday. If December 31 falls on a Tuesday, the adjusting entry to record accrued salaries would be to:
A) debit Salaries Payable, $2,600; credit Salaries Expense, $2,600.
B) debit Salaries Expense, $5,200; credit Salaries Payable, $5,200.
C) debit Salaries Expense, $2,600; credit Salaries Payable, $2,600.
D) debit Salaries Payable, $5,200; credit Salaries Expense, $5,200.
Answer: B
Diff: 1
Question Type: Application

47) The balance in Unearned Revenues prior to adjustment was $3,150. If the amount still unearned as of the end of the period is $1,700, the adjusting entry needed would be to:
A) debit Cash, $3,150; credit Unearned Service Revenue, $3,150.
B) debit Unearned Service Revenue, $1,700; credit Service Revenue, $1,700.
C) debit Unearned Service Revenue, $1,450; credit Service Revenue, $1,450.
D) debit Service Revenue, $1,450; credit Unearned Service Revenue, $1,450.
Answer: C
Diff: 2
Question Type: Application

48) A company started the year with no supplies. During this year they bought $230 worth of supplies on account and later paid $150 of this debt. If there were $20 supplies left at the end of this year, what was the supply expense for the period?
A) $210
B) $80
C) $20
D) $60
Answer: A
Diff: 2
Question Type: Application

49) Which of the following is a TRUE statement regarding the Unearned Revenue account?
A) Unearned Revenue is accrued as the business provides goods or services.
B) Unearned Revenue is expensed as the business provides goods or services.
C) Unearned Revenue decreases as the business provides goods or services.
D) Unearned Revenue increases as the business provides goods or services.
Answer: C
Diff: 2
Question Type: Concept
50) Prepaid expenses are also called:
A) accrued expenses.
B) deferred expenses.
C) both A and B.
D) neither A or B.
Answer: B
Diff: 1
Question Type: Concept

51) On January 1 Corporate Condos, Inc received $89,000 for one years rent for building A. What would the adjusting entry be on March 31?
A) Debit Rent Expense $7,417, credit Prepaid Rent $7,417
B) Debit Unearned Rent Revenue $7,417, credit Rent Revenue $7,417
C) Debit Rent Expense $22,250, credit Prepaid Rent $22,250
D) Debit Unearned Rent Revenue $22,250, credit Rent Revenue $22,250
Answer: D
Diff: 2
Question Type: Application

52) On January 1, Daisy Company paid $6,400 for six months rent. Assume no other adjusting entries have been done this fiscal year. What would the adjusting entry be on March 31?
A) Debit Rent Expense $1,067, credit Prepaid Rent $1,067
B) Debit Rent Expense $1,067, credit Cash $1,067
C) Debit Rent Expense $3,200, credit Prepaid Rent $3,200
D) Debit Rent Expense $3,200, credit Cash $3,200
Answer: C
Diff: 2
Question Type: Application

53) Annual depreciation on equipment at Charmed, Inc.is $1,800. The adjusting entry to record one months worth of depreciation would be:
A) Debit Depreciation Expense $150, credit Cash $150
B) Debit Depreciation Expense $150, credit Accumulated Depreciation $150
C) Debit Depreciation Expense $1,800 credit Cash $1,800
D) Debit Depreciation Expense $1,800, credit Accumulated Depreciation $1,800
Answer: B
Diff: 2
Question Type: Application

54) Safety First Supply Company purchased a 5-year insurance policy for $2,900. What would the adjusting entry be at the end of the first year?
A) Debit Insurance Expense $2,900, credit Prepaid Insurance $2,900
B) Debit Insurance Expense $2,900, credit Cash $2,900
C) Debit Insurance Expense $580, credit Prepaid Insurance $580
D) Debit Insurance Expense $580, credit Cash $580
Answer: C
Diff: 2
Question Type: Application
55) If a company forgets to make an adjusting entry relating to a deferred expense, which of the following would NOT be true?
A) Assets would be overstated
B) Expenses would be understated
C) Retained earnings would be overstated
D) Stockholders Equity would be understated
Answer: D
Diff: 2
Question Type: Concept

