 |
| 1 | |
Which of the following accounting principles allows for an organization's activities to be divided into specific time periods such as a month, a quarter or a year? |
| | A) | Revenue Recognition Principle |
| | B) | Matching Principle |
| | C) | Interim Principle |
| | D) | Time Period Principle |
| | E) | Business Entity Principle |
|
|
|
| 2 | |
Which of the following statements are important when choosing the appropriate time period for financial reporting purposes? |
| | A) | The value of information is linked to its timeliness. |
| | B) | Useful information must reach decision makers in frequently and promptly. |
| | C) | Timely information requires reports be prepared at regular intervals. |
| | D) | All of the above |
| | E) | None of the above |
|
|
|
| 3 | |
Which of the following statements is correct concerning the accrual basis of accounting? |
| | A) | The accrual basis does not consider the revenue recognition principle. |
| | B) | The accrual basis must follow the revenue recognition principle but not the matching principle |
| | C) | The accrual basis uses the adjusting process to recognize revenues when earned and to match expenses with revenues. |
| | D) | The accrual basis recognizes revenues when earned and records expenses when cash is paid. |
| | E) | The accrual basis is the same as the cash basis of accounting. |
|
|
|
| 4 | |
Which best describes the revenue recognition principle? |
| | A) | It is unrelated to the matching principle of accounting. |
| | B) | It is not GAAP. |
| | C) | It requires that revenues be recorded when earned, not before or after. |
| | D) | It requires that revenues be recorded when the cash is received, not before or after. |
|
|
|
| 5 | |
Which of the following statements are correct with respect to the cash basis of accounting? |
| | A) | The cash basis of accounting recognizes revenues when the cash is received. |
| | B) | The cash basis of accounting recognizes expenses when the cash is paid. |
| | C) | The cash basis of accounting is acceptable for GAAP purposes. |
| | D) | All of the above are correct. |
|
|
|
| 6 | |
A company paid for a 12-month insurance policy on February 1, 2004 for $3,600 and debited the Prepaid Insurance account for the cost of the policy. Assuming no previous adjusting entries have been made, what adjusting entry should be made at March 31, 2004 for the interim financial statements to be properly stated? |
| | A) | Debit Insurance Expense for $3,600; Credit Prepaid Insurance for $3,600 |
| | B) | Debit Prepaid Insurance for $600; Credit Insurance Expense for $600 |
| | C) | Debit Insurance Expense for $200; Credit Prepaid Insurance for $200 |
| | D) | Debit Insurance Expense for $600; Credit Prepaid Insurance for $600 |
| | E) | Debit Insurance Expense for $2,700; Credit Prepaid Insurance for $2,700 |
|
|
|
| 7 | |
Which of the following is a correct statement about prepaid expenses? |
| | A) | Prepaid expenses are items paid for in advance of receiving their benefits. |
| | B) | Prepaid expenses are assets. |
| | C) | When prepaid amounts are used up, they become expenses. |
| | D) | All of the above. |
|
|
|
| 8 | |
Which of the following is not a type of adjustment made under accrual accounting? |
| | A) | Unearned revenues |
| | B) | Accrued expenses |
| | C) | Accrued revenues |
| | D) | Prepaid expenses |
| | E) | Cash expenses |
|
|
|
| 9 | |
Which of the following is correct regarding plant assets? |
| | A) | They are long term |
| | B) | They are tangible |
| | C) | They provide benefits for more than one accounting period |
| | D) | They generally wear out or decline in usefulness |
| | E) | All of the above |
|
|
|
| 10 | |
The depreciation adjustment accomplishes which of the following? |
| | A) | It allocates the cost of the asset over its useful life. |
| | B) | It decreases expenses on the income statement. |
| | C) | It increases the value of the asset on the balance sheet. |
| | D) | All of the above. |
| | E) | None of the above. |
|
|
|
| 11 | |
Which if the following is correct regarding the accumulated depreciation account? |
| | A) | It appears on the income statement. |
| | B) | It has a normal debit balance. |
| | C) | It is a contra asset account, and has a credit balance. |
| | D) | It is a temporary account that must be closed out at year end. |
| | E) | All of the above |
|
|
|
| 12 | |
Which of the following is correct with respect to unearned revenues? |
| | A) | They are also called deferred revenues. |
| | B) | Unearned revenues are cash received in advance of providing the product or service. |
| | C) | Unearned revenues are liability accounts. |
