Ch.2 Complete Test Bank Review Of The Accounting Process

Intermediate Accounting, 10e (Spiceland)

Chapter 2 Review of the Accounting Process

1) Owners' equity can be expressed as assets minus liabilities.

Difficulty: 1 Easy

Topic: Accounting equation

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

2) Debits increase asset accounts and decrease liability accounts.

Difficulty: 1 Easy

Topic: Account relationships and records

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

3) Balance sheet accounts are referred to as temporary accounts because their balances are always changing.

Difficulty: 1 Easy

Topic: Account relationships and records

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

4) After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements.

Difficulty: 1 Easy

Topic: Accounting processing cycle steps

Learning Objective: 02-02 Describe the steps in the accounting processing cycle.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

5) Adjusting journal entries are recorded at the end of any period when financial statements are prepared.

Difficulty: 1 Easy

Topic: Accounting processing cycle steps

Learning Objective: 02-02 Describe the steps in the accounting processing cycle.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

6) Accruals occur when the cash flow precedes either revenue or expense recognition.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

7) The adjusted trial balance contains only permanent accounts.

Difficulty: 1 Easy

Topic: Trial balance―Adjusted

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

8) The income statement summarizes the operating activity of a company at a particular point in time.

Difficulty: 1 Easy

Topic: Financial statement―Income Statement

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

9) The balance sheet can be considered a change or flow statement.

Difficulty: 1 Easy

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

10) The statement of cash flows summarizes transactions that caused cash to change during a reporting period.

Difficulty: 1 Easy

Topic: Financial statement―Cash flow

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

11) The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts.

Difficulty: 2 Medium

Topic: Financial statement―Shareholders equity

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

12) The post-closing trial balance contains only permanent accounts.

Difficulty: 1 Easy

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

13) The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account.

Difficulty: 1 Easy

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

14) A reversing entry at the beginning of a period for salaries would include a debit to salaries expense.

Difficulty: 2 Medium

Topic: Reversing entries

Learning Objective: Appendix 2B Reversing Entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

15) The sale of merchandise on account would be recorded in a sales journal.

Difficulty: 1 Easy

Topic: Subsidiary ledgers and Special journals

Learning Objective: Appendix 2C Subsidiary Ledgers and Special Journals.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

16) The payment of cash to a supplier would be recorded in a purchases journal.

Difficulty: 1 Easy

Topic: Subsidiary ledgers and Special journals

Learning Objective: Appendix 2C Subsidiary Ledgers and Special Journals.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

17) The accounting equation can be stated as:

A) A + L − OE = 0.

B) A − L + OE = 0.

C) −A + L − OE = 0.

D) A − L − OE = 0.

Difficulty: 2 Medium

Topic: Accounting equation

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

18) Examples of external transactions include all of the following except:

A) Paying employee salaries.

B) Purchasing equipment.

C) Depreciating equipment.

D) Collecting a receivable.

Difficulty: 2 Medium

Topic: Account relationships and records; Analyze transaction-Record journal entry

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-03 Analyze and record transactions using journal entries.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

19) Examples of internal transactions include all of the following except:

A) Writing off an uncollectible account.

B) Recording the expiration of prepaid insurance.

C) Recording unpaid salaries.

D) Paying salaries to company employees.

Difficulty: 2 Medium

Topic: Account relationships and records; Analyze updating-Record adjusting entry

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

20) XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:

A) Debit to investments.

B) Credit to retained earnings.

C) Credit to common stock.

D) Credit to revenue.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

21) Incurring an expense for advertising on account would be recorded by:

A) Debiting liabilities.

B) Crediting assets.

C) Debiting an expense.

D) Debiting assets.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

22) A sale on account would be recorded by:

A) Debiting revenue.

B) Crediting assets.

C) Crediting liabilities.

D) Debiting assets.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

23) The entry to record a sale on account would include:

A)

B)

C)

D)

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

24) Super Corporation receives $4,000,000 from investors when issuing them shares of its stock. Super's entry to record this transaction would include which of the following?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

25) Mary Parker Co. invested $15,000 in ABC Corporation and received common stock in exchange. Mary Parker Co.'s journal entry to record this transaction would include a:

A) Debit to investments.