56) If a company forgets to make an adjusting entry relating to a deferred revenue, which of the following would NOT be true?
A) Liabilities would be overstated
B) Revenues would be understated
C) Retained earnings would be overstated
D) Stockholders Equity would be understated
Answer: C
Diff: 2
Question Type: Concept

3.3 Prepare financial statements from an adjusted trial balance

1) The adjusted trial balance is prepared before the adjusting entries are completed and posted.
Answer: FALSE
Diff: 1
Question Type: Concept

2) After preparing the adjusted trial balance, those figures are used to complete the Balance Sheet only.
Answer: FALSE
Diff: 1
Question Type: Concept

3) The balance of Retained Earnings on the adjusted trial balance does not represent the final Retained Earnings balance on the Balance Sheet.
Answer: TRUE
Diff: 1
Question Type: Concept

4) Net income or net loss can be determined by the adjusted trial balance figures.
Answer: TRUE
Diff: 1
Question Type: Concept

5) On the Income Statement, expenses are always listed in descending order from the largest to the smallest amount.
Answer: FALSE
Diff: 1
Question Type: Concept
6) Using the adjusted trial balance, the first financial statement to prepare is the Income Statement.
Answer: TRUE
Diff: 1
Question Type: Concept

7) Dividends are not included on an adjusted trial balance.
Answer: FALSE
Diff: 1
Question Type: Concept

8) Expenses are always listed in alphabetical order on the Income Statement.
Answer: FALSE
Diff: 1
Question Type: Concept

9) The unadjusted trial balance for Supplies shows a normal balance of $525. If $100 of supplies were expensed, the adjusted trial balance would show a debit balance of $625 in Supplies.
Answer: FALSE
Diff: 2
Question Type: Application

10) The unadjusted trial balance for Prepaid Rent shows a normal balance of $8,000. If $4,000 of rent were used during the period, the adjusted trial balance would show a credit balance of $4,000.
Answer: FALSE
Diff: 2
Question Type: Application

11) Of the following, which are reported on the Balance Sheet?
A) Assets
B) Revenues
C) Expenses
D) Net income or net loss
Answer: A
Diff: 1
Question Type: Concept

12) Of the following, which is NOT reported on the Balance Sheet?
A) cash
B) equipment
C) Depreciation Expense
D) account payable
Answer: C
Diff: 1
Question Type: Concept

13) Of the following, which would be reported on the Income Statement?
A) Rent Expense
B) rent revenue
C) Prepaid Rent
D) both A and B
Answer: D
Diff: 1
Question Type: Concept

14) The adjusted trial balance is the basis for the preparation of:
A) the Statement of Retained Earnings.
B) the Income Statement.
C) the Balance Sheet.
D) all financial statements.
Answer: D
Diff: 1
Question Type: Concept

15) Which of the following accounts does NOT go onto the Income Statement from the adjusted trial balance?
A) Sales Revenue
B) Insurance Expense
C) Accounts Receivable
D) Rent Expense
Answer: C
Diff: 1
Question Type: Concept

16) Which of the following does NOT go onto the Balance Sheet from the adjusted trial balance?
A) Dividends
B) Accounts Payable
C) Land
D) Cash
Answer: A
Diff: 1
Question Type: Concept

17) The adjusted trial balance will directly show the:
A) amount of the adjustments made to expense accounts only.
B) final balance in the Retained Earnings account.
C) amount of the adjustment made to each account.
D) adjusted balances for every account affected by an adjusting entry.
Answer: A
Diff: 1
Question Type: Concept

18) The adjusted trial balance shows:
A) accounts that may still be out of balance.
B) revenues and expense amounts only.
C) numbers ready to be transferred to the financial statements.
D) assets, liabilities and Stockholders Equity amounts only.
Answer: C
Diff: 1
Question Type: Concept

19) The balance in the Depreciation Expense account on the adjusted trial balance:
A) is generally equal to the balance on the unadjusted trial balance.
B) is generally greater than the balance on the unadjusted trial balance.
C) is generally less than the balance on the unadjusted trial balance.
D) has no relationship to the balance on the unadjusted trial balance.
Answer: B
Diff: 2
Question Type: Concept

