1. (Points: 2)
All adjusting entries always involve
1. at least one income statement account and one balance sheet account.
2. the cash account.
3. only income statement accounts.
4. only balance sheet accounts.
2. (Points: 2)
Which of the accounts below would appear on an adjusted trial balance but probably would not appear on the trial balance?
1. Accounts Receivable
2. Fees Earned
3. Unearned Fees
4. Depreciation Expense
3. (Points: 2)
Prior to the adjusting process, accrued revenue has
1. not been earned but recorded as revenue
2. been earned and cash received
3. not been recorded as revenue but cash has been received
4. been earned and not recorded as revenue
4. (Points: 2)
Depreciation Expense and Accumulated Depreciation are classified, respectively, as
1. revenue, asset
2. asset, contra liability
3. contra asset, expense
4. expense, contra asset
5. (Points: 2)
Adjusting entries are
1. rarely needed in large companies
2. needed to bring accounts up to date and match revenue and expense
3. optional under generally accepted accounting principles
4. the same as correcting entries
6. (Points: 2)
Which of the following is an example of accrued revenue?
1. Swimming pool cleaning that has been provided and paid on the same day.
2. Swimming pool cleaning that has been provided but has not been billed or paid.
3. Swimming pool cleaning that has been for three months in advance.
4. An agreement has been signed for swimming pool cleaning for the next three months.
7. (Points: 2)
At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true?
1. Total liabilities and total assets will be understated.
2. Net income will be overstated for the current year.
3. The balance sheet and income statement will be misstated but the retained earnings statement will be correct for the current year.
4. Total assets will be understated at the end of the current year.
8. (Points: 2)
The heading of an adjusted trial balance contains the heading "For the Month Ended December 31, 2008."
9. (Points: 2)
The balance in the office supplies account on June 1 was $6,300, supplies purchased during June were $3,100, and the supplies on hand at June 30 were $2,500. The amount to be used for the appropriate adjusting entry is
10. (Points: 2)
If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n)
11. (Points: 2)
Deferrals are recorded transactions that delay the recognition of an expense or revenue.
12. (Points: 2)
The accrual basis of accounting requires revenue be recorded when cash is received from customers.
13. (Points: 2)
If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)
14. (Points: 2)
If the adjustment to recognize expired insurance at the end of the period is inadvertently omitted, the assets at the end of the period will be understated.
15. (Points: 2)
The general term employed to indicate a delay of the recognition of an expense already paid or of a revenue already received is
16. (Points: 2)
The net income reported on the income statement is $85,000. However, adjusting entries have not been made at the end of the period for supplies expense of $2,200 and accrued salaries of $800. Net income, as corrected, is
17. (Points: 2)
If the adjustment for depreciation for the year is inadvertently omitted, the assets on the balance sheet at the end of the period will be understated.
18. (Points: 2)
Which of the following is an example of an accrued expense?
1. Supplies on hand
2. A two-year premium paid on a fire insurance policy
3. Fees received but not yet earned
4. Salary owed but not yet paid
19. (Points: 2)
The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting.
20. (Points: 2)
How will the following adjusting journal entry affect the accounting equation?.
Unearned Subscriptions 11,500
Subscriptions earned 11,500
1. Increase liabilities, increase revenues
2. Decrease liabilities, increase revenues
3. Increase assets, increase revenues
4. Decrease liabilities, decrease revenues
21. (Points: 2)
Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.
22. (Points: 2)
A work sheet heading is dated for a period of time.
23. (Points: 2)
The fiscal year selected by companies
1. will change each year
2. must always begin on January 1.
3. is the same as the calendar year
4. begins with the first day of the month and ends on the last day of the twelfth month
24. (Points: 2)
Real accounts are not permanent accounts.
25. (Points: 2)
A post-closing trial balance should be prepared before the financial statements are prepared.
26. (Points: 2)
The most important output of the accounting cycle is the financial statements.
27. (Points: 2)
The amount of the net income for a period appears on both the income statement and the balance sheet for that period.
28. (Points: 2)
Use the following information in the adjusted trial balance for Stockton Company to answer Questions 16-20.
Adjusted Trial Balance
For the Year ended December 31, 2010
Cash $ 6,030
Accounts Receivable 2,100
Prepaid Expenses 700
Accumulated Depreciation $ 1,100
Accounts Payable 1,900
Notes Payable 4,200
Capital Stock 12,940
Fees Earned 8,750
Wages Expense 2,500
Rent Expense 1,960
Utilities Expense 775
Depreciation Expense 250
Miscellaneous Expense 85
Totals $28,890 $28,890
Determine the net income (loss) for the period.
1. Net Loss $5,570
2. Net Loss $790
3. Net Income $2,390
4. Net Income $3,180
29. (Points: 2)
The income statement columns in the worksheet show that debits are equal to $55,800 and credits are $62,705. What does this information mean to the accountant?
1. The accounts are out of balance, indicating an error has been made.
2. Net loss of $6,905
3. The accounts have not been updated.
4. Net income of $6,905
30. (Points: 2)
Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $5,400 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense and prepaid insurance during the closing process at the end of Amir’s first month of operations on March 31st?
31. (Points: 2)
Use the following worksheet to answer Questions 50-54.
For the Year Ended December 31, 2010
Adjusted Trial Balance Income Statement Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit
Cash 48,000 48,000
Accounts Receivable 18,000 18,000
Supplies 6,000 6,000
Equipment 57,000 57,000
Accumulated Depr-Equip 18,000 18,000
Accounts Payable 30,000 30,000
Wages Payable 6,000 6,000
Capital Stock 4,000 4,000
Retained Earnings 29,000 29,000
Dividends 3,000 3,000
Fees Earned 141,000 141,000
Wages Expense 63,000 63,000
Rent Expense 18,000 18,000
Depreciation Expense 15,000 15,000
Totals 228,000 228,000 96,000 141,000 132,000 87,000
Net Income (Loss) 45,000 45,000
141,000 141,000 132,000 132,000
Based on the preceding trial balance, the entry to close income summary would be:
1. debit Income Summary $141,000; credit Retained Earnings $141,000
2. debit Retained Earnings $45,000; credit Income Summary $45,000
3. debit Income Summary $45,000, credit Retained Earnings $45,000
4. debit Retained Earnings $9,000; credit Income Summary $9,000
32. (Points: 2)
All income statement accounts will be closed at the end of the period.
33. (Points: 2)
1. need not be journalized if adjusting entries are prepared
2. must be journalized and posted
3. are not needed if adjusting entries are prepared
4. need not be posted if the financial statements are prepared from the work sheet
34. (Points: 2)
Which of the accounts below would be closed by posting a debit to the account?
1. Rent Expense
2. Fees Earned
4. Unearned Revenue
35. (Points: 2)
Journalizing and posting closing entries must be completed before financial statements can be prepared.
36. (Points: 2)
Accumulated Depreciation appears on the
1. income statement as an operating expense
2. balance sheet in the current assets section
3. balance sheet in the long-term liabilities section
4. balance sheet in the property, plant and equipment section
37. (Points: 2)
The trial balance may be listed on the work sheet instead of being prepared separately.
38. (Points: 2)
The income summary account is closed to the retained earnings account.
39. (Points: 2)
The post-closing trial balance differs from the adjusted trial balance in that it
1. does not include income statement accounts
2. does not take into account closing entries
3. does not take into account adjusting entries
4. does not include balance sheet accounts
40. (Points: 2)
Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
1. Prepaid Insurance
2. Accumulated Depreciation
3. Unearned Rent
4. Supplies Expense