B) Credit to retained earnings.

C) Credit to common stock.

D) Debit to expense.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

26) Hughes Aircraft sold a four-passenger airplane for $980,000, receiving a a 12% note receivable. The journal entry to record this sale would include a:

A) Credit to cash.

B) Credit to interest revenue.

C) Debit to notes receivable.

D) Credit to notes receivable.

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

27) Boing Aircraft sold a four-passenger airplane for $2,800,000, receiving a $500,000 down payment and a 7% note for the balance. The entry to record this sale would include which of the following?

A)

B)

C)

D)

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

28) Somerset Leasing received $12,000 for 12 months' rent in advance. How should Somerset record this transaction?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

29) Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise, costing $620, and sold on account for $960?

A)

B)

C)

D)

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

30) Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase?

A)

B)

C)

D)

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

31) Which of the following accounts has a balance whereby debits normally exceed credits?

A) Accounts payable.

B) Accrued salaries.

C) Accumulated depreciation.

D) Advertising expense.

Difficulty: 1 Easy

Topic: Account relationships and records; Determine account balance-Analyze entries

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

32) An example of a contra account is:

A) Depreciation expense.

B) Accounts receivable.

C) Sales revenue.

D) Accumulated depreciation.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

33) Making insurance payments in advance is an example of:

A) An accrued receivable transaction.

B) An accrued liability transaction.

C) A deferred revenue transaction.

D) A prepaid expense transaction.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment; Analyze transaction-Record journal entry

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.; 02-03 Analyze and record transactions using journal entries.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

34) Recording revenue before it is collected is an example of:

A) A prepaid expense transaction.

B) A deferred revenue transaction.

C) An accrued liability transaction.

D) An accrued receivable transaction.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

35) When a magazine company collects cash for selling a subscription, it is an example of:

A) An accrued liability transaction.

B) An accrued receivable transaction.

C) A prepaid expense transaction.

D) A deferred revenue transaction.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment; Analyze transaction-Record journal entry

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.; 02-03 Analyze and record transactions using journal entries.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

36) On December 31, 2020, Coolwear, Inc. had a balance in its prepaid insurance account of $48,400. During 2021, $86,000 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $42,000. Insurance expense for 2021 was:

A) $6,400.

B) $134,400.

C) $86,000.

D) $92,400.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry; Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

37) Adjusting entries are needed primarily for:

A) Cash basis accounting.

B) Accrual accounting.

C) Current value accounting.

D) Manual accounting systems.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

38) Prepayments occur when:

A) Cash flow precedes expense recognition.

B) Sales are delayed pending credit approval.

C) Customers are unable to pay the full amount due when goods are delivered.

D) Manufactured goods await quality control inspections.

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

39) Accruals occur when cash flows:

A) Occur before expense recognition.

B) Occur after revenue or expense recognition.

C) Are uncertain.

D) May be substituted for goods or services.

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

40) On December 31, 2021, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2021 balance sheet will be valued at:

A) $53,600.

B) $54,800.

C) $52,400.

D) $1,200.

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

41) Cal Farms reported supplies expense of $2,000,000 this year. The supplies account decreased by $200,000 during the year to an ending balance of $400,000. What was the cost of supplies the Cal Farms purchased during the year?

A) $1,600,000.

B) $1,800,000.

C) $2,200,000.

D) $2,400,000.

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

42) Which of the following is not an adjusting entry?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

43) The adjusting entry required when amounts previously recorded as deferred revenues are recognized includes:

A) A debit to a liability.

B) A debit to an asset.

C) A credit to a liability.

D) A credit to an asset.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

44) Which of the following accounts has a balance whereby credits normally exceed debits?

A) Salaries expense.

B) Interest payable.

C) Land.

D) Prepaid rent.

Difficulty: 1 Easy

Topic: Account relationships and records; Determine account balance-Analyze entries

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

45) When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account:

A) (S)he usually debits cash.