20) The balance in the Supplies account on the adjusted trial balance:
A) is generally equal to the balance on the unadjusted trial balance.
B) is generally greater than the balance on the unadjusted trial balance.
C) is generally less than the balance on the unadjusted trial balance.
D) has no relationship to the balance on the unadjusted trial balance.
Answer: C
Diff: 2
Question Type: Concept

21) The balance in the Accumulated Depreciation account on the adjusted trial balance:
A) is equal to the balance on the unadjusted trial balance.
B) is greater than the balance on the unadjusted trial balance.
C) is less than the balance on the unadjusted trial balance.
D) has no relationship to the balance on the unadjusted trial balance.
Answer: B
Diff: 2
Question Type: Concept

22) The balance for the Land account on the adjusted trial balance:
A) must be equal to the balance on the unadjusted trial balance.
B) must be greater than the balance on the unadjusted trial balance.
C) must be less than the balance on the unadjusted trial balance.
D) has no relationship to the balance on the unadjusted trial balance.
Answer: A
Diff: 2
Question Type: Concept

23) The Income Statement that is prepared from the adjusted trial balance begins with the:
A) first asset account listed on the adjusted trial balance.
B) first liability account listed on the adjusted trial balance.
C) first revenue account listed on the adjusted trial balance.
D) first expense account listed on the adjusted trial balance.
Answer: C
Diff: 2
Question Type: Concept

24) The Statement of Retained Earnings that is prepared from the adjusted trial balance begins with the:
A) first stock account listed on the adjusted trial balance.
B) Retained Earnings balance on the adjusted trial balance.
C) first dividend account listed on the adjusted trial balance.
D) net income listed on the adjusted trial balance.
Answer: B
Diff: 2
Question Type: Concept

25) All financial statements must have, in order, the:
A) title of financial statement and specific date.
B) title of financial statement, name of company, and specific date.
C) name of company, title of financial statement, and specific date.
D) name of company, title of financial statement, and a specific date or period.
Answer: D
Diff: 1
Question Type: Concept

26) The adjusted trial balance proves that:
A) all adjusting entries have been recorded correctly.
B) debit totals equal credit totals.
C) no adjusting entry has been entered twice.
D) the balance of the adjusted trial balance is correct.
Answer: B
Diff: 1
Question Type: Concept

27) The unadjusted trial balance for Supplies shows a $634 balance. If $532 of supplies were used during the period, the adjusted balance for Supplies would be a:
A) $102 credit.
B) $102 debit.
C) $532 debit.
D) $532 credit.
Answer: B
Diff: 2
Question Type: Application
28) The unadjusted trial balance for Prepaid Insurance shows a $1,850 balance. $600 of the balance was unexpired at years end. On the adjusted trial balance, the balance for Prepaid Insurance is a:
A) $600 debit.
B) $600 credit.
C) $1,250 debit.
D) $1,250 credit.
Answer: A
Diff: 2
Question Type: Application

29) The unadjusted trial balance shows a $1,080 balance for Depreciation Expense. Depreciation of $235 was recorded for the period. The adjusted trial balance figure for Depreciation Expense is now a:
A) $845 debit.
B) $845 credit.
C) $1,315 debit.
D) $1,315 credit.
Answer: C
Diff: 2
Question Type: Application

30) The unadjusted trial balance shows a $15,000 balance for Prepaid Rent. At the end of the year, $3,000 of the rent had been used. The adjusted trial balance reflects a balance for Prepaid Rent of:
A) $12,000 debit.
B) $12,000 credit.
C) $3,000 debit.
D) $3,000 credit.
Answer: A
Diff: 2
Question Type: Application

31) The unadjusted trial balance lists Supplies with a $1,078 balance. After taking an inventory of supplies, it was found that $590 were on hand. The adjustment to Supplies Expense is a:
A) $590 debit.
B) $590 credit.
C) $488 debit.
D) $488 credit.
Answer: C
Diff: 2
Question Type: Application

32) The unadjusted trial balance shows Accumulated DepreciationComputer with a credit balance of $220. After determining depreciation expense is $125, the adjusted balance in the Accumulated Depreciation account for the computer will be a:
A) $125 debit.
B) $220 credit.
C) $345 credit.
D) $95 debit.
Answer: C
Diff: 2
Question Type: Application

