ACC 557 Week 4 Quiz – Strayer University NEW

ACC/557 Week 4 Quiz – Strayer NEW

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ACC 557 Quiz Chapter 4 Week 4 Solutions Perfect Help

A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If a worksheet is used, financial statements can be prepared before adjusting entries are journalized.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The balance of the depreciation expense account will appear in the income statement debit column of a worksheet.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The Dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing the Dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The Dividends account is a permanent account whose balance is carried forward to the next accounting period.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Closing entries are journalized after adjusting entries have been journalized.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The post-closing trial balance is entered in the first two columns of a worksheet.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A business entity has only one accounting cycle over its economic existence.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The accounting cycle begins at the start of a new accounting period.

Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.

Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period.

Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated.

Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

In a corporation, Retained Earnings is a part of owners’ equity.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A company’s operating cycle and fiscal year are usually the same length of time.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Cash and supplies are both classified as current assets.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Long-term investments would appear in the property, plant, and equipment section of the balance sheet.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A liability is classified as a current liability if the company is to pay it within the forthcoming year.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A company’s liquidity is concerned with the relationship between long-term investments and long-term debt.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

Current assets are customarily the first items listed on a classified balance sheet.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The operating cycle of a company is determined by the number of years the company has been operating.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The accumulated depreciation account shows the total amount of depreciation that the company has expensed thus far in the asset’s life.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The use of reversing entries changes the amount reported in the financial statements.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Each reversing entry is the exact opposite of the adjusting entry made in the previous period.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Reversing entries are an optional bookkeeping procedure.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

After a worksheet has been completed, the statement columns contain all data that are required for the preparation of financial statements.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

In one closing entry, Dividends is credited and Income Summary is debited.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The post-closing trial balance will contain only retained earnings statement accounts and balance sheet accounts.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The operating cycle of a company is the average time required to collect the receivables resulting from producing revenues.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

Current assets are listed in the order of liquidity.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Current liabilities are obligations that the company is to pay within the coming year.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

MULTIPLE CHOICE QUESTIONS

Preparing a worksheet involves
two steps.
three steps.
four steps.
five steps.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The adjustments entered in the adjustments columns of a worksheet are
not journalized.
posted to the ledger but not journalized.
not journalized until after the financial statements are prepared.
journalized before the worksheet is completed.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The information for preparing a trial balance on a worksheet is obtained from
financial statements.
general ledger accounts.
general journal entries.
business documents.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the
adjusted trial balance.
post-closing trial balance.
the general journal.
adjustments columns of the worksheet.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has
earned net income for the period.
an error because debits do not equal credits.
suffered a net loss for the period.
to make an adjusting entry.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A worksheet is a multiple column form that facilitates the
identification of events.
measurement process.
preparation of financial statements.
analysis process.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process?
Large company with numerous accounts
Small company with numerous accounts
All companies, since worksheets are required under generally accepted accounting principles
Small company with few accounts

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

A worksheet can be thought of as a(n)
permanent accounting record.
optional device used by accountants.
part of the general ledger.
part of the journal.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The account, Supplies, will appear in the following debit columns of the worksheet.
Trial balance
Adjusted trial balance
Balance sheet
All of these

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet?
They should be inserted in alphabetical order into the trial balance accounts already given.
They should be inserted in chart of account order into the trial balance already given.
They should be inserted on the lines immediately below the trial balance totals.
They should not be inserted on the trial balance until the next accounting period.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

When using a worksheet, adjusting entries are journalized
after the worksheet is completed and before financial statements are prepared.
before the adjustments are entered on to the worksheet.
after the worksheet is completed and after financial statements have been prepared.
before the adjusted trial balance is extended to the proper financial statement columns.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet?
Income statement columns
Adjustments columns
Trial balance columns
Adjusted trial balance columns

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Adjusting entries are prepared from
source documents.
the adjustments columns of the worksheet.
the general ledger.
last year’s worksheet.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The net income (or loss) for the period
is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.
cannot be found on the worksheet.
is found by computing the difference between the income statement columns of the worksheet.
is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The worksheet does not show
net income or loss for the period.
revenue and expense account balances.
the ending balance in the retained earnings account.
the trial balance before adjustments.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

If the total debits exceed total credits in the balance sheet columns of the worksheet, owner’s equity
will increase because net income has occurred.
will decrease because a net loss has occurred.
is in error because a mistake has occurred.
will not be affected.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement and balance sheet columns of Iron and Wine Company’s worksheet reflect the following totals:

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.

