Adjusting Financial Statements | Test Bank – 10th

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Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) A company's fiscal year must correspond with the calendar year.

⊚ true
⊚ false

2) The time period assumption presumes that an organization's activities can be divided into specific time periods such as a month, a three-month quarter, a six-month interval, or a year.

⊚ true
⊚ false

3) Interim financial statements report a company's business activities for a one-year period.

⊚ true
⊚ false

4) An organization can use a fiscal year consisting of any 12 consecutive months or 52 weeks.

⊚ true
⊚ false

5) All adjusting entries are made at the beginning of an accounting period.

⊚ true
⊚ false

6) Accrual basis accounting records revenues when services and products are delivered and records expenses when incurred.

⊚ true
⊚ false

7) Two main accounting principles used in the adjusting process are the cash recognition principle and full disclosure principle.

⊚ true
⊚ false

8) Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly reported.

⊚ true
⊚ false

9) The expense recognition (matching) principle does not require that expenses be recorded in the same accounting period as the revenues that are recognized as a result of those expenses.

⊚ true
⊚ false

10) The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.

⊚ true
⊚ false

11) Accrual basis accounting increases the comparability of financial statements from period to period.

⊚ true
⊚ false

12) Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

⊚ true
⊚ false

13) Since the revenue recognition principle requires that revenues be recorded when earned, there are no unearned revenues in accrual accounting.

⊚ true
⊚ false

14) The expense recognition (matching) principle requires that expenses be recorded in the same accounting period as the revenues that are recognized as a result of those expenses, not necessarily when cash is paid.

⊚ true
⊚ false

15) The cash basis of accounting is a system in which revenues are recorded when earned and expenses are recorded when incurred.

⊚ true
⊚ false

16) The cash basis of accounting records revenues when cash payments from customers are received.

⊚ true
⊚ false

17) The accrual basis of accounting recognizes revenues when cash is received from customers, regardless of when the goods or services are provided.

⊚ true
⊚ false

18) Accrual basis accounting always recognizes expenses when cash is paid.

⊚ true
⊚ false

19) Recording revenues early overstates current-period income; recording revenues late understates current period income.

⊚ true
⊚ false

20) Recording expenses early overstates current-period income; recording expenses late understates current period income.

⊚ true
⊚ false

21) An adjusting journal entry will always affect at least one income statement account and at least one balance sheet account (but never the Cash account).

⊚ true
⊚ false

22) A company paid $9,000 for a twelve-month insurance policy on February 1. The policy coverage began on February 1. On February 28, $750 of insurance expense must be recorded.

⊚ true
⊚ false

23) On October 15, a company received $15,000 cash as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this contract for October.

⊚ true
⊚ false

24) Accrual basis accounting reflects the principle that revenue is recorded when services and products are delivered, not necessarily when cash is received.

⊚ true
⊚ false

25) The accrual basis of accounting requires that revenue be recognized in the period when goods or services are provided to customers.

⊚ true
⊚ false

26) Prepaid expenses, or deferred expenses, are liabilities.

⊚ true
⊚ false

27) Adjustments are necessary to bring an asset or liability account to its proper amount and also to update a related expense or revenue account.

⊚ true
⊚ false

28) Each adjusting entry will affect a balance sheet account.

⊚ true
⊚ false

29) Adjusting entries always affect the Cash account.

⊚ true
⊚ false

30) Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

⊚ true
⊚ false

31) Accrued revenues at the end of one accounting period are expected to result in cash receipts in a future period.

⊚ true
⊚ false

32) Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets) are referred to as accrued revenues.

⊚ true
⊚ false

33) Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

⊚ true
⊚ false

34) Under the accrual basis of accounting, adjustments are often made for prepaid expenses and unearned revenues.

⊚ true
⊚ false

35) The entry to record a cash receipt from a customer when the service is to be provided in a future period involves a debit to an unearned revenue account.

⊚ true
⊚ false

36) Costs incurred in a period that are both unpaid and unrecorded are accrued expenses.

⊚ true
⊚ false

37) An adjusting entry often includes an entry to Cash.

⊚ true
⊚ false

38) Before an adjusting entry is made to recognize the cost of expired insurance for the period, Prepaid Insurance and Insurance Expense are both overstated.

⊚ true
⊚ false

39) Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

⊚ true
⊚ false

40) Failure to record depreciation expense will overstate assets and understate expenses.

⊚ true
⊚ false

41) A company's month-end adjusting entry for Insurance Expense is $1,000. If this entry is not made then expenses are understated by $1,000 and net income is overstated by $1,000.

⊚ true
⊚ false

42) Profit margin can also be called return on sales.

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⊚ false

43) Profit margin measures the relation of debt to assets.

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⊚ false

44) Profit margin reflects the percent of profit in each dollar of sales.

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⊚ false

45) Profit margin is calculated by dividing net sales by net income.

⊚ true
⊚ false

46) Truman had total assets of $149,501,000, net income of $6,276,090, and net sales of $209,203,000. Its profit margin was 3%.

⊚ true
⊚ false

47) A contra account is an account linked with another account and is reported as an addition to the other account’s balance.

⊚ true
⊚ false

48) If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance (lease beginning January 1), and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.

⊚ true
⊚ false

49) Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

⊚ true
⊚ false

50) A salary owed to employees is an example of an accrued expense.

⊚ true
⊚ false

51) In accrual accounting, accrued revenues are recorded as liabilities.

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⊚ false

52) Depreciation expense is an example of an accrued expense.

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⊚ false

53) Earned but unrecorded revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

⊚ true
⊚ false

54) Depreciation expense for a period is the portion of a plant asset's cost that is allocated to that period.

⊚ true
⊚ false

55) All plant assets, including land, are depreciated.

⊚ true
⊚ false

56) Net income for a period will be understated if accrued revenues are not recorded at the end of the accounting period.

⊚ true
⊚ false

57) Depreciation measures the decline in market value of an asset.

⊚ true
⊚ false

58) A company owes its employees $5,000 for the year ended December 31. It will pay employees on January 6 for the previous two weeks' salaries. The year-end adjusting entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

⊚ true
⊚ false

59) A company had no supplies available at the beginning of August. The company purchased $6,000 worth of supplies in August and recorded the purchase in the Supplies account. On August 31, the fiscal year-end, the physical count of supplies indicates the cost of unused supplies is $3,200. The adjusting entry would include a $2,800 debit to Supplies.

⊚ true
⊚ false

60) A company performs 20 days of work on a 30-day contract before the end of the year. The total contract is valued at $6,000 and payment will not be received until the contract is completed. The required adjusting entry includes a $4,000 debit to Unearned Revenue.

⊚ true
⊚ false

61) A company performs 20 days of work on a 30-day contract before the end of the year. The total contract is valued at $6,000, with payment received in advance. The $6,000 cash receipt was initially recorded as Unearned Revenue. The required adjusting entry includes a $4,000 debit to Unearned Revenue.

⊚ true
⊚ false

62) A company entered into a 2-month contract for $50,000 on April 1. It performed $25,000 of the contract services in April and billed the customer. The company should recognize the revenue when it receives the customer's check.

⊚ true
⊚ false

63) The adjusted trial balance must be prepared before the adjusting entries are made.

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⊚ false

64) An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

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⊚ false

65) Financial statements can be prepared directly from the information in the adjusted trial balance.

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⊚ false

66) Asset and liability balances are transferred from the adjusted trial balance to the income statement.

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⊚ false

67) Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

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⊚ false

68) Revenue and expense balances are transferred from the adjusted trial balance to the income statement.

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⊚ false

69) In preparing financial statements from the adjusted trial balance, the balance sheet must be prepared first.

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⊚ false

70) It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

⊚ true
⊚ false

71) It is acceptable to record cash received in advance of providing products or services to revenue accounts if an adjusting entry is made at the end of the period to bring the unearned revenue account balance to the correct amount.

⊚ true
⊚ false

72) Accounts that appear in the balance sheet are often called temporary accounts.

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⊚ false

73) Income Summary is a temporary account only used for the closing process.

⊚ true
⊚ false

74) Revenue and expense accounts are temporary accounts that must begin each accounting period with zero balances.

⊚ true
⊚ false

75) Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.

⊚ true
⊚ false

76) The closing process takes place before financial statements have been prepared.

⊚ true
⊚ false

77) Revenue and expense accounts are permanent accounts and should not be closed at the end of the accounting period.

⊚ true
⊚ false

78) Closing entries result in the Dividends account being transferred into net income or net loss for the period ending.

⊚ true
⊚ false

79) The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

⊚ true
⊚ false

80) Closing entries are required at the end of each accounting period to close all ledger accounts.

⊚ true
⊚ false

81) The closing process resets revenue, expense, and dividends account balances to zero at the end of each period.

⊚ true
⊚ false

82) The Income Summary account is a permanent account that will be carried forward period after period.

⊚ true
⊚ false

83) Closing entries are necessary so that retained earnings will begin each period with a zero balance.

⊚ true
⊚ false

84) Permanent accounts carry their ending balances into future periods.

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⊚ false

85) Closing entries are only required when a business is shutting down.

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⊚ false

86) The first step in the accounting cycle is to analyze transactions to prepare for journalizing.

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87) The accounting cycle refers to the sequence of steps used in preparing the work sheet.

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88) The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

⊚ true
⊚ false

89) The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, recording closing entries, and recording adjusting entries.

⊚ true
⊚ false

90) A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

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⊚ false

91) A classified balance sheet broadly groups accounts by revenues and expenses.

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⊚ false

92) Current liabilities are expected to come due within one year or the company's operating cycle, whichever is longer.

⊚ true
⊚ false

93) Intangible assets are long-term assets that benefit business operations but lack physical form.

⊚ true
⊚ false

94) Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

⊚ true
⊚ false

95) Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle, whichever is longer.

⊚ true
⊚ false

96) Long-term investments can include land held for future expansion.

⊚ true
⊚ false

97) Intangible assets are long-term assets that have physical form and are used to produce or sell products and services.

⊚ true
⊚ false

98) Current liabilities include accounts receivable, unearned revenues, and salaries payable.

⊚ true
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99) Cash and supplies are both classified as current assets.

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100) Current assets and current liabilities are listed on the balance sheet in order of how quickly they will be converted to, or paid in, cash.

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101) The current ratio is used to help assess a company's ability to pay its debts in the near future.

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⊚ false

102) The current ratio is computed by dividing current liabilities by current assets.

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⊚ false

103) Trekker Bikes’ current assets are $540 million and its current liabilities are $450 million. Its current ratio is 0.63.

⊚ true
⊚ false

104) Trekker Bikes' current assets are $300 million and its current liabilities are $125 million. Its current ratio is 0.417.

⊚ true
⊚ false

105) If a company has current assets of $17,000 and current liabilities of $10,000. Its current ratio is 1.7.

⊚ true
⊚ false

106) If a company has current assets of $15,000 and current liabilities of $9,375, its current ratio is 1.6

⊚ true
⊚ false

107) Flo's Flowers' current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Flo's can cover its short-term liabilities with its short-term assets.

⊚ true
⊚ false

108) A work sheet can be used to help in the preparation of the financial statements.

⊚ true
⊚ false

109) Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

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⊚ false

110) The work sheet is a required report made available to external decision makers.

⊚ true
⊚ false

111) A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

⊚ true
⊚ false

112) All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

⊚ true
⊚ false

113) On a work sheet, if the Debit total exceeds the Credit total of the Income Statement columns, a net loss is indicated.

⊚ true
⊚ false

114) The first step in preparing a worksheet is to prepare the income statement.