B) (S)he usually debits an expense account.

C) (S)he debits a liability account.

D) (S)he credits an owners' equity account.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

46) When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:

A) Accounts payable.

B) Supplies.

C) Cash.

D) Retained earnings.

Difficulty: 1 Easy

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

47) The adjusting entry required to record accrued expenses includes:

A) A credit to cash.

B) A debit to an asset.

C) A credit to an asset.

D) A credit to liability.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

48) Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year?

A) $300,000.

B) $280,000.

C) $260,000.

D) $240,000.

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

49) Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2021, and charged the $4,200 premium to Insurance expense. At its December 31, 2021, year-end, Yummy Foods would record which of the following adjusting entries?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

50) Tummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2021, and charged the $4,200 premium to Prepaid insurance. At its December 31, 2021, year-end, Tummy Foods would record which of the following adjusting entries?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

51) ILP Services purchased a three-year fire insurance policy on September 1, 2021, and charged the $72,000 premium to Prepaid insurance. At its December 31, 2021, year-end, ILP Services would record an adjusting entry that includes which of the following?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

52) The employees of Persoff Publications work Monday through Friday. Every other Friday the company issues payroll checks totaling $640,000. The current pay period ends on Friday, July 3. Persoff Publications is now preparing financial statements for the fiscal year ended June 30. What is the adjusting entry to record accrued salaries at the end of June?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

53) The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

54) On September 1, 2021, Fortune Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to Deferred subscription revenue. What is the required adjusting entry at December 31, 2021?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

55) Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2021, with principal and interest due on October 31, 2022. The company's fiscal year ends June 30, 2021. What adjusting entry is necessary on June 30, 2021?

A) No entry.

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

56) On September 15, 2021, Oliver's Mortuary received a $6,000, nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2021?

A)

B)

C)

D)

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

57) The debits and credits from the journal entries are posted to the general ledger accounts only for:

A) transactions occurring during the reporting period.

B) closing entries.

C) adjusting entries and closing entries.

D) all journal entries.

Difficulty: 1 Easy

Topic: Post entries to ledger

Learning Objective: 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

58) Eve's Apples opened its business on January 1, 2021, and paid for two insurance policies effective that date. The policy for equipment damage was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2021?

A) $9,000.

B) $18,000.

C) $30,000.

D) $48,000.

Difficulty: 3 Hard

Topic: Determine account balance-Analyze entries; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

59) Fink Insurance collected premiums of $18,000,000 from its customers during the current year. The adjusted balance in the Deferred premiums revenue account increased from $6 million to $8 million dollars during the year. What is Fink's revenue from insurance premiums recognized for the current year?

A) $10,000,000.

B) $16,000,000.

C) $18,000,000.

D) $20,000,000.

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Convert cash basis to accrual basis

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

60) On November 1, 2021, Tim's Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2021?

A) $112,500.

B) $225,000.

C) $450,000.

D) $1,350,000.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry; Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

61) An economic resource of an entity is:

A) A revenue.

B) An asset.

C) A liability.

D) A contra asset until used.

Difficulty: 1 Easy

Topic: Account relationships and records

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

62) Cost of goods sold is:

A) An asset account.

B) A revenue account.

C) An expense account.

D) A permanent equity account.

Difficulty: 1 Easy

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

63) The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:

A) Plus revenues, minus liabilities.

B) Plus accruals, minus deferrals.

C) Plus net income, minus dividends.

D) Plus assets, minus liabilities.

Difficulty: 1 Easy

Topic: Accounting equation; Financial statement–Shareholders equity

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

64) The purpose of "posting" journal entries is

A) provide a chronological record of all economic events affecting the firm.

B) ensure that all accounts are up to date prior to preparing financial statements.

C) ensure that debits equal credits in the trial balance.

D) reflect the information in journal entries in ledger accounts.

Difficulty: 1 Easy

Topic: Post entries to ledger

Learning Objective: 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

65) Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year?

A) $1,600,000.

B) $1,800,000.

C) $2,200,000.

D) $2,400,000.