33) The unadjusted trial balance reflects a normal balance for Wages Expense of $750. Accrued wages for the period are $1,345. The adjusted balance for Wages Expense is now a:
A) $595 debit.
B) $595 credit.
C) $2,095 debit.
D) $2,095 credit.
Answer: C
Diff: 2
Question Type: Application

34) Unearned Ticket Revenue is $5,534 on the unadjusted trial balance. During the period, $3,509 of that money has now been earned. The adjusted balance for Unearned Ticket Revenue is a:
A) $3,509 debit.
B) $3,509 credit.
C) $2,025 debit.
D) $2,025 credit.
Answer: D
Diff: 1
Question Type: Application

35) The adjusted balance for Prepaid Insurance is a $7,124 debit. Insurance Expense for the period was $1,336. What was the balance for Prepaid Insurance on the unadjusted trial balance?
A) $5,788 debit
B) $5,788 credit
C) $8,460 debit
D) $1,336 debit
Answer: C
Diff: 2
Question Type: Application

36) The adjusted balance for Supplies was $403. The unadjusted balance for Supplies was $539. The amount of supplies expense would be recorded as a:
A) $403 debit.
B) $136 debit.
C) $136 credit.
D) $539 debit.
Answer: B
Diff: 2
Question Type: Application
37) Interest Expense had an adjusted balance of $1,208. The adjusting entry for accrued interest was for $422. The unadjusted balance for Interest Expense was a:
A) $422 debit.
B) $1,630 debit.
C) $1,630 credit.
D) $786 debit.
Answer: D
Diff: 2
Question Type: Application

38) It is possible to determine the net income or loss for the period by:
A) taking adjusted trial balance amounts and subtracting expenses from revenues.
B) looking at the bottom line on the Income Statement.
C) taking post-closing trial balance amounts and subtracting expenses from revenues.
D) both A and B, which describe correct ways to determine the net income or loss for the period.
Answer: D
Diff: 1
Question Type: Concept

39) Acme, Inc. washed 130 cars this past month. They charge $10 per car for a wash. The companys only expenses during this month were $93 utilities/water, $300 wages and $41 for soap. The wages were paid during the month, but the utility bill and soap bills were not. What is Acmes income or loss for this month?
A) It is impossible to calculate from the given information, because the amount of revenue received in cash is not known.
B) $1,000 net income
C) $907 net income
D) $866 net income
Answer: D
Diff: 2
Question Type: Application

40) Dogs R Us walked 11 dogs a week this past month. They charge $11 per walk. The companys only expenses incurred during the month were $180 wages, $26 for waste bags, and $18 to repair a broken leash. The wages and leash replacement were paid during the month, but the waste bags were not.
What is Dogs R Us net income or loss for the month? (Assume four weeks in the month.)
A) It is impossible to determine from the given information.
B) $103 net loss
C) $260 net income
D) $304 net income
Answer: C
Diff: 2
Question Type: Application
41) Express Barber gave 410 haircuts this past month. They charge $15 per haircut. Expenses incurred during the month were $3,900 wages, $318 utilities/water, and $270 shampoo/styling products. $2,900 in wages were paid during the month, the rest of the wagesalong with the utilities and shampoo/styling products were not paid during the month. What is Express Barbers net income or loss for the month?
A) Not enough information provided to calculate net income or loss
B) $1,662 net income
C) $2,250 net income
D) $3,250 net income
Answer: B
Diff: 2
Question Type: Application

3.4 Prepare closing entries and a post-closing trial balance

1) Revenues, expenses and Dividends are called permanent accounts.
Answer: FALSE
Diff: 1
Question Type: Concept

2) Assets, Liabilities and Retained Earnings are permanent accounts that are NOT closed at the end of the accounting period.
Answer: TRUE
Diff: 1
Question Type: Concept

3) The post-closing trial balance is a listing of the general ledger accounts that have balances at the end of the accounting period.
Answer: TRUE
Diff: 1
Question Type: Concept

4) Revenue accounts are closed by crediting them and debiting Retained Earnings.
Answer: FALSE
Diff: 1
Question Type: Application

5) Expense accounts are closed by crediting them and debiting Retained Earnings.
Answer: TRUE
Diff: 1
Question Type: Application