⊚ true
⊚ false

115) Normally closing entries are first entered in the general journal and then posted to the work sheet.

⊚ true
⊚ false

116) Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

⊚ true
⊚ false

117) On a work sheet, the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

⊚ true
⊚ false

118) On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Retained Earnings Credit column.

⊚ true
⊚ false

119) All necessary amounts to prepare the balance sheet, including ending retained earnings, can be found in the Balance Sheet columns of the work sheet.

⊚ true
⊚ false

120) A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements.

⊚ true
⊚ false

121) Because it is a substitute for financial statements, the work sheet must be prepared according to specified accounting procedures.

⊚ true
⊚ false

122) An expense account is normally closed by debiting Income Summary and crediting the expense account.

⊚ true
⊚ false

123) The Dividends account is normally closed by debiting it.

⊚ true
⊚ false

124) After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,500 debit balance. This result implies that Cleaver has net income of $4,500.

⊚ true
⊚ false

125) After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver has net income of $4,000.

⊚ true
⊚ false

126) After posting the entries to close all revenue and expense accounts, Marker Company's Income Summary account has a credit balance of $7,000, and its Dividends account has a debit balance of $3,000. These balances indicate that net income for the current accounting period amounted to $4,000.

⊚ true
⊚ false

127) After posting the entries to close all revenue and expense accounts, Marker Company's Income Summary account has a credit balance of $6,000, and its Dividends account has a debit balance of $2,500. These balances indicate that net income for the current accounting period amounted to $3,500.

⊚ true
⊚ false

128) When there is a net loss, the Income Summary account would have a credit balance.

⊚ true
⊚ false

129) The Income Summary account is used to close the permanent accounts at the end of an accounting period.

⊚ true
⊚ false

130) The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Retained Earnings; (4) close Dividends to Retained Earnings.

⊚ true
⊚ false

131) During the closing process, Retained Earnings is closed to the Dividends account.

⊚ true
⊚ false

132) A post-closing trial balance is a list of permanent accounts and their balances after all closing entries.

⊚ true
⊚ false

133) The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts, and (2) all temporary accounts have zero balances.

⊚ true
⊚ false

134) A company's post-closing trial balance has total debits of $40,560 and total credits of $40,650. Accordingly, the company should review for errors in the closing process.

⊚ true
⊚ false

135) Reversing entries are optional.

⊚ true
⊚ false

136) Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

⊚ true
⊚ false

137) Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of a reporting period.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
138) Which of following is not a time period commonly used by companies in reporting accounting information?

A) Month.
B) Quarter.
C) Six-month interval.
D) Year.
E) Fourteen-month interval.

139) The assumption that presumes that an organization’s activities can be divided into specific time periods such as a month, a three-month quarter, a six-month interval, or a year is called the:

A) Operating cycle of a business.
B) Time period assumption.
C) Going-concern assumption.
D) Expense recognition (matching) principle.
E) Accrual basis of accounting.

140) Interim financial statements refer to financial reports:

A) That cover less than one year, usually spanning one, three, or six-month periods.
B) That are prepared before any adjustments have been recorded.
C) That show the assets above the liabilities and the liabilities above the equity.
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

141) The 12-month period that ends when a company's sales activities are at their lowest level is called the:

A) Fiscal year.
B) Calendar year.
C) Natural business year.
D) Accounting period.
E) Interim period.

142) The length of time covered by a set of periodic financial statements, primarily a year for most companies, is referred to as the:

A) Fiscal year.
B) Natural business year.
C) Accounting period.
D) Business cycle.
E) Calendar year.

143) The accounting principle that requires revenue be recorded when goods or services are provided customers is:

A) Expense recognition (matching) principle.
B) Revenue recognition principle.
C) Time period assumption.
D) Accrual reporting principle.
E) Going-concern assumption.

144) Adjusting entries:

A) Affect only income statement accounts.
B) Affect only balance sheet accounts.
C) Affect both income statement and balance sheet accounts.
D) Affect cash accounts.
E) Affect only equity accounts.

145) The main purpose of adjusting entries is to:

A) Record external transactions and events.
B) Recognize transactions and events that are not yet recorded.
C) Recognize assets purchased during the period.
D) Recognize debts paid during the period.
E) Correct errors in the accounting records.

146) The principle that requires expenses to be reported in the same period as the revenues that were recognized as a result of those expenses is the:

A) Recognition principle.
B) Cost principle.
C) Cash basis of accounting.
D) Expense recognition (matching) principle.
E) Time period principle.

147) The system of preparing financial statements based on recording revenues when cash is received and reporting expenses when the cash is paid is called:

A) Accrual basis accounting.
B) Operating cycle accounting.
C) Cash basis accounting.
D) Revenue recognition accounting.
E) Current basis accounting.

148) Which of the following is not accomplished by an adjusting entry?

A) Updating liability and asset accounts to their proper balances.
B) Assigning revenues to the periods in which they are earned.
C) Assigning expenses to the periods in which they are incurred.
D) Assuring that financial statements reflect the revenues earned and the expenses incurred.
E) Assuring that external transaction amounts remain unchanged.

149) The approach to preparing financial statements based on recording revenues when products and services are delivered and recording expenses when incurred is:

A) Cash basis accounting.
B) The expense recognition (matching) principle.
C) The time period assumption.
D) Accrual basis accounting.
E) Revenue basis accounting.

150) 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 accounts.
D) Asset accounts.
E) Income statement accounts.

151) The accrual basis of accounting:

A) Increases the comparability of financial statements from period to period.
B) Is flawed because it gives complete information about cash flows.
C) Recognizes revenues when received in cash.
D) Recognizes expenses when paid in cash.
E) Eliminates the need for adjusting entries at the end of each period.

152) In its first year of operations, Grace Company reports the following: Revenue of $60,000 ($52,000 cash received from customers); Expenses of $35,000 ($31,000 cash paid toward expenses). Net income under the accrual basis of accounting is:

A) $17,000.
B) $21,000.
C) $13,000.
D) $25,000.
E) None of the answer choices is correct.

153) In its first year of operations, Grace Company reports the following: Revenue of $60,000 ($52,000 cash received from customers); Expenses of $35,000 ($31,000 cash paid toward expenses). Net income under the cash basis of accounting is:

A) $17,000.
B) $13,000.
C) $21,000.
D) $25,000.
E) None of the answer choices is correct.

154) Which of the following statements is incorrect?

A) Adjustments to prepaid expenses 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 only balance sheet accounts.

155) An adjusting entry is not made for which of the following?

A) Prepaid expenses.
B) Depreciation.
C) Cash.
D) Unearned revenues.
E) Accrued expenses.

156) A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:

A) Understate net income by $28,000.
B) Overstate net income by $28,000.
C) Have no effect on net income.
D) Overstate assets by $28,000.
E) Understate assets by $28,000.

157) 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.

158) If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Revenue account to the Revenue account, 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.

159) A company records the fees for legal services paid in advance by its clients in Unearned Revenue. If the company fails to make the end-of-period adjusting entry to move the portion of these fees that has been earned to a revenue account, 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.

160) Profit margin is defined as:

A) Revenues divided by net sales.
B) Net sales divided by assets.
C) Net income divided by net sales.
D) Net income divided by assets.
E) Net sales divided by net income.

161) A company reported net income of $5,445 for October. Its net sales for October were $16,500. Its profit margin is:

A) 7%.
B) 3%.
C) 200%.
D) 303%.
E) 33%.

162) A company reported net income of $3,000 for October. Its net sales for October were $10,000. Its profit margin is:

A) 3%.
B) 30%.
C) 33%.
D) 333%.
E) 33.3%

163) Which of the following statements regarding profit margin is false:

A) Profit margin reflects the percent of profit in each dollar of sales.
B) Profit margin is also called return on sales.
C) Profit margin can be used to compare a firm's performance to its competitors.
D) Profit margin is calculated by dividing net income by net sales.
E) Profit margin is not a useful measure of a company's operating results.

164) A company had $6,900,000 in net income for the year. Its net sales were $14,290,000 for the same period. Calculate its profit margin.

A) 24.2 %.
B) 96.6 %.
C) 107.1 %.
D) 48.3 %.
E) 207.1 %.

165) A company had $6,992,000 in net income for the year. Its net sales were $15,200,000 for the same period. Calculate its profit margin.

A) 85.4%.
B) 117.1%.
C) 53.9%.
D) 217.1%.
E) 46.0%.

166) On July 1 Olive Company paid $7,500 cash for management services to be performed over a two-year period. Olive Company follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Olive should record:

A) A debit to an expense and credit to a prepaid expense for $7,500.
B) A debit to an expense and credit to Cash for $7,500.
C) A debit to a prepaid expense and a credit to Cash for $7,500.
D) A credit to a prepaid expense and a debit to Cash for $7,500.
E) A debit to Cash for $7,500 and a credit to an expense for $7,500.

167) On July 1 of the current calendar year, Olive Company paid $9,200 cash for management services to be performed over a two-year period beginning July 1. Olive Company follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Olive would include:

A) A debit to a prepaid expense and a credit to Cash for $6,900.
B) A debit to an expense and a credit to a prepaid expense for $6,900.
C) A debit to an expense and a credit to a prepaid expense for $2,300.
D) A debit to a prepaid expense and a credit to an expense for $2,300.
E) A credit to a liability and a debit to a prepaid expense for $2,300.

168) On July 1 of the current calendar year, Olive Company paid $7,500 cash for management services to be performed over a two-year period beginning July 1. Olive Company follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Olive would include:

A) A debit to an expense and a credit to a prepaid expense for $5,625.
B) A debit to a prepaid expense and a credit to Cash for $5,625.
C) A debit to an expense and a credit to a prepaid expense for $1,875.
D) A debit to a prepaid expense and a credit to an expense for $1,875.
E) A credit to a liability and a debit to a prepaid expense for $1,875.

169) Accrued revenues:

A) At the end of one accounting period result in cash receipts in a future 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.

170) An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n):

A) Accrued expense.
B) Contra account.
C) Accrued revenue.
D) Intangible asset.
E) Adjunct account.

171) The contra account that includes total depreciation expense for all prior periods for which an asset was used:

A) Is referred to as depreciation expense.
B) Is referred to as accumulated depreciation.
C) Is shown on the income statement of the final period.
D) Is only recorded when the asset is disposed of.
E) Is referred to as an accrued asset.

172) The allocation of the costs of plant assets over their expected useful lives is known as:

A) Accumulated depreciation.
B) A contra account.
C) The expense recognition (matching) principle.
D) Depreciation.
E) An accrued account.

173) Prior to recording adjusting entries, the Office Supplies account had a $372 debit balance. A physical count of the supplies showed $112 of unused supplies available. The required adjusting entry is:

A) Debit Office Supplies $260 and credit Office Supplies Expense $260.
B) Debit Office Supplies $112 and credit Supplies Expense $260.
C) Debit Office Supplies $112 and credit Office Supplies Expense $112
D) Debit Office Supplies Expense $112 and credit Office Supplies $112.
E) Debit Office Supplies Expense $260 and credit Office Supplies $260.

174) 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.

175) If throughout an accounting period the fees for legal services paid in advance by clients are recorded in Unearned Revenue, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

A) Debit Cash and credit Revenue.
B) Debit Cash and credit Unearned Revenue.
C) Debit Unearned Revenue and credit Revenue.
D) Debit Revenue and credit Unearned Revenue.
E) Debit Unearned Revenue and credit Accounts Receivable.