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries

Learning Objective: 02-03 Analyze and record transactions using journal entries.; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

66) Permanent accounts do not include:

A) Interest expense.

B) Salaries payable.

C) Prepaid rent.

D) Deferred sales revenue.

Difficulty: 2 Medium

Topic: Account relationships and records; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-08 Explain the closing process.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

67) Permanent accounts do not include:

A) Cost of goods sold.

B) Inventory.

C) Current liabilities.

D) Accumulated depreciation.

Difficulty: 2 Medium

Topic: Account relationships and records; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-08 Explain the closing process.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

68) The purpose of closing entries is to transfer:

A) Accounts receivable to retained earnings when an account is fully paid.

B) Balances in temporary accounts to a permanent account.

C) Inventory to cost of goods sold when merchandise is sold.

D) Assets and liabilities when operations are discontinued.

Difficulty: 2 Medium

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

69) Temporary accounts do not include:

A) Salaries payable.

B) Depreciation expense.

C) Supplies expense.

D) Cost of goods sold.

Difficulty: 2 Medium

Topic: Account relationships and records; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-08 Explain the closing process.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

70) When converting an income statement from a cash basis to an accrual basis, expenses:

A) Exceed cash payments to suppliers.

B) Equal cash payments to suppliers.

C) Are less than cash payments to suppliers.

D) May exceed or be less than cash payments to suppliers.

Difficulty: 2 Medium

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

71) When the amount of revenue collected in advance decreases during an accounting period:

A) Accrual-basis revenues exceed cash collections from customers.

B) Accrual-basis net income exceeds cash-basis net income.

C) Accrual-basis revenues are less than cash collections from customers.

D) Accrual-basis net income is less than cash-basis net income.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

72) When converting an income statement from a cash basis to an accrual basis, which of the following is incorrect?

A) An adjustment for depreciation reduces net income.

B) A decrease in salaries payable decreases net income.

C) A reduction in prepaid expenses decreases net income.

D) An increase in accrued payables decreases net income.

Difficulty: 2 Medium

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

73) Molly's Auto Detailers maintains its records on the cash basis. During 2021, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual-basis net income was:

A) $38,000.

B) $54,000.

C) $49,000.

D) $42,000.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

74) Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $42,000 in tailoring fees, and paid $14,000 in expenses. Depreciation expense totaled $2,000. Accounts receivable increased $1,500, supplies increased $4,000, and accrued liabilities increased $2,500. Pat's accrual-basis net income was:

A) $18,000.

B) $34,000.

C) $23,000.

D) $29,000.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

75) The Hamada Company sales for 2021 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2021, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2021, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000. Net cash flows from these activities were:

A) $45,000.

B) $55,000.

C) $58,000.

D) $74,000.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

76) When the amount of interest receivable decreases during an accounting period:

A) Accrual-basis interest revenue exceeds cash collection from borrowers.

B) Accrual-basis net income exceeds cash-basis net income.

C) Accrual-basis interest revenue is less than cash collection from borrowers.

D) Accrual-basis net income is less than cash-basis net income.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

77) When converting an income statement from a cash basis to an accrual basis, cash received for services:

A) Exceeds service revenue.

B) May exceed or be less than service revenue.

C) Is less than service revenue.

D) Equals service revenue.

Difficulty: 2 Medium

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

78) Compared to the accrual basis of accounting, the cash basis of accounting produces a higher amount of income by the net decrease during the accounting period of:

A) Option a

B) Option b

C) Option c

D) Option d

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

79) On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $2,000,000. The company provided $6,400,000 of services in June and received full payment in July. Royal also incurred expenses of $3,000,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $1,000,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?

A) Option a

B) Option b

C) Option c

D) Option d

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

80) When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows:

What was the total amount of cash paid by Castle for insurance premiums during the year?

A) $218,750

B) $166,250

C) $210,000

D) $227,500

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation

81) The accounting processing cycle:

A) Is a three-wheeled vehicle used to deliver audit papers to clients.

B) deals only with internal transactions.

C) Is the process of bringing the company's financial information up to date before preparing the financial statements.