6) Dividend accounts are closed by crediting them and debiting Retained Earnings.
Answer: TRUE
Diff: 1
Question Type: Application
7) The account to which revenue and expenses are closed is called:
A) Cash.
B) Retained Earnings.
C) Common Stock.
D) Sales.
Answer: B
Diff: 1
Question Type: Concept

8) The account to which dividends are closed is called:
A) Cash.
B) Retained Earnings.
C) Common Stock.
D) Sales.
Answer: B
Diff: 1
Question Type: Concept

9) Preparing the post-closing trial balance is the ________ step in the accounting cycle.
A) first
B) second
C) third
D) last
Answer: D
Diff: 1
Question Type: Concept

10) With an accrued revenue, cash is received first and revenue is earned and recorded later.
Answer: FALSE
Diff: 1
Question Type: Concept

11) With a deferred expense, an expense is incurred first and cash is paid later.
Answer: FALSE
Diff: 1
Question Type: Concept

12) S&C Corp had closing entries which included debits to revenues for a total of $4,500, credits to expenses for a total of $2,000, and credits to dividends for $500. S&Cs net income was $2,000.
Answer: FALSE
Diff: 2
Question Type: Application

13) Bach, Inc. had closing entries which included debits to revenues for a total of $6,425, credits to expenses for a total of $3,000, and credits to dividends for $400. Bachs net income was $3,425.
Answer: TRUE
Diff: 2
Question Type: Application
14) Monets Paint Co. had closing entries which included $7,300 of revenues, $3,000 of expenses, and $300 of dividends. The net change in retained earnings was $4,000.
Answer: TRUE
Diff: 2
Question Type: Application

15) The accounts that are NOT closed are:
A) Assets, Liabilities, and Revenues.
B) Assets, Liabilities, and Stockholders Equity.
C) Assets, Liabilities, and Expenses.
D) Revenues, Expenses and Dividends.
Answer: B
Diff: 1
Question Type: Concept

16) Dividends paid and net losses are:
A) additions to Retained Earnings.
B) subtractions from Retained Earnings.
C) additions to net income.
D) subtractions from net income.
Answer: B
Diff: 1
Question Type: Concept

17) Revenues are:
A) additions to Retained Earnings.
B) subtractions from Retained Earnings.
C) additions to dividends.
D) subtractions from net income.
Answer: A
Diff: 1
Question Type: Concept

18) Respectively, Cash, Rent Expense and Accounts Payable are:
A) all permanent accounts.
B) permanent, temporary, and temporary accounts.
C) temporary, permanent, and temporary accounts.
D) permanent, temporary, and permanent accounts.
Answer: D
Diff: 1
Question Type: Concept

19) Respectively, dividends, revenues, and expenses are:
A) temporary, permanent, and temporary accounts.
B) temporary, temporary, and permanent accounts.
C) all temporary accounts.
D) all permanent accounts.
Answer: C
Diff: 1
Question Type: Concept
20) Respectively, Inventory, Accounts Receivable, and Accounts Payable are:
A) temporary, permanent, and temporary accounts.
B) temporary, temporary, and permanent accounts.
C) all temporary accounts.
D) all permanent accounts.
Answer: D
Diff: 1
Question Type: Concept

21) The closing entries show a debit to Retained Earnings of $350, and a credit to Retained Earnings of $760. There was also a credit to Dividends Payable of $120. This company had a:
A) net loss of $410.
B) net income of $410.
C) net loss of $530.
D) net income of $530.
Answer: B
Diff: 2
Question Type: Application

22) The total revenues of $6,700, total expenses of $3,900 and dividends of $900 were recorded in the closing entries. The net income for the month was:
A) $5,800.
B) $2,800.
C) $1,900.
D) $3,700.
Answer: B
Diff: 2
Question Type: Application

23) The total revenues of $7,000, total expenses of $3,700 and dividends of $900 were recorded in the closing entries. The net change in Retained Earnings for the month was:
A) $6,100.
B) $3,300.
C) $2,400.
D) $4,200.
Answer: C
Diff: 2
Question Type: Application