176) On April 1, a company paid the $2,100 premium on a three-year insurance policy with benefits beginning on that date. What amount of the insurance expense will be reported on the annual income statement for the first year ended December 31?

A) $2,100.00.
B) $58.33.
C) $525.00.
D) $1,575.00.
E) $700.00.

177) On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What amount of the insurance expense will be reported on the annual income statement for the first year ended December 31?

A) $1,350.00.
B) $450.00.
C) $1,012.50.
D) $337.50.
E) $37.50.

178) On July 1, a company paid the $4,440 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the first year ended December 31?

A) $2,220.
B) $4,440.
C) $1,850.
D) $3,330.
E) $1,110.

179) On July 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the first year ended December 31?

A) $1,200.
B) $2,400.
C) $1,000.
D) $400.
E) $1,400.

180) A company had no office supplies available at the beginning of the year. During the year, the company purchased $310 worth of office supplies. On December 31, $95 worth of office supplies remained. How much should the company report as office supplies expense for the year?

A) $95.
B) $215.
C) $310.
D) $405.
E) $195.

181) 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.

182) On January 1, a company purchased a five-year insurance policy for $1,900 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

A) Debit Insurance Expense, $380; credit Prepaid Insurance, $380.
B) Debit Prepaid Insurance, $1,520; credit Insurance Expense, $1,520.
C) Debit Prepaid Insurance, $380; credit Insurance Expense, $380.
D) Debit Insurance Expense, $380; credit Prepaid Insurance, $1,520.
E) Debit Prepaid Insurance, $1,900; credit Cash, $1,900.

183) On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

A) Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
B) Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
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, $1,440.

184) 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) A financing activity on the statement of cash flows.

185) Which of the following assets is not depreciated?

A) Vehicles.
B) Computers.
C) Land.
D) Buildings.
E) Equipment.

186) Which of the following does not require an adjusting entry at year-end?

A) Accrued interest on notes payable.
B) Supplies used during the period.
C) Cash invested by stockholders.
D) Accrued wages.
E) Expired portion of prepaid insurance.

187) On May 1, a two-year insurance policy was purchased for $9,600 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31?

A) $9,600.
B) $3,200.
C) $2,800.
D) $400.
E) $3,600.

188) On May 1, a two-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31?

A) $750.
B) $5,270.
C) $6,000.
D) $6,750.
E) $18,000.

189) Fragmental Company leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $925. Fragmental collected the entire $7,400 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Company on December 31 would be:

A) A debit to Cash and a credit to Revenue for $7,400.
B) A debit to Revenue and a credit to Cash for $2,775.
C) A debit to Revenue and a credit to Unearned Revenue for $2,775.
D) A debit to Unearned Revenue and a credit to Revenue for $4,625.
E) A debit to Unearned Revenue and a credit to Revenue for $2,775.

190) Fragmental Company leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $800. Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Company on December 31 would be:

A) A debit to Revenue and a credit to Cash for $2,400.
B) A debit to Revenue and a credit to Unearned Revenue for $2,400.
C) A debit to Cash and a credit to Revenue for $6,400.
D) A debit to Unearned Revenue and a credit to Revenue for $2,400.
E) A debit to Unearned Revenue and a credit to Revenue for $4,000.

191) On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 of the current year to April 30 of the following year. The Cash receipt was recorded as unearned revenue and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be:

A) A debit to Unearned Revenue and a credit to Cash for $500.
B) A debit to Revenue and a credit to Unearned Revenue for $500.
C) A debit to Unearned Revenue and a credit to Revenue for $1,000.
D) A debit to Revenue and a credit to Cash for $1,000.
E) A debit to Revenue and a credit to Cash for $500.

192) 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.

193) The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided 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.

194) A company pays each of its two office employees each Friday at the rate of $120 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

A) Debit Salaries Expense $480 and credit Cash $480.
B) Debit Salaries Expense $480 and credit Salaries Payable $480.
C) Debit Salaries Payable $480 and credit Salaries Expense $480.
D) Debit Salaries Expense $720 and credit Salaries Payable $720.
E) Debit Unpaid Salaries $720 and credit Salaries Payable $720.

195) A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end 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.

196) A company pays its employees $4,450 each Friday, which amounts to $890 per day for the five-day work week that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:

A) $3,560.
B) $4,450.
C) $1,780.
D) $2,670.
E) $890.

197) A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day work week that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:

A) $4,000.
B) $800.
C) $1,600.
D) $2,400.
E) $3,200.

198) The adjusting entry to record salaries earned, but unpaid at the end of the accounting period, should be recorded as follows:

A) Debit Salaries Payable and credit Salaries Expense.
B) Debit Salaries Expense and credit Cash.
C) Debit Accrued Salaries and credit Salaries Payable.
D) Debit Cash and credit Salaries Expense.
E) Debit Salaries Expense and credit Salaries Payable.

199) On January 1, Eastern College received $1,350,000 from its students for the spring semester that it recorded in Unearned Revenue. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. Assuming the college prepares adjustments monthly, what amount of tuition revenue should the college recognize on February 28?

A) $1,012,500.
B) $1,350,000.
C) $337,500.
D) $950,000.
E) $675,000.

200) On January 1, Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Revenue. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. Assuming the college prepares adjustments monthly, what amount of tuition revenue should the college recognize on February 28?

A) $300,000.
B) $600,000.
C) $800,000.
D) $900,000.
E) $1,200,000.

201) On January 1, Fashion Forward Magazine received $15,000 from subscribers for annual subscriptions and recorded Unearned Revenue. Four issues are delivered each year. What amount of revenue should the magazine recognize on March 31, after the first issue is delivered?

A) $15,000.
B) $1,250.
C) $7,500.
D) $3,750.
E) $0.

202) An adjusting entry was made on year-end December 31 to accrue salary expense of $2,400. Assuming the company does not prepare reversing entries, which of the following entries would be prepared to record the $5,400 payment of salaries in January of the following year?

A)

B)

C)

D)

E)

203) An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. Assuming the company does not prepare reversing entries, which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year?

A)

B)

C)

D)

E)

204) 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.

205) A company purchased a new delivery van at a cost of $49,000 on January 1. The delivery van is estimated to have a useful life of 5 years and a salvage value of $3,700. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31?

A) $9,060.
B) $4,900.
C) $4,440.
D) $4,530.
E) $5,270.

206) A company purchased a new delivery van at a cost of $45,000 on January 1. The delivery van is estimated to have a useful life of 6 years and a salvage value of $3,000. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31?

A) $3,250.
B) $7,000.
C) $4,000.
D) $6,500.
E) $3,500.

207) A company's Office Supplies account shows a beginning balance of $720 and an ending balance of $640. If office supplies expense for the year is $3,700, what amount of office supplies was purchased during the period?

A) $3,060.
B) $3,780.
C) $4,340.
D) $3,620.
E) $4,420.

208) A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period?

A) $2,700.
B) $2,900.
C) $3,300.
D) $3,500.
E) $3,700.

209) If a company records prepayment of expenses in an asset account, the adjusting entry when all or part of the prepaid asset is used or expired would:

A) Result in a debit to an expense and a credit to an asset account.
B) Cause an adjustment to prior expense to be overstated and assets to be understated.
C) Cause an accrued liability account to exist.
D) Result in a debit to a liability and a credit to an asset account.
E) Decrease cash.

210) A company recorded 2 days of accrued salaries of $2,100 for its employees on January 31. On February 9, it paid its employees $8,400 for these accrued salaries and for other salaries earned through February 9. Assuming the company does not prepare reversing entries, the January 31 and February 9 journal entries are:

A)

B)

C)

D)

E)

211) A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees $7,000 for these accrued salaries and for other salaries earned through February 9. Assuming the company does not prepare reversing entries, the January 31 and February 9 journal entries are:

A)

B)

C)

D)

E)

212) If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include:

A) A debit to Cash and a credit to Salaries Payable.
B) A debit to Cash and a credit to Prepaid Salaries.
C) A debit to Salaries Payable and a credit to Cash.
D) A debit to Salaries Payable and a credit to Salaries Expense.
E) No entry would be necessary on January 5.

213) On December 1, Orenthal Marketing Company received $3,300 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned revenue. The adjusting entry for the year ended December 31 would include:

A) a credit to Revenue for $2,200.
B) a debit to Revenue for $2,200.
C) a credit to Unearned Revenue for $1,100.
D) a debit to Revenue for $3,300.
E) a debit to Unearned Revenue for $1,650.

214) On December 1, Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned revenue. The adjusting entry for the year ended December 31 would include:

A) a debit to Revenue for $3,600.
B) a debit to Unearned Revenue for $1,800.
C) a credit to Unearned Revenue for $1,800.
D) a debit to Revenue for $1,800.
E) a credit Revenue for $3,600.

215) Harrod Company paid $6,600 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is $6,600, and no adjustments had been made previously. The adjusting entry required on December 31 is:

A) Debit Cash, $6,600; Credit Prepaid Insurance, $6,600.
B) Debit Prepaid Insurance, $3,300; credit Insurance Expense, $3,300.
C) Debit Insurance Expense, $3,300; credit Prepaid Insurance, $3,300.
D) Debit Insurance Expense, $1,650; credit Prepaid Insurance, $1,650.
E) Debit Prepaid Insurance, $1,650; credit Insurance Expense, $1,650.

216) Harrod Company paid $4,800 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is $4,800 and no adjustments had been made previously. The adjusting entry required on December 31 is:

A) Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
B) Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400.
C) Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200.
D) Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200.
E) Debit Cash, $4,800; Credit Prepaid Insurance, $4,800.

217) What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $9,250 before adjustment, and the unexpired amount per analysis of policies is $4,000?

A) Debit Insurance Expense, $4,000; credit Prepaid Insurance, $4,000.
B) Debit Insurance Expense, $9,250; credit Prepaid Insurance, $9,250.
C) Debit Insurance Expense, $5,250; credit Prepaid Insurance, $5,250.
D) Debit Prepaid Insurance, $5,250; credit Insurance Expense, $5,250.
E) Debit Cash, $9,250; Credit Prepaid Insurance, $9,250.

218) What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is $3,250?

A) Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500.
B) Debit Insurance Expense, $3,250; credit Prepaid Insurance, $3,250.
C) Debit Prepaid Insurance, $4,500; credit Insurance Expense, $4,500.
D) Debit Insurance Expense, $7,750; credit Prepaid Insurance, $7,750.
E) Debit Cash, $7,750; Credit Prepaid Insurance, $7,750.

219) On April 1, Garcia Publishing Company received $3,168 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?

A) $0.
B) $1,056.00.
C) $792.00.
D) $264.00.
E) $88.00.

220) On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?

A) $0.
B) $516.
C) $387.
D) $129.
E) $430.

221) On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the second year of the subscription assuming the company uses a calendar-year reporting period?

A) $0
B) $516.
C) $387.
D) $129.
E) $430.

222) On April 1, Garcia Publishing Company received $21,780 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, what is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

A) debit Unearned Revenue, $5,445; credit Revenue, $5,445.
B) debit Unearned Revenue, $7,260; credit Revenue, $7,260.
C) debit Unearned Revenue, $1,815; credit Revenue, $1,815.
D) debit Unearned Revenue, $16,335; credit Revenue, $16,335.
E) debit Unearned Revenue, $21,780; credit Revenue, $21,780.

223) On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

A) debit Unearned Revenue, $1,548; credit Revenue, $1,548.
B) debit Unearned Revenue, $516; credit Revenue, $516.
C) debit Unearned Revenue, $1,161; credit Revenue, $1,161.
D) debit Unearned Revenue, $129; credit Revenue, $129.
E) debit Unearned Revenue, $387; credit Revenue, $387.