D) Is the process used to identify, analyze, record, and summarize transactions and prepare financial statements.

Difficulty: 1 Easy

Topic: Accounting processing cycle steps

Learning Objective: 02-02 Describe the steps in the accounting processing cycle.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: FN Measurement / Keyboard Navigation

82) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment; Trial balance―Adjusted; Trial balance―Unadjusted; The closing process

Learning Objective: 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.; 02-05 Identify and describe the different types of adjusting journal entries.; 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance.; 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

83) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 1 Easy

Topic: Analyze updating-Identify type of adjustment; Accounting processing cycle steps; Financial statement―Cash flow; Financial statement―Balance sheet; Accounting equation; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-02 Describe the steps in the accounting processing cycle.; 02-05 Identify and describe the different types of adjusting journal entries.; 02-07 Describe the four basic financial statements.; 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

84) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 2 Medium

Topic: Accounting equation; Analyze transaction-Record journal entry; Analyze updating-Identify type of adjustment

Learning Objective: 02-03 Analyze and record transactions using journal entries.; 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

85) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 1 Easy

Topic: Account relationships and records; Accounting processing cycle steps; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-02 Describe the steps in the accounting processing cycle.; 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

86) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 1 Easy

Topic: Accounting processing cycle steps; Subsidiary ledger-Special journal—App C; Accounting equation

Learning Objective: 02-02 Describe the steps in the accounting processing cycle.; 02-Appendix 2C Subsidiary Ledgers and Special Journals.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

87) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.

Difficulty: 1 Easy

Topic: Accounting processing cycle steps; Subsidiary ledger-Special journal—App C; Account relationships and records; Accounting equation

Learning Objective: 02-02 Describe the steps in the accounting processing cycle.; 02-Appendix 2C Subsidiary Ledgers and Special Journals.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

88) Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term.

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment; Trial balance―Unadjusted; Accounting processing; cycle steps; Accounting equation; Account relationships and records; The closing process

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-02 Describe the steps in the accounting processing cycle.; 02-04 Post the effects of journal entries to general ledger accounts and prepare an unadjusted trial balance.; 02-05 Identify and describe the different types of adjusting journal entries.; 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

Use this information to answer the following questions:

The account titles to be responded to are provided in no particular order. Assume that all accounts have normal balances according to whether the account is increased by a debit or increased by a credit.

Required:

In column A, indicate whether a debit will:

1. Increase the account balance, or

2. Decrease the account balance.

In column B, classify each account according to the following scheme. For contra accounts, indicate the classification of the account to which it relates.

1. A current asset in the balance sheet.

2. A noncurrent asset in the balance sheet.

3. A current liability in the balance sheet.

4. A long-term liability in the balance sheet.

5. A permanent equity account in the balance sheet.

6. A revenue account in the income statement.

7. An expense account shown in the income statement.

8. Account does not appear in either the balance sheet or the income statement.

89) Office equipment

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

90) Notes payable (short-term)

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

91) Cost of goods sold

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

92) Accounts receivable

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

93) Inventory

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

94) Deferred rent revenue

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

95) Salaries payable

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

96) Retained earnings

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

97) Interest revenue

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

98) Supplies expense

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

99) Prepaid rent

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

100) Common stock

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Accounting equation; Distinguish among financial statements

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

Use this information to answer the following questions:

Required:

Using the chart of accounts provided, indicate by account number the account or accounts that would be debited and credited in the following transactions. Also enter the number 1, 2, or 3 to indicate the type of transaction as: (1) an external transaction, (2) an internal transaction recorded as an adjusting journal entry, or (3) a closing entry. The company uses a perpetual inventory system. All prepayments are initially recorded in permanent accounts.

101) Purchased building and equipment for $10,000,000, paying 20% cash and issuing a 30-year note for the balance.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

102) Invested idle cash in short-term money market funds.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

103) Purchased inventory on account.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

104) Sold inventory on account.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

105) Sold merchandise to a customer in exchange for a promissory note.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

106) Accrued the interest recognized but not collected on notes receivable.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

107) Collected a note receivable at maturity, including the interest that had already been accrued.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

108) Collected cash on account from customers.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

109) Sold inventory for cash.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

110) Received payment for services to be performed next year.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

111) Salaries have been recognized but are unpaid at the end of an accounting period.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

112) Closed the dividends account.