24) Closing entries included debits to revenues for a total of $5,300, credits to expenses for a total of $3,400, and a credit to dividends for $700. The net income for the month was:
A) $700.
B) $1,900.
C) $3,400.
D) $4,600.
Answer: B
Diff: 2
Question Type: Application
25) Closing entries included debits to revenues for a total of $5,100, credits to expenses for a total of $3,200, and a credit to dividends for $700. The net change in Retained Earnings for the month was:
A) $1,200.
B) $1,900.
C) $3,200.
D) $4,400.
Answer: A
Diff: 2
Question Type: Application

26) Closing entries included debits to revenues for a total of $8,000 credits to expenses for a total of $4,100, and a credit to dividends for $650. The net change in Retained Earnings for the month was:
A) cannot be calculated with the information provided.
B) $3,250.
C) $3,900.
D) $4,550.
Answer: B
Diff: 2
Question Type: Application

27) Which of the following accounts are NOT closed?
A) Rent Expense
B) rent revenue
C) Prepaid Rent
D) both A and B
Answer: C
Diff: 1
Question Type: Concept

28) The post-closing accounting equation is:
A) assets = liabilities + common stock + Retained Earnings dividends.
B) assets = liabilities + common stock + Retained Earnings.
C) assets = liabilities + Retained Earnings + revenues expenses.
D) assets = liabilities + Retained Earnings dividends.
Answer: B
Diff: 1
Question Type: Concept

29) Closing the revenue, expense, and dividend accounts:
A) yields the amount of net income or net loss for the period.
B) yields the change in Retained Earnings for the period.
C) yields the change in the permanent accounts for the period.
D) yields the final balance in Stockholders Equity for the period.
Answer: B
Diff: 1
Question Type: Concept
30) ________ entries transfer net income or net loss and dividends to the Retained Earnings account.
A) Adjusting
B) Closing
C) General
D) Timely
Answer: B
Diff: 1
Question Type: Concept

31) Closing entries are prepared for which of the following reasons?
A) To get the accounts ready for the next accounting period
B) To get the worksheet ready for the next accounting period
C) To get the journal ready for the next accounting period
D) To get the financial statements ready for the next accounting period
Answer: A
Diff: 1
Question Type: Concept

32) Which of the following accounts appear on the post-closing trial balance?
A) Rent Expense
B) Sales Revenue
C) Cash
D) Dividends
Answer: C
Diff: 1
Question Type: Concept

33) Which of the following accounts would NOT appear on a post-closing trial balance?
A) Common Stock
B) Dividends
C) Dividends Payable
D) Accounts Receivable
Answer: B
Diff: 1
Question Type: Concept

34) The account balances on the post-closing trial balance should match the balances in the:
A) general journal.
B) Income Statement.
C) general ledger.
D) Statement of Retained Earnings.
Answer: C
Diff: 1
Question Type: Concept
35) The entry to close the revenue accounts includes:
A) a debit to Retained Earnings and credits to the respective revenue accounts.
B) a debit to Dividends and credits to the respective revenue accounts.
C) debits to the respective revenue accounts and a credit to Retained Earnings.
D) debits to the respective revenue accounts and a credit to Dividends.
Answer: C
Diff: 1
Question Type: Application

36) The entry to close the expense accounts includes:
A) a debit to Retained Earnings and credits to the respective expense accounts.
B) a debit to Dividends and credits to the respective expense accounts.
C) debits to the respective expense accounts and a credit to Retained Earnings.
D) debits to the respective expense accounts and a credit to Dividends.
Answer: A
Diff: 1
Question Type: Application

37) The entry to close the Dividend account includes:
A) a debit to Common Stock and a credit to Dividends.
B) a debit to Dividends and a credit to Retained Earnings.
C) a debit to Dividends and a credit to Common Stock.
D) a debit to Retained Earnings and a credit to Dividends.
Answer: D
Diff: 1
Question Type: Application

38) A company had a normal $51,000 cash balance on their adjusted trial balance. If revenues, expenses and dividends respectively were $91,000; $20,000 and $3,000 what amount of cash will be found on the post-closing trial balance?
A) $122,000 normal balance
B) $51,000 normal balance
C) $119,000 normal balance
D) $165,000 normal balance
Answer: B
Diff: 1
Question Type: Application

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