224) On April 1, Garcia Publishing Company received $1,548 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the second year?

A) debit Unearned Revenue, $1,548; credit Revenue, $1,548.
B) debit Unearned Revenue, $516; credit Revenue, $516.
C) debit Unearned Revenue, $1,161; credit Revenue, $1,161.
D) debit Unearned Revenue, $129; credit Revenue, $129.
E) debit Unearned Revenue, $387; credit Revenue, $387.

225) On April 1, Otisco, Incorporated paid Garcia Publishing Company $2,520 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?

A) $0.
B) $840.
C) $1,890.
D) $630.
E) $2,520.

226) On April 1, Otisco, Incorporated paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?

A) $1,548.
B) $387.
C) $516.
D) $1,161.
E) $0.

227) On April 1, Otisco, Incorporated paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the second year assuming the company is using a calendar-year reporting period and the previous year adjustment had been made?

A) $516.
B) $1,548.
C) $645.
D) $0.
E) $387.

228) On April 1, Otisco, Incorporated paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What adjusting entry should be made by Otisco, Incorporated for the adjustment on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustments had been made?

A) Debit Subscription Expense $516 and credit Prepaid Subscriptions $516.
B) Debit Prepaid Subscriptions $516 and credit Subscription Expense $516.
C) Debit Subscription Expense $387 and credit Cash $387.
D) Debit Unearned Subscriptions $387 and credit Subscription Expense $387.
E) Debit Subscription Expense $387 and credit Prepaid Subscriptions $387.

229) A company made no adjusting entry for accrued and unpaid employee salaries of $8,000 on December 31. Which of the following statements is true?

A) It will understate current-year expenses and overstate current-year net income by $8,000.
B) It will understate assets by $8,000.
C) It will overstate assets and liabilities by $8,000.
D) It will understate current-year net income by $8,000.
E) It will have no effect on income.

230) A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 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 $9,000.
C) It will understate current-year net income by $9,000.
D) It will understate assets by $9,000.
E) It will understate current-year expenses and overstate current-year net income by $9,000.

231) The correct adjusting entry for accrued and unpaid employee salaries of $7,500 on December 31 is:

A) Debit Salaries Payable, $7,500; credit Salary Expense, $7,500.
B) Debit Salary Expense, $7,500; credit Cash, $7,500.
C) Debit Salary Expense, $7,500; credit Prepaid Salary, $7,500.
D) Debit Salary Expense, $7,500; credit Salaries Payable, $7,500.
E) Debit Salary Expense, $7,500; credit Revenue, $7,500.

232) The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

A) debit Salary Expense, $9,000; credit Cash, $9,000
B) debit Salary Expense, $9,000; credit Revenue, $9,000
C) debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D) debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E) debit Salaries Payable, $9,000; credit Salary Expense $9,000

233) A company purchased new furniture at a cost of $29,000 on January 1. The furniture is estimated to have a useful life of 5 years and a salvage value of $3,500. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the furniture for the first year ended December 31?

A) $1,625
B) $1,275
C) $5,100
D) $5,950
E) $1,450

234) A company purchased new furniture at a cost of $14,000 on January 1. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the furniture for the first year ended December 31?

A) $437
B) $375
C) $1,500
D) $500
E) $1,750

235) A company purchased new furniture at a cost of $14,000 on January 1. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. What is the book value (or net amount) of the furniture on December 31 of the first year?

A) $13,562
B) $12,250
C) $12,500
D) $13,500
E) $13,625

236) A company purchased new furniture at a cost of $16,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method of depreciation. What is the book value (or net amount) of the furniture on December 31 of the first year?

A) $16,000
B) $15,000
C) $2,500
D) $13,500
E) $13,333

237) The balances in Labeille Accounting Services' office supplies account on February 1 and February 28 were $1,100 and $475, respectively. If the office supplies expense for the month is $1,200, what amount of office supplies was purchased during February?

A) $1,100
B) $475
C) $575
D) $1,575
E) $1,825

238) The balances in Labeille Accounting Services' office supplies account on February 1 and February 28 were $1,200 and $375, respectively. If the office supplies expense for the month is $1,900, what amount of office supplies was purchased during February?

A) $1,075
B) $1,500
C) $1,525
D) $2,325
E) $3,100

239) If Bojana Tax Services' office supplies account balance on March 1 was $1,050, the company purchased $600 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

A) $1,050
B) $1,650
C) $1,700
D) $600
E) $400

240) If Bojana Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

A) $675
B) $825
C) $1,250
D) $1,975
E) $525

241) A physical count of supplies on hand at the end of May for Masters, Incorporated indicated $1,260 of supplies on hand. The general ledger balance before any adjustment is $2,200. What is the adjusting entry for office supplies that should be recorded on May 31?

A) Debit Supplies $1,251 and credit Cash $1,251.
B) Debit Supplies Expense $940 and credit Supplies $940.
C) Debit Supplies Expense $1,260 and credit Supplies $1,260.
D) Debit Prepaid Supplies $940 and credit Supplies Expense $940.
E) Debit Supplies Expense $2,200 and credit Supplies $2,200.

242) A physical count of supplies on hand at the end of May for Masters, Incorporated indicated $1,250 of supplies on hand. The general ledger balance before any adjustment is $2,100. What is the adjusting entry for office supplies that should be recorded on May 31?

A) Debit Supplies Expense $1,250 and credit Supplies $1,250.
B) Debit Prepaid Supplies $850 and credit Supplies Expense $850.
C) Debit Supplies Expense $1,250 and credit Supplies $2,100.
D) Debit Supplies $1,250 and credit Cash $1,250.
E) Debit Supplies Expense $850 and credit Supplies $850.

243) Which of the following statements is incorrect?

A) An income statement reports revenues earned less expenses incurred.
B) An unadjusted trial balance is a list of accounts and balances after adjusting entries have been recorded and posted to the ledger.
C) Interim financial reports can be based on one-month or three-month accounting periods.
D) The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual accounting period.
E) Property, plant, and equipment are referred to as plant assets.

244) A trial balance prepared after adjustments have been recorded is called a(n):

A) Balance sheet.
B) Adjusted trial balance.
C) Unadjusted trial balance.
D) Classified balance sheet.
E) Unclassified balance sheet.

245) 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) A balance sheet.
E) Only prepared once a year.

246) 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.

247) 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..

248) A list of accounts and balances before adjustments are recorded is known as a(n):

A) Report form balance sheet.
B) Account form balance sheet.
C) Classified balance sheet.
D) Unadjusted trial balance.
E) Unclassified balance sheet.

249) Financial statements can be prepared directly from a(n):

A) Adjusted trial balance.
B) Report form balance sheet.
C) Interim balance sheet.
D) Classified balance sheet.
E) Unclassified balance sheet.

250) Under the alternative method for accounting for unearned revenue, which of the following pairs of journal entry formats is correct?

A)

B)

C)

D)

E)

251) Under the alternative method for recording prepaid expenses, which is the correct set of journal entries?

A)

B)

C)

D)

E)

252) An adjusting entry that increases a revenue and decreases a liability is known as a(n):

A) Accrued expense.
B) Deferred expense.
C) Deferred revenue.
D) Accrued revenue.
E) Depreciation.

253) On December 1, Milton Company borrowed $320,000, at 6% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?

A) debit Interest Expense, $1,600; credit Cash, $1,600.
B) debit Interest Expense, $19,200; credit Interest Payable, $19,200.
C) debit Interest Payable, $1,600; credit Interest Expense, $1,600.
D) debit Interest Expense, $1,600; credit Interest Payable, $1,600.
E) debit Interest Expense, $3,200; credit Interest Payable, $3,200.

254) On December 1, Milton Company borrowed $300,000, at 8% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?

A) debit Interest Payable, $2,000; credit Interest Expense, $2,000.
B) debit Interest Expense, $2,000; credit Interest Payable, $2,000.
C) debit Interest Expense, $2,000; credit Cash, $2,000.
D) debit Interest Expense, $4,000; credit Interest Payable, $4,000.
E) debit Interest Expense, $24,000; credit Interest Payable, $24,000.

255) On September 1, Kennedy Company loaned $102,000, at 10% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?

A) Debit Interest Expense, $10,200; credit Interest Payable, $10,200
B) Debit Interest Receivable, $10,200; credit Cash, $10,200
C) Debit Interest Expense, $3,400; credit Interest Payable, $3,400
D) Debit Cash, $3,400; credit Interest Revenue, $3,400.
E) Debit Interest Receivable, 3,400; credit Interest Revenue, $3,400.

256) On September 1, Kennedy Company loaned $100,000, at 12% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?

A) Debit Interest Expense, $12,000; credit Interest Payable, $12,000.
B) Debit Interest Expense, $4,000; credit Interest Payable, $4,000.
C) Debit Interest Receivable, $12,000; credit Cash, $12,000.
D) Debit Interest Receivable, $4,000; credit Interest Revenue, $4,000.
E) Debit Cash, $4,000; credit Interest Revenue, $4,000.

257) A roofing company collects fees when jobs are complete. The work for one customer, whose job was bid at $3,000, has been completed as of December 31, but the customer has not yet been billed. Assuming adjustments are only made at year-end, what is the adjusting entry the company would need to make on December 31, the calendar year-end?

A) Debit Cash, $3,000; credit Roofing Fees Revenue, $3,000.
B) Debit Roofing Fees Revenue, $3,000; credit Accounts Receivable, $3,000.
C) Debit Accounts Receivable, $3,000; credit Roofing Fees Revenue, $3,000.
D) <p> <!--[if gte mso 9]><xml> <o:OfficeDocumentSettings> <o:RelyOnVML></o:RelyOnVML> <o:AllowPNG></o:AllowPNG> </o:OfficeDocumentSettings> </xml><![endif]-->Debit Cash, $3,000; credit Accounts Receivable, $3,000.</p>
E) No adjustment is required.

258) Which of the following regarding prepaid expenses is false?

A) They are paid for in advance of receiving their benefits.
B) They are assets.
C) When they are used, their costs become expenses.
D) The adjusting entry for prepaid expenses increases expenses and decreases liabilities.
E) The adjusting entry for prepaid expenses increases expenses and decreases assets.

259) An annual reporting period consisting of any twelve consecutive months or 52 weeks is known as:

A) Fiscal year.
B) Calendar year.
C) Interim financial period.
D) Natural business year.
E) Seasonal year.

260) Two accounting principles that are critical to the adjusting process used in accrual accounting are:

A) Revenue recognition and monetary unit.
B) Revenue recognition and going-concern.
C) Expense recognition (matching) and cost.
D) Expense recognition (matching) and business entity.
E) Revenue recognition and Expense recognition (matching).

261) Which of the following regarding unearned revenues is false?

A) They are payments received in advance of services performed.
B) The adjusting entry for unearned revenues increases assets and increases revenues.
C) The adjusting entry for unearned revenues increases revenues and decreases liabilities.
D) They are liabilities.
E) As they are earned, they become revenues.

