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1 | |
Retained Earnings is not: |
| | A) | Increased by net income |
| | B) | Decreased by expenses |
| | C) | Increased by revenues |
| | D) | Decreased by dividends declared |
| | E) | Decreased by gains and losses |
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2 | |
Which of the following is not a correct expression of the accounting equation? |
| | A) | Assets = Equities |
| | B) | Assets = Liabilities - Owners' Equity |
| | C) | Assets = Liabilities + Paid-in Capital + Retained Earnings |
| | D) | Assets = Liabilities + Paid-in Capital + Revenues - Expenses |
| | E) | Assets - Liabilities = Owners' Equity |
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3 | |
Which of the following lists of accounts all have debit balances? |
| | A) | Land, Equipment, and Paid-in Capital. |
| | B) | Accounts Receivable, Merchandise Inventory, and Salary Expense. |
| | C) | Notes Receivable, Dividends Payable, and Interest Expense. |
| | D) | Accounts Receivable, Accumulated Depreciation, and Buildings. |
| | E) | None of the above. |
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4 | |
Credits are used to record: |
| | A) | decreases to assets and increases to expenses, liabilities, revenues, and owners' equity. |
| | B) | decreases to assets and expenses and increases to liabilities, revenues, and owners' equity. |
| | C) | increases to assets, and decreases to expenses, liabilities, and owners' equity. |
| | D) | increases to assets and expenses and decreases to revenues, liabilities, and owners' equity. |
| | E) | decreases to assets and owners' equity and increases to liabilities, expenses and revenues. |
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5 | |
The sale of merchandise on account would, in the seller's records: |
| | A) | Increase assets and increase expenses. |
| | B) | Increase assets and decrease liabilities. |
| | C) | Increase assets and increase paid-in capital. |
| | D) | Increase assets and decrease revenues. |
| | E) | Decrease assets and increase expenses |
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6 | |
The effect of an adjusting entry on the financial statements is usually to: |
| | A) | make the balance sheet balance. |
| | B) | increase net income. |
| | C) | increase the accuracy of both the balance sheet and income statement. |
| | D) | match revenues and assets. |
| | E) | increase of decrease cash. |
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7 | |
The purchase of merchandise on account would, in the buyer's records: |
| | A) | Increase assets and increase expenses. |
| | B) | Increase assets and increase liabilities. |
| | C) | Increase liabilities and increase paid-in capital. |
| | D) | Increase liabilities and decrease assets. |
| | E) | Have no effect on total assets. |
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8 | |
Which of the following is not one of the 5 questions of transaction analysis? |
| | A) | What's going on? |
| | B) | Which accounts are affected? |
| | C) | Is this an accrual? |
| | D) | Does the balance sheet balance? |
| | E) | Does my analysis make sense? |
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9 | |
9 Arch Co. has a note payable to its bank. An adjusting entry is likely to be required on Arch's books at the end of every month that the loan is outstanding to record the: |
| | A) | Amount of interest paid during the month. |
| | B) | Amount of total interest to be paid when the note is paid off. |
| | C) | Amount of principal payable at the maturity date of the note. |
| | D) | Accrued interest expense for the month. |
| | E) | All of the above. |
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10 | |
Which statement best describes the purpose of closing entries: |
| | A) | To continue recording the effects of transactions which began in one year and will be completed in another year. |
| | B) | To compute net income or net loss for the year. |
| | C) | To prepare the books for the posting process and taking a trial balance. |
| | D) | To eliminate the balances in the revenue and expense accounts so they have zero balances at the beginning of the next fiscal year. |
| | E) | To eliminate the need for preparing adjusting entries. |
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2002 McGraw-Hill Higher Education