Difficulty: 2 Medium

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

113) Accrued property taxes were paid.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

114) Declared cash dividends on common stock that will be paid in the next month.

Difficulty: 3 Hard

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

115) Paid rent for the next three months.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

116) Rite Shoes was involved in the transactions described below.

Required:

Prepare the appropriate journal entry for each transaction. If an entry is not required, state "No Entry."

1. Purchased $8,200 of inventory on account.

2. Paid weekly salaries, $920.

3. Recorded sales for the first week: Cash: $7,100; On account: $5,300.

4. Paid for inventory purchased in event (1).

5. Placed an order for $6,200 of inventory.

Difficulty: 1 Easy

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

117) Prepare journal entries to record the following transactions of Daisy King Ice Cream Company. If an entry is not required, state "No Entry."

1. Started business by issuing 10,000 shares of common stock for $20,000.

2. Leased a building for three years at $500 per month and paid six months' rent in advance.

3. Purchased equipment for $5,400, signing a two-year, 10% note.

4. Purchased $1,800 of supplies on account.

5. Recorded cash sales of $800 for the first week.

6. Paid weekly salaries, $320.

7. Paid for supplies purchased in item (5).

8. Recorded depreciation on equipment, $50.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry

Learning Objective: 02-03 Analyze and record transactions using journal entries.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

118) Flint Hills, Inc. has prepared a year-end 2021 trial balance. Certain accounts in the trial balance do not reflect all activities that have occurred.

Required:

Prepare adjusting journal entries, as needed, for the following items.

1. The Supplies account shows a balance of $540, but a count of supplies reveals only $210 on hand.

2. Flint Hills initially records the payments of all insurance premiums as expenses. The trial balance shows a balance of $420 in Insurance expense. A review of insurance policies reveals that $125 of insurance is unexpired.

3. Flint Hills employees work Monday through Friday, and salaries of $2,400 per week are paid each Friday. Flint Hills' year-end falls on Tuesday.

4. On December 31, 2021, Flint Hills received a utility bill for December electricity usage of $190 that will be paid in early January of 2022.

Difficulty: 2 Medium

Topic: Analyze updating-Record adjusting entry

Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

119) The following is selected financial information for D. Kay Dental Laboratories for 2020 and 2021:

2020 2021

Retained earnings, January 1 $53,000 ?

Net income 37,000 42,000

Dividends declared and paid 15,000 18,000

Common stock 70,000 ?

Kay issued 2,000 shares of additional common stock in 2021 for $20,000. There were no other shareholder transactions.

Required:

Prepare a statement of shareholders' equity for D. Kay Dental Laboratories for the year ended December 31, 2021.

Difficulty: 3 Hard

Topic: Financial statement―Shareholders equity

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

120) The Yankel Corporation's controller prepares adjusting entries only at the end of the fiscal year. The following adjusting entries were prepared on December 31, 2021:

Debit Credit

Interest expense 1,800

Interest payable 1,800

Insurance expense 60,000

Prepaid insurance 60,000

Interest receivable 3,000

Interest revenue 3,000

Additional information:

1. The company borrowed $30,000 on June 30, 2021. Principal and interest are due on June 30, 2022. This note is the company's only interest-bearing debt.

2. Insurance for the year on the company's office buildings is $90,000. The insurance is paid in advance.

3. On August 31, 2021, Yankel lent money to a customer. The customer signed a note with principal and interest at 9% due in one year.

Required:

Determine the following:

1. What is the interest rate on the company's note payable?

2. The 2021 insurance payment was made at the beginning of which month?

3. How much did Yankel lend its customer on August 31?

Difficulty: 3 Hard

Topic: Analyze updating-Record adjusting entry; Determine account balance-Analyze entries

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.; 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance.