262) Assuming prepaid expenses are originally recorded in balance sheet accounts, the adjusting entry to record use of a prepaid expense is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

263) Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

264) The adjusting entry to record an accrued expense is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

265) The adjusting entry to record an accrued revenue is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

266) On October 1, Vista View Company rented warehouse space to a tenant for $4,400 per month. The tenant paid five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Revenue account. The company's annual accounting period ends on December 31. The year-end adjusting entry needed on December 31 is:

A) Debit Unearned Revenue, $8,800; credit Revenue, $8,800.
B) Debit Accounts Receivable, $13,200; credit Revenue, $13,200.
C) Debit Accounts Receivable, $22,000; credit Revenue, $22,000.
D) Debit Unearned Revenue, $22,000; credit Revenue, $22,000.
E) Debit Unearned Revenue, $13,200; credit Revenue, $13,200.

267) On October 1, Vista View Company rented warehouse space to a tenant for $2,500 per month. The tenant paid five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Revenue account. The company's annual accounting period ends on December 31. The year-end adjusting entry needed on December 31 is:

A) Debit Accounts Receivable, $12,500; credit Revenue, $12,500.
B) Debit Accounts Receivable, $7,500; credit Revenue, $7,500.
C) Debit Unearned Revenue, $7,500; credit Revenue, $7,500.
D) Debit Unearned Revenue, $5,000; credit Revenue, $5,000.
E) Debit Unearned Revenue, $12,500; credit Revenue, $12,500.

268) On October 1, Vista View Company rented warehouse space to a tenant for $3,600 per month and received $18,000 for five months’ rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Revenue account. The company’s annual accounting period ends on December 31. The Unearned Revenue account balance at the end of December, after adjustment, should be:

A) $7,200.
B) $14,400.
C) $10,800.
D) $3,600.
E) $18,000.

269) On October 1, Vista View Company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Revenue account. The company's annual accounting period ends on December 31. The Unearned Revenue account balance at the end of December, after adjustment, should be:

A) $5,000.
B) $7,500.
C) $12,500.
D) $2,500.
E) $10,000.

270) Chase Company rents space to a tenant for $2,600 per month. The tenant currently owes rent for November and December. The tenant has agreed to pay the November, December, and January rents in full on January 15 and has agreed not to fall behind again. The adjusting entry needed on December 31 is:

A) Debit Accounts Receivable, $7,800; credit Revenue, $7,800.
B) Debit Accounts Receivable, $2,600; credit Revenue, $2,600.
C) Debit Unearned Revenue, $5,200; credit Revenue, $5,200.
D) Debit Accounts Receivable, $5,200; credit Revenue, $5,200.
E) Debit Unearned Revenue, $2,600; credit Revenue, $2,600.

271) Chase Company rents space to a tenant for $2,200 per month. The tenant currently owes rent for November and December. The tenant has agreed to pay the November, December, and January rents in full on January 15 and has agreed not to fall behind again. The adjusting entry needed on December 31 is:

A) Debit Accounts Receivable, $6,600; credit Revenue, $6,600.
B) Debit Unearned Revenue, $4,400; credit Revenue, $4,400.
C) Debit Unearned Revenue, $2,200; credit Revenue, $2,200.
D) Debit Accounts Receivable, $4,400; credit Revenue, $4,400.
E) Debit Accounts Receivable, $2,200; credit Revenue, $2,200.

272) Chase Company has 10 employees, who earn a total of $2,100 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended on December 31, which is a Wednesday, and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is:

A) Debit Salaries Expense, $10,500; credit Salaries Payable, $10,500.
B) Debit Salaries Payable, $6,300; credit Salaries Expense, $6,300.
C) Debit Salaries Expense, $4,200; credit Salaries Payable, $4,200.
D) Debit Salaries Expense, $6,300; credit Cash, $6,300.
E) Debit Salaries Expense, $6,300; credit Salaries Payable, $6,300.

273) Chase Company has 10 employees, who earn a total of $1,800 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended on December 31, which is a Wednesday, and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is:

A) Debit Salaries Expense, $5,400; credit Salaries Payable, $5,400.
B) Debit Salaries Expense, $3,600; credit Salaries Payable, $3,600.
C) Debit Salaries Expense, $9,000; credit Salaries Payable, $9,000.
D) Debit Salaries Payable, $5,400; credit Salaries Expense, $5,400.
E) Debit Salaries Expense, $5,400; credit Cash, $5,400.

274) On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs, and only prepares adjustments at year-end. The adjusting entry needed on December 31 of the first year is:

A) Debit Depreciation Expense, $9,000; credit Accumulated Depreciation, $9,000.
B) Debit Depreciation Expense, $18,000; credit Accumulated Depreciation, $18,000.
C) Debit Depreciation Expense, $90,000; credit Accumulated Depreciation, $90,000.
D) Debit Depreciation Expense, $18,000; credit Equipment, $18,000.
E) Debit Depreciation Expense, $9,000; credit Equipment, $9,000.

275) Holman Company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method, and only prepares adjustments at year-end. The adjusting entry needed to record annual depreciation is:

A) Debit Depreciation Expense, $15,000; credit Equipment, $15,000.
B) Debit Equipment, $15,000; credit Accumulated Depreciation, $15,000.
C) Debit Depreciation Expense, $10,000; credit Accumulated Depreciation, $10,000.
D) Debit Depreciation Expense, $10,000; credit Equipment, $10,000.
E) Debit Depreciation Expense, $15,000; credit Accumulated Depreciation, $15,000.

276) On November 1, Jasper Company loaned another company $180,000 at a 7.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The amount of interest revenue that should be reported in the first year is:

A) $6,175.
B) $0.
C) $18,700.
D) $2,100.
E) $7,500.

277) On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The amount of interest revenue that should be reported in the first year is:

A) $0.
B) $6,000.
C) $5,000.
D) $16,667.
E) $1,000.

278) On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31, and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

A) No entry required.
B) Debit Interest Expense, $5,000; credit Interest Payable, $5,000.
C) Debit Interest Expense, $1,000; credit Note Payable, $1,000.
D) Debit Interest Receivable, $500; credit Interest Revenue, $500.
E) Debit Interest Receivable, $1,000; credit Interest Revenue, $1,000.

279) On December 1, Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank. The note payable plus interest will not be paid until April 1 of the following year. The company's annual accounting period ends on December 31, and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

A) No entry required.
B) Debit Interest Expense, $250; credit Interest Payable, $250.
C) Debit Interest Expense, $250; credit Note Payable, $250.
D) Debit Interest Payable, $1,000; credit Interest Expense, $1,000.
E) Debit Interest Expense, $1,000; credit Interest Payable, $1,000.

280) Which of the following statements is incorrect:

A) An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.
B) An adjusted trial balance is a list of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger.
C) Each trial balance amount is used in preparing the financial statements.
D) Financial statements can be prepared directly from information in the unadjusted trial balance.
E) Financial statements can be prepared directly from information in the adjusted trial balance.

281) On December 31, Carmack Company received a $215 utility bill for December that it will not pay until January 15. The adjusting entry needed on December 31 to accrue this expense is:

A) Debit Utilities Expense $215; credit Accounts Payable $215.
B) Debit Accounts Payable $215; credit Utilities Expense $215.
C) Debit Prepaid Utilities $215; credit Cash $215.
D) Debit Utilities Expense $215; credit Prepaid Utilities $215.
E) Debit Prepaid Utilities $215; credit Accounts Payable $215.

282) On December 31, Jacoby Company received a $385 bill for the purchase of supplies in December that it will not pay for until January 15. Jacoby follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry needed on December 31 to accrue this cost is:

A) Debit Supplies $385; credit Accounts Payable $385.
B) Debit Accounts Payable $385; credit Supplies $385.
C) Debit Accounts Payable $385; credit Cash $385.
D) Debit Supplies Expense $385; credit Cash $385.
E) Debit Supplies Expense $385; credit Supplies $385.

283) On December 31, Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000. The insurance was purchased on July 1 of the same year for one year of insurance coverage, with coverage beginning on that date. The adjusting entry needed on December 31 is:

A) Debit Prepaid Insurance $6,000; credit Cash $6,000.
B) Debit Insurance Expense $3,000; credit Accounts Payable $3,000.
C) Debit Insurance Expense $3,000; credit Prepaid Insurance $3,000.
D) Debit Cash $6,000; credit Prepaid Insurance $6,000.
E) Debit Insurance Expense $6,000; credit Accounts Payable $6,000.

284) On December 31, Jacoby Company's Prepaid Rent account had a balance before adjustment of $6,000. Three months' rent was paid in advance on December 1, the first day of the lease term. The adjusting entry needed on December 31 is:

A) Debit Prepaid Rent $6,000; credit Cash $6,000.
B) Debit Rent Expense $2,000; credit Accounts Payable $2,000.
C) Debit Rent Expense $2,000; credit Prepaid Rent $2,000.
D) Debit Cash $2,000; credit Prepaid Rent $2,000.
E) Debit Rent Expense $6,000; credit Accounts Payable $6,000.

285) Which of the following accounts is a permanent account?

A) Revenue.
B) Office supplies expense.
C) Interest revenue.
D) Accounts payable.
E) Salaries expense.

286) Closing the temporary accounts at the end of each accounting period does not do which of the following?

A) Transfer the effects of temporary accounts to the retained earnings account on the balance sheet.
B) Prepares the dividends account for use in the next period.
C) Brings the revenue and expense accounts to zero balances.
D) Has no effect on the retained earnings account.
E) Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends.

287) Journal entries that transfer the end-of-period balances in revenue, expense, and dividends accounts to the permanent Retained Earnings account are known as:

A) Adjusting entries.
B) Closing entries.
C) Final entries.
D) Work sheet entries.
E) Updating entries.

288) Closing entries are necessary at the end of each period to:

A) Calculate net income or net loss for an accounting period.
B) Ensure that all permanent accounts are closed to zero at the end of each accounting period.
C) Ensure that the company complies with state laws.
D) Ensure that Retained Earnings reflects the periods’ revenues, expenses, and dividends.
E) Ensure that management is aware of how well the company is operating.

289) Closing entries are required:

A) If management has decided to cease operating the business.
B) Only if the company adheres to the accrual method of accounting.
C) If a company's bookkeeper does not choose to prepare reversing entries.
D) So that revenue, expense, and dividends accounts begin each period with zero balances.
E) In order to satisfy the Internal Revenue Service guidelines.

290) The recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the:

A) Accounting period.
B) Operating cycle.
C) Accounting cycle.
D) Closing cycle.
E) Natural business year.

291) 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 post-closing trial balance.
D) Preparing the financial statements.
E) Preparing a work sheet.

292) A classified balance sheet:

A) Measures a company's ability to pay its bills on time.
B) Organizes assets and liabilities into subgroups.
C) Broadly groups items into assets, liabilities and equity.
D) Reports operating, investing, and financing activities.
E) Reports the effect of profit and dividends on retained earnings.

293) The assets section of a classified balance sheet usually includes the subgroups:

A) Current assets, long-term investments, plant assets, and intangible assets.
B) Current assets, long-term assets, revenues, and intangible assets.
C) Current assets, long-term investments, plant assets, and equity.
D) Current liabilities, long-term investments, plant assets, and intangible assets.
E) Current assets, liabilities, plant assets, and intangible assets.

294) The usual order for the asset subgroups of a classified balance sheet is:

A) Current assets, prepaid expenses, long-term investments, intangible assets.
B) Long-term investments, current assets, plant assets, intangible assets.
C) Current assets, long-term investments, plant assets, intangible assets.
D) Intangible assets, current assets, long-term investments, plant assets.
E) Plant assets, intangible assets, long-term investments, current assets.