| | D) | The unearned revenue account would be found of the balance sheet. |
| | E) | All of the above. |
|
|
|
| 13 | |
Which of the following are correct about accrued expenses: |
| | A) | They have no effect on the income statement. |
| | B) | They are the same as prepaid expenses. |
| | C) | They have been paid in advance. |
| | D) | They refer to costs that are incurred but are unpaid and unrecorded. |
| | E) | All of the above. |
|
|
|
| 14 | |
If a magazine publisher receives $12 million for annual subscriptions to a monthly magazine on November 1, what would be the appropriate adjustment on 12/31 assuming no other transactions had taken place? |
| | A) | Debit Unearned Subscriptions and Cr. Subscription Income for two million. |
| | B) | Debit Unearned Subscriptions and Cr. Subscription Income for one million. |
| | C) | Debit Prepaid Subscriptions and Cr. Unearned Subscriptions for two million. |
| | D) | Debit Prepaid Subscriptions and Cr. Unearned Subscriptions for one million. |
|
|
|
| 15 | |
Which of the following accounts is not a temporary account? |
| | A) | Income Summary |
| | B) | Rental Revenue |
| | C) | Common Stock |
| | D) | Dividends |
| | E) | Depreciation Expense-Office Equipment |
|
|
|
| 16 | |
Why would an accrued interest expense adjustment be necessary at year end? |
| | A) | To reflect interest accrued on a note payable or other long-term liability |
| | B) | to reflect interest accrued on a note receivable or other long-term asset |
| | C) | Interest accruals are always for small amounts and are not necessary |
| | D) | None of the above |
|
|
|
| 17 | |
The ABC Company has a $15,000 payroll for a 5-day workweek starting on Monday and ending on Friday. If the fiscal year ends on a Tuesday, what would be the appropriate adjustment? |
| | A) | Debit Salary Expense $15,000 and Credit Salaries Payable $15,000 |
| | B) | Debit Salary Expense $6,000 and Credit Salaries Payable $6,000 |
| | C) | Debit Salary Expense $9,000 and Credit Salaries Payable $9,000 |
| | D) | Debit Salaries Payable $10,000 and Credit Salary Expense $10,000 |
| | E) | None of the above |
|
|
|
| 18 | |
Which of the following is correct about accrued revenues? |
| | A) | They refer to revenues earned that are both unrecorded and not yet received in cash. |
| | B) | They commonly arise from services, products, interest and rent. |
| | C) | The adjustment includes a credit to a revenue account. |
| | D) | All of the above. |
|
|
|
| 19 | |
Which of the following would be true if the adjustment for prepaid expenses was not made at year end? |
| | A) | Assets would be overstated and expenses understated. |
| | B) | Liabilities would be overstated and revenues understated. |
| | C) | Liabilities would be understated and expenses understated. |
| | D) | Assets would be understated and revenues understated. |
| | E) | None of the above. |
|
|
|
| 20 | |
Revenue and expense accounts at the beginning and end of the accounting period should have which of the following? |
| | A) | A balance of zero |
| | B) | Balances of cumulative amounts of activity during the period |
| | C) | A net balance (credits minus debits) equal to the balance of the Retained Earnings account |
| | D) | A net balance equal to assets minus liabilities |
| | E) | None of the above |
|
|
|
| 21 | |
Which of the following closing entries is usually recorded first? |
| | A) | Closing the Income Summary account |
| | B) | Closing the expense accounts |
| | C) | Closing the Dividends account |
| | D) | Closing the revenue accounts |
| | E) | Closing the Common Stock account |
|
|
|
| 22 | |
After the closing procedure is complete, which of the documents proves the equality of debits and credits? |
| | A) | Income Statement |
| | B) | Account form balance sheet |
| | C) | Post-Closing Trial Balance |
| | D) | Work Sheet |
| | E) | All of the documents listed prove the equality of debits and credits |
|
|
|
| 23 | |
The Supplies account has a zero balance at the end of the accounting period. The unadjusted Supplies Expense account has a balance of $460. The total value of supplies on hand is $40. The correct adjusting entry for this situation will be |
| | A) | Supplies Expense, debit, $40; Supplies, credit, $40. |
| | B) | Supplies Expense, debit, $420; Supplies, credit, $420. |
| | C) | Supplies, debit, $460; Supplies Expense, credit, $460. |
| | D) | Supplies, debit, $40; Supplies Expense, credit, $40. |
| | E) | Supplies, debit, $40; Cash, credit, $40. |
|
|
|
| 24 | |
Which of the following is a benefit to using a work sheet at the end of the accounting cycle? |
| | A) | Reduces errors when working with systems requiring many accounts and adjustments |