Bloom's: Analyze; Apply

AACSB: Analytical Thinking; Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

Use this information to answer the following questions:

Suppose that Laramie Company's adjusted trial balance ignored the following information. For each item of information, indicate what effects, if any, these omissions would have on the stated components of Laramie Company's 2021 Income Statement and 12/31/2021 Balance Sheet. Assume no income taxes.

Use the following code for your answers and be sure to include the dollar amounts of the effects next to the letter O or U:

N = No Effect

O = Overstated

U = Understated

121)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

122)

Difficulty: 2 Medium

Topic: Distinguish among financial statements; Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

123)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

124)

Difficulty: 2 Medium

Topic: Distinguish among financial statements; Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

125)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

Use this information to answer the following questions:

You are reviewing O'Brian Co.'s adjusted trial balance for the year ended 12/31/2021. You notice several omissions and incorrect items during your review, some of which are noted below. For each one, you are to determine what effect, if any, these items would have on the stated components of O'Brian Co.'s 2021 Income Statement and 12/31/2021 Balance Sheet if they are not corrected or updated. Assume no income taxes.

Use the following code for your answers. Don't include dollar amounts.

N = No Effect

O = Overstated

U = Understated

126)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

127)

Difficulty: 2 Medium

Topic: Distinguish among financial statements; Determine account balance-Analyze entries

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

128)

Difficulty: 3 Hard

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

129)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

130)

Difficulty: 2 Medium

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

131)

Difficulty: 3 Hard

Topic: Determine account balance-Analyze entries; Distinguish among financial statements

Learning Objective: 02-06 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance; 02-07 Describe the four basic financial statements.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking

Use this information to answer the following questions:

The adjusted trial balance for China Tea Company at December 31, 2021, is presented below:

132) Prepare the closing entries for China Tea Company for the year ended December 31, 2021.

Difficulty: 2 Medium

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

133) Prepare an income statement for China Tea Company for the year ended December 31, 2021.

Difficulty: 2 Medium

Topic: Financial statement―Income Statement

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

134) Prepare a classified balance sheet for China Tea Company as of December 31, 2021.

Difficulty: 2 Medium

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

Use this information to answer the following questions:

The following information, based on the 12/31/2021 Annual Report to Shareholders of Krafty Foods ($ in millions):

135) Based on the information presented above, prepare the Income Statement for Krafty Foods for the year ended December 31, 2021.

Difficulty: 2 Medium

Topic: Financial statement―Income Statement

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

136) Based on the information presented above, prepare the 12/31/2021 Balance Sheet for Krafty Foods.

Difficulty: 3 Hard

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

Use this information to answer the following questions:

The December 31, 2021 (pre-closing) adjusted trial balance for Kline Enterprises was as follows:

137) Assuming no income taxes, compute the following, and place your answer in the space provided:

Kline's 2021 net income (or loss).

Difficulty: 2 Medium

Topic: Financial statement―Income Statement

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

138) Assuming no income taxes, compute the following, and place your answer in the space provided:

Kline's 12/31/2021 total current assets.

Difficulty: 2 Medium

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

139) Assuming no income taxes, compute the following, and place your answer in the space provided.

Kline's 12/31/2021 total current liabilities:

Difficulty: 2 Medium

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

140) Assuming no income taxes, compute the following, and place your answer in the space provided:

Kline's 12/31/2021 total shareholders' equity.

Difficulty: 2 Medium

Topic: Financial statement―Balance sheet

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

141) Presented below is income statement and dividend information of the Nebraska Corporation for the year ended December 31, 2021.

Required:

Prepare the necessary closing entries at December 31, 2021.

Difficulty: 2 Medium

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Apply

AACSB: Knowledge Application

AICPA/Accessibility: FN Measurement

142) Raintree Corporation maintains its records on a cash basis. At the end of each year the company's accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2021:

Selected balance sheet information:

Additional information:

1. On June 30, 2020, Raintree lent a customer $50,000. Interest at 6% is payable annually on each June 30. Principal is due in 2024.