295) A classified balance sheet differs from an unclassified balance sheet in that:

A) An unclassified balance sheet is never used by large companies.
B) A classified balance sheet groups items into the broad categories of asset, liability, and equity.
C) A classified balance sheet classifies assets and liabilities as current (short-term) and noncurrent (long-term).
D) A classified balance sheet will include more accounts than an unclassified balance sheet for the same company on the same date.
E) A classified balance sheet is not usually provided to outside parties.

296) Two common subgroups for liabilities on a classified balance sheet are:

A) Current liabilities and intangible liabilities.
B) Present liabilities and operating liabilities.
C) General liabilities and specific liabilities.
D) Intangible liabilities and long-term liabilities.
E) Current liabilities and long-term liabilities.

297) Which of the following is classified as a current asset?

A) Office equipment.
B) Patent.
C) Unearned revenue.
D) Prepaid expenses.
E) Land.

298) Which of the following is classified as a plant asset?

A) Office equipment.
B) Patent.
C) Cash.
D) Office supplies.
E) Merchandise inventory.

299) The current ratio:

A) Is used to measure a company's profitability.
B) Is used to measure the relation between assets and long-term debt.
C) Measures the effect of operating income on profit.
D) Is used to help assess a company's ability to pay its debts in the near future.
E) Is calculated by dividing current assets by equity.

300) Which of the following about the current ratio is not true?

A) Current ratio is calculated by dividing current assets by current liabilities.
B) Current ratio helps to assess a company's ability to pay its debts in the near future.
C) Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit.
D) Current ratio can affect a supplier’s decision about whether to allow a customer to buy on credit.
E) Current ratio can reveal challenges in covering short-term obligations if it is less than 1.

301) The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $400. The Adjustments columns shows a credit of $225 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

A) $400 debit.
B) $225 debit.
C) $175 credit.
D) $400 credit.
E) $175 debit.

302) The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750. The Adjustments columns shows a credit of $425 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

A) $325 debit.
B) $325 credit.
C) $425 debit.
D) $750 debit.
E) $425 credit.

303) A document that is used internally by companies to help with adjusting and closing accounts and with preparing financial statements is a(n):

A) Adjusted trial balance.
B) Work sheet.
C) Post-closing trial balance.
D) Unadjusted trial balance.
E) General ledger.

304) Accumulated Depreciation and Revenue would be sorted to which respective columns in completing a work sheet?

A) Balance Sheet and Statement of Retained Earnings-Credit and Income Statement-Credit.
B) Balance Sheet and Statement of Retained Earnings-Debit and Income Statement-Debit.
C) Income Statement-Debit and Income Statement-Credit.
D) Balance Sheet and Statement of Retained Earnings-Debit and Balance Sheet and Statement of Retained Earnings-Credit.
E) Balance Sheet and Statement of Retained Earnings-Debit; and Income Statement-Credit.

305) Which of the following statements is incorrect?

A) Work sheets are useful aids in the accounting process.
B) On the work sheet, the effects of the accounting adjustments are shown on the account balances.
C) After the work sheet is completed, it can be used to help prepare the financial statements.
D) On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.
E) A worksheet is not a substitute for financial statements.

306) A company shows a $720 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $260. This adjusting entry results in:

A) $260 decrease in net income.
B) $260 difference between the debit and credit columns of the Unadjusted Trial Balance.
C) $260 increase in net income.
D) An error in the financial statements.
E) $260 of prepaid insurance.

307) A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:

A) $200 decrease in net income.
B) $200 increase in net income.
C) $200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D) $200 of prepaid insurance.
E) An error in the financial statements.

308) The document that shows the effects of proposed or “what-if” transactions is a:

A) Work sheet.
B) Income statement.
C) Balance sheet.
D) Statement of retained earnings.
E) Statement of cash flows.

309) In preparing a work sheet, an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is:

A) An expense amount placed in the Balance Sheet Credit column.
B) A revenue amount placed in the Balance Sheet Debit column.
C) A liability amount placed in the Income Statement Credit column.
D) An asset amount placed in the Balance Sheet Credit column.
E) A liability amount placed in the Balance Sheet Debit column.

310) If the Balance Sheet and Statement of Retained Earnings columns of a work sheet fail to balance when the net income is added to the Balance Sheet and Statement of Retained Earnings Credit column, the cause could be:

A) An expense entered in the Balance Sheet and Statement of Retained Earnings Debit column.
B) A revenue entered in the Balance Sheet and Statement of Retained Earnings Credit column.
C) An asset amount entered in the Income Statement and Statement of Retained Earnings Debit column.
D) A liability amount entered in the Income Statement and Statement of Retained Earnings Credit column.
E) An expense entered in the Balance Sheet and Statement of Retained Earnings Credit column.

311) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $6,700.
B) $2,745.
C) $2,900.
D) $1,820.
E) $2,555.

312) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $1,400.
B) $1,855.
C) $1,905.
D) $2,060.
E) $4,670.

313) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $1,750.
B) $2,745.
C) $2,060.
D) $4,060.
E) $3,065.

314) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $3,305.
B) $4,180.
C) $2,350.
D) $2,540.
E) $3,225.

315) Which of the following errors would cause the Balance Sheet and Statement of Retained Earnings columns of a work sheet to be out of balance?

A) Entering an asset amount in the Income Statement Debit column.
B) Entering a liability amount in the Income Statement Credit column.
C) Entering an expense amount in the Balance Sheet and Statement of Retained Earnings Debit column.
D) Entering a revenue amount in the Balance Sheet and Statement of Retained Earnings Debit column.
E) Entering a liability amount in the Balance Sheet and Statement of Retained Earnings Credit column.

316) The Unadjusted Trial Balance columns of a work sheet total $87,800. The Adjustments columns contain entries for the following:Office supplies used during the period, $2,400.Expiration of prepaid rent, $1,050.Accrued salaries expense, $850.Depreciation expense, $1,150.Accrued service fees receivable, $750.The Adjusted Trial Balance columns total is:

A) $87,800.
B) $91,250.
C) $90,550.
D) $81,600.
E) $94,000.

317) The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following:
Office supplies used during the period, $1,200.Expiration of prepaid rent, $700.Accrued salaries expense, $500.Depreciation expense, $800.Accrued service fees receivable, $400.
The Adjusted Trial Balance columns total is:

A) $80,400.
B) $84,000.
C) $85,700.
D) $85,900.
E) $87,600.

318) The balances in the unadjusted columns of a work sheet will agree with:

A) the balances reflected in the company's financial statements.
B) the balances reflected in the company's unadjusted trial balance.
C) whatever balances management has decided to report.
D) the balances in the company's post-closing trial balance.
E) the balances management budgeted for the accounting period.

319) In the process of completing a work sheet, the accountant determines that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to

A) the Adjustments debit column and the Adjustments credit column.
B) the Unadjusted Trial Balance debit column and the Adjustments credit column.
C) it is not practical to enter Net Income (or Net Loss) on the work sheet.
D) the Balance Sheet & Statement of Retained Earnings debit column and the Income Statement credit column.
E) the Income Statement debit column and the Balance Sheet & Statement of Retained Earnings credit column.

320) The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the Retained Earnings account is the:

A) Income Summary account.
B) Closing account.
C) Balance column account.
D) Contra account.
E) Nominal account.

321) Castillo Services paid K. Castillo, the sole shareholder of Castillo Services, $6,600 in dividends during the current year. The entry to close the dividends account at the end of the year is:

A) Debit Dividends $6,600; credit Retained earnings $6,600
B) Debit Retained earnings $6,600; credit Dividends $6,600
C) Debit Dividends $6,600; credit Cash, $6,600
D) Debit Retained earnings $6,600; credit Salary Expense $6,600
E) Debit Income Summary $6,600; credit Retained earnings $6,600

322) Castillo Services paid K. Castillo, the sole shareholder of Castillo Services, $5,700 in dividends during the current year. The entry to close the dividends account at the end of the year is:

A) Debit Dividends $5,700; credit Cash, $5,700
B) Debit Retained earnings $5,700; credit Dividends $5,700
C) Debit Dividends $5,700; credit Retained earnings $5,700
D) Debit Retained earnings $5,700, credit Salary Expense $5,700
E) Debit Income Summary $5,700; credit Retained earnings $5,700

323) High Step Shoes had annual revenues of $202,000, expenses of $112,200, and dividends of $24,800 during the current year. The retained earnings account before closing had a balance of $314,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

A) Debit Retained earnings $314,000; credit Income Summary $314,000
B) Debit Income Summary $89,800; credit Retained earnings $89,800
C) Debit Retained earnings $65,000; credit Income Summary $65,000
D) Debit Retained earnings $89,800; credit Income Summary $89,800
E) Debit Income Summary $65,000; credit Retained earnings $65,000

324) High Step Shoes had annual revenues of $185,000, expenses of $103,700, and dividends of $18,000 during the current year. The retained earnings account before closing had a balance of $297,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

A) Debit Retained earnings $297,000; credit Income Summary $297,000
B) Debit Retained earnings $63,300; credit Income Summary $63,300
C) Debit Income Summary $63,300; credit Retained earnings $63,300
D) Debit Income Summary $81,300, credit Retained earnings $81,300
E) Debit Retained earnings $81,300; credit Income Summary $81,300

325) High Step Shoes had annual revenues of $193,000, expenses of $107,700, and paid dividends of $21,200 during the current year. The retained earnings account before closing had a balance of $305,000. The Net Income for the year is:

A) $369,100
B) $193,000
C) $85,300
D) $390,300
E) $64,100

326) High Step Shoes had annual revenues of $185,000, expenses of $103,700, and paid dividends of $18,000 during the current year. The retained earnings account before closing had a balance of $297,000. The Net Income for the year is:

A) $185,000
B) $63,300
C) $81,300
D) $360,300
E) $378,300

327) High Step Shoes had annual revenues of $201,000, expenses of $111,700, and paid dividends of $24,400 during the current year. The retained earnings account before closing had a balance of $313,000. The ending retained earnings balance after closing is:

A) $89,300
B) $402,300
C) $201,000
D) $64,900
E) $377,900

328) High Step Shoes had annual revenues of $185,000, expenses of $103,700, and paid dividends of $18,000 during the current year. The retained earnings account before closing had a balance of $297,000. The ending retained earnings balance after closing is:

A) $185,000
B) $63,300
C) $81,300
D) $360,300
E) $378,300

329) A company had revenues of $57,000 and expenses of $44,750 for the accounting period. Dividends of $6,275were paid in cash during the same period. Which of the following entries could not be a closing entry?

A) Debit Revenues $57,000; credit Income Summary $57,000.
B) Debit Income Summary $12,250; credit Retained earnings $12,250.
C) Debit Income Summary $57,000; credit Revenues $57,000.
D) Debit Retained earnings $6,275; credit Dividends $6,275.
E) Debit Income Summary $44,750; credit Expenses $44,750.

330) A company had revenues of $75,000 and expenses of $62,000 for the accounting period. Dividends of $8,000 were paid in cash during the same period. Which of the following entries could not be a closing entry?

A) Debit Income Summary $13,000; credit Retained earnings $13,000.
B) Debit Income Summary $75,000; credit Revenues $75,000.
C) Debit Revenues $75,000; credit Income Summary $75,000.
D) Debit Income Summary $62,000, credit Expenses $62,000.
E) Debit Retained earnings $8,000, credit Dividends $8,000.

331) The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $156,600.
B) $70,200.
C) $64,800.
D) $86,400.
E) $140,400.

332) The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $65,000.
B) $80,000.
C) $130,000.
D) $145,000.
E) $280,000.