| | B) | Links accounts and adjustments to their impacts in financial statements |
| | C) | Assists in planning and organizing an audit of financial statements |
| | D) | Is useful in preparing interim statements |
| | E) | All of the above, but not limited to all of the above |
|
|
|
| 25 | |
The subtotals of the Income Statement Debit and Credit columns of the work sheet are $3,500 and $4,900, respectively. If the subtotal of the Balance Sheet Debit column is $9,600, what should be the subtotal of the Balance Sheet Credit column? (related to appendix 3B) |
| | A) | $ 1,400 |
| | B) | $11,000 |
| | C) | $ 8,200 |
| | D) | $4,700 |
| | E) | A total other than the choices shown |
|
|
|
| 26 | |
The subtotals of the Income Statement Debit and Credit columns of the work sheet are $6,200 and $4,900, respectively. If the subtotal of the Balance Sheet Debit column is $19,000, what should be the subtotal of the Balance Sheet Credit column?(related to appendix 3B) |
| | A) | $20,300 |
| | B) | $ 1,300 |
| | C) | $17,700 |
| | D) | $14,400 |
| | E) | A total other than the choices shown |
|
|
|
| 27 | |
Which is true about an adjusting entry? |
| | A) | Only a permanent account is adjusted |
| | B) | Only a temporary account is adjusted |
| | C) | A permanent account and a temporary account are affected |
| | D) | It is required to satisfy the revenue recognition principle only |
| | E) | None of the above |
|
|
|
| 28 | |
The accounting cycle includes the following steps: | A. Completing the work sheet | F. Journalizing | | B. Adjusting the accounts | G. Posting | | C. Preparing a post-closing trial balance | H. Closing temporary accounts | | D. Preparing an unadjusted trial balance | I. Preparing the statements | | E. Analyzing the transactions | J. Reversing Entries |
What is the proper order of the first five steps? |
| | A) | A, B, C, D, E |
| | B) | E, F, G, D, B |
| | C) | E, F, A, D, G |
| | D) | E, F, G, D, J |
| | E) | None of the above |
|
|
|
| 29 | |
The accounting cycle includes the following steps: | A. Completing the work sheet | F. Journalizing | | B. Adjusting the accounts | G. Posting | | C. Preparing a post-closing trial balance | H. Closing temporary accounts | | D. Preparing an unadjusted trial balance | I. Preparing the statements | | E. Analyzing the transactions | J. Reversing Entries |
What is the proper order of the last five steps? |
| | A) | F, G, H, I, J |
| | B) | E, D, C, B, A |
| | C) | A, B, C, D, E |
| | D) | E, F, G, H, J |
| | E) | None of the above |
|
|
|
| 30 | |
Which of the following accounts represent a current asset on a classified balance sheet? |
| | A) | Short-term investments |
| | B) | Merchandise inventory |
| | C) | Prepaid expenses |
| | D) | Cash |
| | E) | All of the above are current assets on a classified balance sheet |
|
|
|
| 31 | |
What is the formula for profit margin? |
| | A) | Net income/total assets |
| | B) | Net income/net sales |
| | C) | Net sales/net income |
| | D) | Net income/total equity |
| | E) | Net sales/total equity |
|
|
|
| 32 | |
Current assets total $30,000, plant and equipment assets $40,000, current liabilities $10,000, and long-term liabilities $20,000. What is the current ratio of the business? |
| | A) | 1.0:1 |
| | B) | 1.5:1 |
| | C) | 2.5:1 |
| | D) | 3.0:1 |
| | E) | None of the above |
|
|
|
| 33 | |
Which year shows the best current ratio? Year Ratio
|
| | A) | 1999 2.45:1 |
| | B) | 2000 3.55:1 |
| | C) | 2001 3.45:1 |
| | D) | 2002 1.99:1 |
| | E) | 2003 2.35:1 |
|
|
|
| 34 | |
What are the optional entries recorded at the beginning of a new accounting period that prepare the accounts for the usual journal entries as if adjusting entries had not occurred called? |
| | A) | Adjusting entries |
| | B) | Reversing entries |
| | C) | Closing entries |
| | D) | Declarations of cash dividends |
| | E) | Payment of cash dividends |
|
|
|
| 35 | |
At the end of the fiscal year, an adjusting entry was made for accrued salaries of $500. On the first day of the following year, the adjusting entry was reversed. The salaries for one week, $1,250, were paid on the first Friday of the following year. The entry to record paying the salaries expense for the week would be which of the following? |
| | A) | Salaries Exp., debit, $750; Salaries Payable, debit, $500; Cash, credit, $1,250 |
| | B) | Salaries Exp., debit, $500; Salaries Payable, debit, $750; Cash, credit, $1,250 |
| | C) | Salaries Expense, debit, $1,250; Cash, credit, $1,250 |
| | D) | Salaries Expense, debit, $1,250; Salaries Payable, credit, $1,250 |
| | E) | None of the journal entries shown above |
|
|
.