2. The annual insurance payment is made in advance on March 31.

3. Annual rent on the company's facilities is paid in advance on September 30.

Required:

1. Prepare an accrual basis income statement for 2021 (ignore income taxes).

2. Determine the following balance sheet amounts on December 31, 2021:

a. Interest receivable

b. Prepaid insurance

c. Prepaid rent

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis; Determine account balance―Analyze entries; Financial statement―Income Statement

Learning Objective: 02-07 Describe the four basic financial statements; 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze; Apply

AACSB: Knowledge Application

AICPA/Accessibility: BB Critical Thinking; FN Measurement

143) Silicon Chip Company's fiscal year-end is December 31. At the end of 2021, it owed employees $22,000 in salaries that will be paid on January 7, 2022.

Required:

1. Prepare an adjusting entry to record accrued salaries, a reversing entry on January 1, 2022, and an entry to record the payment of salaries on January 7, 2022.

2. Prepare journal entries to record the accrued salaries on December 31, 2021 and the payment of salaries on January 7, 2022, assuming a reversing entry is not recorded.

Difficulty: 3 Hard

Topic: Reversing entries―Appendix B

Learning Objective: Appendix 2B Reversing Entries.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: FN Measurement

144) Describe the difference between external events and internal events, and provide two examples of each.

Difficulty: 2 Medium

Topic: Account relationships and records

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Understand

AACSB: Communication

AICPA/Accessibility: BB Critical Thinking

145) Describe what is meant by deferred revenue and provide two examples.

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment; Analyze transaction-Record journal entry

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts; 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Understand

AACSB: Communication

AICPA/Accessibility: BB Critical Thinking

146) Describe what is meant by prepaid expenses and provide two examples.

Difficulty: 2 Medium

Topic: Analyze transaction-Record journal entry; Analyze updating-Identify type of adjustment

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts; 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

147) What is an accrued liability?

Difficulty: 2 Medium

Topic: Analyze updating-Identify type of adjustment

Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.

Bloom's: Remember

AACSB: Reflective Thinking

AICPA/Accessibility: BB Critical Thinking

148) What is the difference between permanent accounts and temporary accounts, and why does an accounting system have both types of accounts?

Difficulty: 2 Medium

Topic: Account relationships and records

Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.

Bloom's: Understand

AACSB: Communication

AICPA/Accessibility: BB Critical Thinking

149) What is the purpose of the statement of cash flows? List the three major categories of cash flows and give an example of a cash transaction for each category.

Difficulty: 3 Hard

Topic: Financial statement―Cash flow

Learning Objective: 02-07 Describe the four basic financial statements.

Bloom's: Understand

AACSB: Communication

AICPA/Accessibility: BB Critical Thinking

150) What is the purpose of the closing process?

Difficulty: 2 Medium

Topic: The closing process

Learning Objective: 02-08 Explain the closing process.

Bloom's: Understand

AACSB: Communication

AICPA/Accessibility: BB Critical Thinking

151) Claymore Corporation maintains its book on a cash basis. During 2021, the company collected $825,000 in fees from its clients and paid $512,000 in expenses. You are able to determine the following information about accounts receivable, supplies, prepaid rent, salaries payable, and interest payable:

In addition, 2021 depreciation expense on office equipment is $55,000.

Required:

Determine accrual-basis net income for 2021.

Difficulty: 3 Hard

Topic: Convert cash basis to accrual basis

Learning Objective: 02-09 Convert from cash-basis net income to accrual-basis net income.

Bloom's: Analyze

AACSB: Analytical Thinking

AICPA/Accessibility: BB Critical Thinking; FN Measurement

152) The accounting system of Carlton and Sons consists of a general journal (GJ), a cash receipts journal (CR), a cash disbursements journal (CD), a sales journal (SJ), and a purchases journal (PJ). For each of the following, indicate which journal should be used to record the transaction.

Difficulty: 2 Medium

Topic: Subsidiary ledgers―Special journals―Appendix C

Learning Objective: Appendix 2C Subsidiary Ledgers and Special Journals.

Bloom's: Understand

AACSB: Reflective Thinking

AICPA/Accessibility: FN Measurement