333) The following information is available for the Higgins Travel Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $63,800.
B) $174,800.
C) $136,500.
D) $98,200.
E) $209,200.

334) The following information is available for the Higgins Travel Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $75,500.
B) $184,500.
C) $99,500.
D) $160,500.
E) $130,000.

335) The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $238,500.
B) $289,500.
C) $275,700.
D) $303,300.
E) $257,100.

336) The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the Retained earnings account?

A) $239,400.
B) $274,600.
C) $303,400.
D) $289,000.
E) $257,000.

337) The Retained earnings account has a credit balance of $28,900 before closing entries are made. If total revenues for the period are $90,200, total expenses are $66,400, and dividends are $15,300, what is the ending balance in the Retained earnings account after all closing entries are made?

A) $28,900.
B) $13,600.
C) $37,400.
D) $23,800.
E) $52,700.

338) The Retained earnings account has a credit balance of $37,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000, what is the ending balance in the Retained earnings account after all closing entries are made?

A) $37,000.
B) $35,400.
C) $43,400.
D) $28,000.
E) $52,400.

339) The Retained earnings account has a credit balance of $41,000 before closing entries are made. Total revenues for the period are $59,200, total expenses are $41,800, and dividends are $10,600. What is the correct closing entry for the revenue accounts?

A) Debit Revenue accounts $59,200; credit Retained earnings $41,000.
B) Debit Revenue accounts $41,000; credit Retained earnings $41,000.
C) Debit Income Summary $59,200; credit Revenue accounts $59,200.
D) Debit Income Summary $41,000; credit Retained earnings $41,000.
E) Debit Revenue accounts $59,200; credit Income Summary $59,200.

340) The Retained earnings account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000. What is the correct closing entry for the revenue accounts?

A) Debit Income Summary $55,200; credit Revenue accounts $55,200.
B) Debit Revenue accounts $37,000; credit Retained earnings $37,000.
C) Debit Revenue accounts $55,200; credit Retained earnings $37,000.
D) Debit Revenue accounts $55,200; credit Income Summary $55,200.
E) Debit Income Summary $37,000; credit Retained earnings $37,000.

341) The Retained earnings account has a credit balance of $47,000 before closing entries are made. Total revenues for the period are $65,200, total expenses are $44,800, and dividends are $13,000. What is the correct closing entry for the expense accounts?

A) Debit Expense accounts $44,800; credit Income Summary $44,800.
B) Debit Income Summary $44,800; credit Retained earnings $44,800.
C) Debit Expense accounts $47,000; credit Retained earnings $47,000.
D) Debit Income Summary $44,800; credit Expense accounts $44,800.
E) Debit Dividends account $44,800; credit Expense accounts $44,800.

342) The Retained earnings account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000. What is the correct closing entry for the expense accounts?

A) Debit Income Summary $39,800; credit Expense accounts $39,800.
B) Debit Expense accounts $37,000; credit Retained earnings $37,000.
C) Debit Dividends account $39,800; credit Expense accounts $39,800.
D) Debit Expense accounts $39,800; credit Income Summary $39,800.
E) Debit Income Summary $39,800; credit Retained earnings $39,800.

343) The Income Summary account is used to:

A) Adjust and update asset and liability accounts.
B) Close the revenue and expense accounts.
C) Determine the appropriate dividend amount.
D) Replace the income statement under certain circumstances.
E) Replace the Retained earnings account in some businesses.

344) A company paid Jen Rogers, its sole stockholder, a total of $19,000 in dividends during the current year. The entry needed to close the dividends account is:

A) Debit Income Summary and credit Cash for $19,000.
B) Debit Dividends and credit Cash for $19,000
C) Debit Dividends and credit Retained earnings for $19,000.
D) Debit Income Summary and credit Dividends for $19,000.
E) Debit Retained earnings and credit Dividends for $19,000.

345) A company paid Jen Rogers, its sole stockholder, a total of $35,000 in dividends during the current year. The entry needed to close the dividends account is:

A) Debit Income Summary and credit Cash for $35,000.
B) Debit Dividends and credit Cash for $35,000.
C) Debit Income Summary and credit Dividends for $35,000.
D) Debit Retained earnings and credit Dividends for $35,000.
E) Debit Dividends and credit Retained earnings for $35,000.

346) A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Retained earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

A) $15,250 debit.
B) $6,850 credit.
C) $21,250 credit.
D) $15,250 credit.
E) $16,390 credit.

347) A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Retained earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

A) $16,780 debit.
B) $7,180 credit.
C) $16,780 credit.
D) $18,280 credit.
E) $23,780 credit.

348) It is obvious that an error occurred in the preparation and/or posting of closing entries if:

A) all revenue and expense accounts have zero balances.
B) the Retained earnings account is debited for the amount of the net loss for the period.
C) the income summary account is debited for the amount of net income for the period.
D) all balance sheet accounts have zero balances.
E) only permanent accounts appear on the post-closing trial balance.

349) At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $205,000; Total Liabilities = $26,100; Common stock of $60,900; and Retained earnings = $118,000. During the year, the company reported revenues of $53,200 and expenses of $34,800. In addition, dividends for the year totaled $23,200. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

A) $113,200.
B) $159,600.
C) $76,400.
D) $4,800.
E) $122,800.

350) At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $25,000; Common stock of $100,000; and Retained earnings = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, dividends for the year totaled $20,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

A) $116,000.
B) $136,000.
C) $24,000.
D) $96,000.
E) $104,000.

351) At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $240,000 and Total Liabilities of $18,500 and Common stock of $74,000. During the year, the company reported total revenues of $281,000 and expenses of $217,500. Also, dividends during the year totaled $58,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

A) $239,500.
B) $147,000.
C) $150,000.
D) $208,000.
E) $153,000.

352) At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $195,000; Total Liabilities of $15,000; and Common stock of $60,000. During the year, the company reported total revenues of $226,000 and expenses of $175,000. Also, dividends during the year totaled $48,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

A) $174,000.
B) $78,000.
C) $171,000.
D) $120,000.
E) $123,000.

353) After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $27,000. The entry to close the income summary account will be:

A) Debit Dividends $27,000; Credit Retained earnings $27,000.
B) Debit Income Summary $27,000; credit Dividends $27,000.
C) Debit Income Summary $27,000; credit Retained earnings $27,000.
D) Debit Dividends $27,000; credit Income Summary $27,000.
E) Debit Retained earnings $27,000; credit Income Summary $27,000.

354) After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

A) Debit Dividends $33,000; credit Income Summary $33,000.
B) Debit Income Summary $33,000; credit Dividends $33,000.
C) Debit Income Summary $33,000; credit Retained earnings $33,000.
D) Debit Retained earnings $33,000; credit Income Summary $33,000.
E) Debit Dividends $33,000; Credit Retained earnings $33,000.

355) A list of all permanent accounts and their balances after all closing entries have been made is a(n):

A) Unadjusted trial balance.
B) Post-closing trial balance.
C) General ledger.
D) Adjusted trial balance.
E) Work sheet.

356) Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

A) Office Equipment.
B) Accumulated Depreciation-Office Equipment.
C) Depreciation Expense-Office Equipment.
D) Retained earnings.
E) Salaries Payable.

357) Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

A) Land.
B) Dividends.
C) Accounts Payable.
D) Unearned Revenue.
E) Prepaid Insurance.

358) Which of the following statements is true?

A) Retained earnings must be closed each accounting period.
B) A post-closing trial balance should include only permanent accounts.
C) The work sheet can be substituted for preparing financial statements.
D) By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts.
E) Closing entries are only necessary if errors have been made.

359) Reversing entries:

A) Are optional.
B) Are mandatory.
C) Correct errors in journal entries.
D) Are required by GAAP.
E) Are prepared on the worksheet.

360) Karl Company accrued wages of $8,250 that were earned by employees but were unpaid at the year-end. Assuming Karl uses reversing entries, which of the following entries correctly reverses the accrued wages at the beginning of the following year?

A) Debit Wages Payable $8,250; credit Wages Expense $8,250.
B) Debit Wages Expense $8,250; credit Cash $8,250.
C) Debit Cash $8,250; credit Wages Expense $8,250.
D) Debit Wages Expense $8,250; credit Wages Payable $8,250.
E) Debit Wages Payable $8,250; credit Cash $8,250.

361) Karl Company accrued wages of $7,350 that were earned by employees but were unpaid at the year-end. Assuming Karl uses reversing entries, which of the following entries correctly reverses the accrued wages at the beginning of the following year?

A) Debit Wages Expense $7,350; credit Cash $7,350.
B) Debit Wages Expense $7,350; credit Wages Payable $7,350.
C) Debit Wages Payable $7,350; credit Cash $7,350.
D) Debit Cash $7,350; credit Wages Expense $7,350.
E) Debit Wages Payable $7,350; credit Wages Expense $7,350.

362) Which of the following is not true regarding reversing entries?

A) Reversing entries are optional.
B) Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of a reporting period.
C) Reversing entries are used to simplify a company's record keeping.
D) Reversing entries are dated the first day of the new accounting period.
E) Reversing entries should not be the exact opposite of previous period adjusting entries.

363) Reversing entries:

A) Are necessary when journal entries have been incorrectly recorded.
B) Are a required step in the accounting cycle.
C) Will often result temporarily in abnormal account balances in some accounts.
D) Are required only if the company uses accounting software to record journal entries.
E) Must be made before preparing the post-closing trial balance.

364) The purpose of reversing entries is to:

A) Simplify a company’s record keeping.
B) Correct errors made in previous journal entries.
C) Ensure that closing entries have been properly posted to the ledger accounts.
D) Make certain that only permanent accounts are carried forward into the next accounting period.
E) Complete a required step in the accounting cycle.

365) Which of the following statements regarding a worksheet is false?

A) A worksheet aids in the preparation of financial statements.
B) A worksheet reduces possible errors when working with many accounts and adjustments.
C) A worksheet is not useful in planning and organizing an audit of financial statements.
D) A worksheet helps in preparing interim financial statements.
E) A worksheet shows the effects of proposed or "what-if" transactions.

366) Which of the following statements regarding the Income Statement columns on the work sheet is false?

A) The balances in the Income Statement credit column are revenues.
B) The balances in the Income Statement credit column are unearned revenues.
C) The balances in the Income Statement debit column are expenses.
D) The difference between the totals of the Income Statement columns is net income or net loss.
E) The net income or net loss from the Income Statement columns is entered in the Balance Sheet & Statement of Retained Earnings columns.

367) Which of the following is a permanent account?

A) Consulting revenue.
B) Salaries expense.
C) Rent expense.
D) Prepaid rent.
E) Rent revenue.

368) Which of the following is a temporary account?

A) Accumulated Depreciation—Equipment.
B) Prepaid Insurance.
C) Cash.
D) Accounts Receivable.
E) Depreciation Expense.

369) Which of the following statements about a company's operating cycle is not true:

A) Non-current items are those expected to come due within one year or the company's operating cycle.
B) The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services.
C) The length of a company's operating cycle depends on its activities.
D) For a merchandiser selling products, the operating cycle is the time span between paying suppliers for merchandise and receiving cash from customers.
E) Most operating cycles are less than one year.

370) The steps in preparing financial statements are known as the:

A) Interim financial statements.
B) Fiscal year.
C) Calendar-year.
D) Operating cycle.
E) Accounting cycle.

371) Use the information in the adjusted trial balance presented below to calculate current assets for Wicked Wicker Company:

A) $10,100.
B) $89,600.
C) $27,000.
D) $394,600.
E) $27,000.
F) $10,100.
G) $105,000.

