Reference no: EM13840904

Question 1: Adjusting entries affect cash flows in the current period.

True

False

Question 2: A contra account is an account whose balance is subtracted from an associated account in the financial statements.

True

False

Question 3: Net income is misleading when revenue is overstated or expenses are understated by significant amounts.

True

False

Question 4: The only accounts that are closed are income statement accounts.

True

False

Question 5: An adjusted trial balance provides all the data needed to record the closing entries.

True

False

Question 6: Which of the following transactions is most likely not to result in an adjusting entry at the end of the period?

Performance of a service for which payment was not received in advance.

Purchase of inventory for sale in the subsequent period.

Purchase of office equipment.

Purchase of a two-year insurance policy.

Question 7: Which of the following transactions results in the recognition of an expense?

Expiration of the usefulness of equipment during the accounting period.

Payment on an account payable.

Declaration and payment of dividends.

Payment on the principal portion of a loan.

Question 8: Which of the following situations is not an example of a deferral?

Recording supplies consumed.

Recording unrecorded, earned revenues.

Recording depreciation.

Recording the portion of prepaid rent that has expired.

Question 9: Equipment might be depreciated over 15 years because

it will lose most of its market value in 15 years.

it will be paid for in 15 years.

it will help to generate revenue for the company over 15 years.

income tax provisions require depreciation over 15 years.

Question 10: Which of the following is not an application of accrual accounting?

Recording advertising fees earned at the time the work is done.

Adjusting unearned advertising fees to the proper balance at the end of the month.

Recording advertising fees earned at the time the cash payment is received.

Recording telephone expense in the accounting period covered by the monthly bill.

Question 11: An adjusting entry made to record salaries earned but not yet paid or recorded is made with which of the following entries?

Salaries Expense - Debit; Cash - Credit

Salaries Payable - Debit; Salaries Expense - Credit

Salaries Expense - Debit; Salaries Payable - Credit

Cash - Debit; Salaries Expense - Credit

Question 12: A work sheet is useful for all except which of the following?

Preparing financial statements

Recording closing entries

Recording adjusting entries

Recording transactions from source documents

Question 13: Closing entries will

decrease the Retained Earnings balance.

either increase or decrease the Retained Earnings balance.

increase the Retained Earnings balance.

not affect the Retained Earnings balance.

Question 14: In preparing closing entries, which of the following columns of the work sheet are the most helpful?

Adjusted Trial Balance columns

Income Statement columns

Adjustments columns

Balance Sheet columns

Question 15: Closing entries ultimately will affect

total liabilities.

the Cash account.

the Retained Earnings account.

total assets.

Question 16: Prepaid Rent was $800 at the end of May and $1,300 at the end of June. Rent Expense for June was $720. How much cash was paid for rent during June?

$820

$1,020

$1,220

$1,420

Question 17: Accounts Receivable was $1,500 at the end of November and $1,050 at the end of December. Revenue totaled $8,400 for December. How much cash was received from revenues during December?

$10,950

$8,850

$7,950

$5,950

Question 18: Use this information to answer the following question.

The trial balance for Nowwick Company appears as follows:

Nowwick Company Trial Balance December 31, 20x5
Cash	$  240
Accounts Receivable	1,000
Prepaid Insurance	100
Supplies	300
Office Equipment	800
Accumulated Depreciation-Office Equipment		$  400
Accounts Payable		600
Common Stock		1,200
Service Revenue		1,000
Salaries Expense	200
Rent Expense	400	______
	$3,200	$3,200

If as of December 31, 20x5, the rent of $100 for December had not been recorded or paid, the adjusting entry would include a

debit to Rent Expense for $100.

debit to Rent Payable for $100.

credit to Cash for $100.

credit to Accumulated Rent for $100.

Question 19: The Retained Earnings, Dividends, and Income Summary accounts for Harmon Repair Company for the accounting period are presented below in T account form after the recording and posting of closing entries:

Retained Earnings								Dividends
12/31		300		1/1	1,500			3/1		100		12/31		400
12/31		400						6/1		100
								9/1		100
								12/31		100
Income Summary
12/31		900		12/31		600
				12/31		300

The Retained Earnings balance on 1/1 was

$300.

$800.

$700.

$1,500.

Question 20: The Retained Earnings, Dividends, and Income Summary accounts for Laurel Repair Company for the accounting period are presented below in T account form after the recording and posting of closing entries:

Retained Earnings								Dividends
	12/31		200		1/1	2,000			3/1		50		12/31		200
					12/31		400		6/1		50
									9/1		50
									12/31		50
	Income Summary
	12/31		500		12/31		900
	12/31		400

The total amount of expenses for the period is

$200.

$400.

$900.

$500.