372) Use the information in the adjusted trial balance presented below to calculate current assets for Wicked Wicker Company:

A) $21,200.
B) $45,600.
C) $24,400.
D) $95,600.
E) $41,200.

373) Use the information in the adjusted trial balance presented below to calculate the current ratio for Wicked Wicker Company:

A) 0.51.
B) 1.98.
C) 1.88.
D) 3.53.
E) 1.71.

374) Use the information in the adjusted trial balance presented below to calculate the current ratio for Wicked Wicker Company:

A) 1.85.
B) .54.
C) 3.92.
D) 1.77.
E) 1.60.

375) An adjusting entry that increases an asset and increases a revenue is known as a(n):

A) Accrued expense.
B) Deferred expense.
C) Deferred revenue.
D) Accrued revenue.
E) Depreciation.

376) Based on the following information from Scranton Company's balance sheet, calculate the current ratio.

A) 1.07.
B) 3.52.
C) 3.06.
D) 2.25.
E) 0.44.

377) Based on the following information from Scranton Company's balance sheet, calculate the current ratio.

A) .44.
B) 3.51.
C) 3.33.
D) 1.06.
E) 2.23.

378) The following information is available for Cubic Company before closing the accounts. After all closing entries are made, what will be the balance in the Retained earnings account?

A) $108,100.
B) $174,100.
C) $244,200.
D) $897,900.
E) $212,100.

379) The following information is available for Cubic Company before closing the accounts. After all closing entries are made, what will be the balance in the Retained earnings account?

A) $115,000.
B) $225,000.
C) $264,000.
D) $186,000.
E) $956,000.

380) The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained earnings?

A) $47,000.
B) $80,875.
C) $33,875.
D) $49,150.
E) $94,000.

381) The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained earnings?

A) $80,000.
B) $64,400.
C) $43,000.
D) $32,400.
E) $42,400.

382) For the year ended December 31, a company had revenues of $197,000 and expenses of $118,200. $39,400 in dividends were paid during the year. Which of the following entries could not be a closing entry?

A) Debit Income Summary $197,000; credit Revenues $197,000.
B) Debit Income Summary $78,800; credit Retained earnings $78,800.
C) Debit Income Summary $118,200; credit Expenses $118,200.
D) Debit Revenues $197,000; credit Income Summary $197,000.
E) Debit Retained earnings $39,400; credit Dividends $39,400.

383) For the year ended December 31, a company had revenues of $187,000 and expenses of $109,000. $37,000 in dividends were paid during the year. Which of the following entries could not be a closing entry?

A) Debit Income Summary $78,000; credit Retained earnings $78,000.
B) Debit Retained earnings $37,000; credit Dividends $37,000.
C) Debit revenues $187,000; credit Income Summary $187,000.
D) Debit Income Summary $109,000, credit expenses $109,000.
E) Debit Income Summary $187,000; credit revenues $187,000.

384) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $13,600 of unpaid and unrecorded salaries. The next payday is January 3, at which time $34,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

A) Debit Salaries expense $20,400; debit Salaries payable $13,600; credit Cash $34,000.
B) Debit Salaries expense $20,400; credit Salaries payable $20,400.
C) Debit Salaries payable $20,400; credit Cash $20,400.
D) Debit Salaries payable $13,600; credit Salaries expense $13,600.
E) Debit Salaries expense $13,600; credit Salaries payable $13,600.

385) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

A) Debit Salaries expense $12,000; credit Salaries payable $12,000.
B) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000.
C) Debit Salaries payable $18,000; credit Cash $18,000.
D) Debit Salaries payable $12,000, credit Salaries expense $12,000.
E) Debit Salaries expense $18,000; credit Salaries payable $18,000.

386) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $8,800 of unpaid and unrecorded salaries. The next payday is January 3, at which time $22,000 will be paid. Prepare the journal on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

A) Debit Salaries expense $8,800; debit Salaries payable $13,200; credit Cash $22,000.
B) Debit Salaries payable $22,000; credit Cash $22,000.
C) Debit Salaries expense $13,200; credit Cash $13,200.
D) Debit Salaries expense $13,200; debit Salaries payable $8,800; credit Cash $22,000.
E) Debit Salaries expense $22,000; credit Cash $22,000.

387) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the journal entry on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

A) Debit Salaries expense $12,000; debit Salaries payable $18,000; credit Cash $30,000.
B) Debit Salaries expense $30,000; credit Cash $30,000.
C) Debit Salaries payable $30,000; credit Cash $30,000.
D) Debit Salaries expense $18,000, debit Salaries payable $12,000; credit Cash $30,000.
E) Debit Salaries expense $18,000; credit Cash $18,000.

388) Which of the following accounts would be included in a post-closing trial balance?

A) Accounts Receivable.
B) Dividends.
C) Revenue.
D) Depreciation Expense—Equipment.
E) Salaries Expense.

389) Palmer Company is at the end of its annual accounting period. The accountant has journalized and posted all external transactions and all adjusting entries, has prepared an adjusted trial balance, and completed the financial statements. The next step in the accounting cycle is:

A) Prepare a work sheet.
B) Prepare reversing entries.
C) Close temporary accounts.
D) Prepare a post-closing trial balance.
E) Prepare an unadjusted trial balance.

390) For the year ended December 31, a company has revenues of $337,000 and expenses of $206,000. The company paid $58,000 in dividends during the year. The balance in the Retained earnings account before closing is $101,000. Which of the following entries would be used to close the dividends account?

A) Debit Retained earnings $101,000; credit Income Summary $101,000.
B) Debit Income Summary $101,000; credit Dividends $101,000.
C) Debit Retained earnings $58,000; credit Dividends $58,000.
D) Debit Dividends $58,000; credit Retained earnings $58,000.
E) Debit Income Summary $58,000; credit Retained earnings $58,000.

391) For the year ended December 31, a company has revenues of $317,000 and expenses of $196,000. The company paid $50,000 in dividends during the year. The balance in the Retained earnings account before closing is $81,000. Which of the following entries would be used to close the dividends account?

A) Debit Income Summary $50,000; credit Retained earnings $50,000.
B) Debit Retained earnings $50,000; credit Dividends $50,000.
C) Debit Retained earnings $81,000; credit Income Summary $81,000.
D) Debit Income Summary $81,000, credit Dividends $81,000.
E) Debit Dividends $50,000; credit Retained earnings $50,000.

392) Which of the following accounts could not be classified as a current liability?

A) Unearned revenues.
B) Accounts payable.
C) Notes payable (due in 11 months).
D) Current portion of long-term note payable.
E) Notes payable (due in 5 years).

Answer Key

Test name: John Wild Ch03 Algorithmic and Static

1) FALSE

2) TRUE

3) FALSE

4) TRUE

5) FALSE

6) TRUE

7) FALSE

8) TRUE

9) FALSE

10) TRUE

11) TRUE

12) TRUE

13) FALSE

14) TRUE

15) FALSE

16) TRUE

17) FALSE

18) FALSE

19) TRUE

20) FALSE

21) TRUE

22) TRUE

23) TRUE

24) TRUE

25) TRUE

26) FALSE

27) TRUE

28) TRUE

29) FALSE

30) TRUE

31) TRUE

32) TRUE

33) FALSE

34) TRUE

35) FALSE

36) TRUE

37) FALSE

38) FALSE

39) TRUE

40) TRUE

41) TRUE

42) TRUE

43) FALSE

44) TRUE

45) FALSE

46) TRUE

47) FALSE

48) TRUE

49) TRUE

50) TRUE

51) FALSE

52) FALSE

53) FALSE

54) TRUE

55) FALSE

56) TRUE

57) FALSE

58) FALSE

59) FALSE

60) FALSE

61) TRUE

62) FALSE

63) FALSE

64) TRUE

65) TRUE

66) FALSE

67) TRUE

68) TRUE

69) FALSE

70) TRUE

71) TRUE

72) FALSE

73) TRUE

74) TRUE

75) TRUE

76) FALSE

77) FALSE

78) FALSE

79) TRUE

80) FALSE

81) TRUE

82) FALSE

83) FALSE

84) TRUE

85) FALSE

86) TRUE

87) FALSE

88) TRUE

89) FALSE

90) TRUE

91) FALSE

92) TRUE

93) TRUE

94) TRUE

95) FALSE

96) TRUE

97) FALSE

98) FALSE

99) TRUE

100) TRUE

101) TRUE

102) FALSE

103) FALSE

104) FALSE

105) TRUE

106) TRUE

107) TRUE

108) TRUE

109) TRUE

110) FALSE

111) FALSE

112) TRUE

113) TRUE

114) FALSE

115) FALSE

116) TRUE

117) TRUE

118) FALSE

119) FALSE

120) FALSE

121) FALSE

122) TRUE

123) FALSE

124) FALSE

125) FALSE

126) FALSE

127) FALSE

128) FALSE

129) FALSE

130) TRUE

131) FALSE

132) TRUE

133) FALSE

134) TRUE

135) TRUE

136) FALSE

137) TRUE

138) E

139) B

140) A

141) C

142) C

143) B

144) C

145) B

146) D

147) C

148) E

149) D

150) B

151) A

152) D

153) C

154) E

155) C

156) B

157) E

158) C

159) B

160) C

161) E

162) B

163) E

164) D

165) E

166) C

167) C

168) C

169) A

170) B

171) B

172) D

173) E

174) C

175) C

176) C

177) D

178) A

179) A

180) B

181) C

182) A

183) D

184) B

185) C

186) C

187) B

188) C

189) E

190) D

191) C

192) E

193) D

194) B

195) B

196) A

197) E

198) E

199) C

200) A

201) D

202) A

203) E

204) E

205) A

206) B

207) D

208) B

209) A

210) A

211) E

212) C

213) E

214) B

215) C

216) A

217) C

218) A

219) C

220) C

221) B

222) A

223) E

224) B

225) C

226) D

227) C

228) E

229) A

230) E

231) D

232) D

233) C

234) C

235) C

236) D

237) C

238) A

239) E

240) B

241) B

242) E

243) B

244) B

245) C

246) D

247) D

248) D

249) A

250) B

251) A

252) C

253) D

254) B

255) E

256) D

257) C

258) D

259) A

260) E

261) B

262) D

263) C

264) A

265) B

266) E

267) C

268) A

269) A

270) D

271) D

272) E

273) A

274) B

275) E

276) D

277) E

278) E

279) B

280) D

281) A

282) A

283) C

284) C

285) D

286) D

287) B

288) D

289) D

290) C

291) C

292) B

293) A

294) C

295) C

296) E

297) D

298) A

299) D

300) C

301) E

302) A

303) B

304) A

305) D

306) A

307) A

308) A

309) C

310) E

311) E

312) B

313) B

314) E

315) D

316) C

317) C

318) B

319) D

320) A

321) B

322) B

323) B

324) D

325) C

326) C

327) E

328) D

329) C

330) B

331) E

332) C

333) B

334) D

335) A

336) A

337) C

338) C

339) E

340) D

341) D

342) A

343) B

344) E

345) D

346) D

347) C

348) D

349) A

350) D

351) E

352) E

353) E

354) D

355) B

356) C

357) B

358) B

359) A

360) A

361) E

362) E

363) C

364) A

365) C

366) B

367) D

368) E

369) A

370) E

371) B

372) B

373) B

374) A

375) D

376) D

377) E

378) B

379) D

380) B

381) B

382) A

383) E

384) D

385) D

386) E

387) B

388) A

389) C

390) C

391) B

392) E