Totals $72,000 $48,000 $60,000 $84,000

The net income (or loss) for the period is

$48,000 income.
$24,000 income.
$24,000 loss.
not determinable.

Ans: LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement and balance sheet columns of Iron and Wine Company’s worksheet reflect the following totals:

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.

Totals $72,000 $48,000 $60,000 $84,000

To enter the net income (or loss) for the period into the above worksheet requires an entry to the

income statement debit column and the balance sheet credit column.
income statement credit column and the balance sheet debit column.
income statement debit column and the income statement credit column.
balance sheet debit column and the balance sheet credit column.

Ans: LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Only two adjustments appear in the adjustments column of a worksheet for Tempest Sailing Inc. One of these is to record $8,000 depreciation of equipment, and the other is to record the expiration of $1,500 of prepaid insurance. If the Trail Balance column totals are $145,320, what are the totals of the Adjusted Trial Balance columns?
$145,320.
$153,320.
$151,820.
$154,820.

Ans: LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

If sales are $540,000, expenses are $440,000 and dividends are $50,000, what is the balance of income Summary prior to closing?
It will have a credit balance of $50,000.
It will have a debit balance of $50,000.
It will have a debit balance of $100,000.
It will have a credit balance of $100,000.

Ans: LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Which of the following accounts would not be debited in the process of preparing closing entries for Bargain World, Inc
Income Summary.
Service Revenue.
Dividends.
Retained Earnings.

Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Which of the following journal entries is required to close the Income Summary account of a profitable company?
Debit Income Summary, credit Retained Earnings.
Credit Income Summary, debit Retained Earnings.
Debit Income Summary, credit Revenue.
Credit Income Summary, debit Common Stock.

Ans: LO2 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: problem solving

The following information is available for Baker Industries

Baker Industries Inc
Trial Balance
12/31/13
Debit Credit
Cash 16
Accounts Receivable 26
Supplies 4
Equipment 191
Accumulated Depreciation 13
Accounts Payable 21
Common stock 106
Retained Earnings 56
Dividends 11
Service Revenue 189
Salaries and Wages Expense 86
Depreciation Expense 39
Supplies Expense 12
385 385

What is the balance in Income Summary before it is closed to Retained Earnings for Baker Industries?

$56
$52
$41
$248

Ans: LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The following information is available for Baker Industries

Baker Industries Inc
Trial Balance
12/31/13
Debit Credit
Cash 16
Accounts Receivable 26
Supplies 4
Equipment 191
Accumulated Depreciation 13
Accounts Payable 21
Common stock 106
Retained Earnings 56
Dividends 11
Service Revenue 189
Salaries and Wages Expense 86
Depreciation Expense 39
Supplies Expense 12
385 385

What is the balance in Retained Earnings after posting closing entries at December 31 for Baker Industries?

$108
$97
$237
$4

Ans: LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The following information is available for Baker Industries

Baker Industries Inc
Trial Balance
12/31/13
Debit Credit
Cash 16
Accounts Receivable 26
Supplies 4
Equipment 191
Accumulated Depreciation 13
Accounts Payable 21
Common stock 106
Retained Earnings 56
Dividends 11
Service Revenue 189
Salaries and Wages Expense 86
Depreciation Expense 39
Supplies Expense 12
385 385

What is the amount of total debits on the post-closing trial balance for Baker Industries?

$237
$248
$289
$224

Ans: LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Closing entries are necessary for
permanent accounts only.
temporary accounts only.
both permanent and temporary accounts.
permanent or real accounts only.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Each of the following accounts is closed to Income Summary except
Expenses.
Dividends
Revenues.
All of these are closed to Income Summary.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing entries are made
in order to terminate the business as an operating entity.
so that all assets, liabilities, and stock holder’s equity accounts will have zero balances when the next accounting period starts.
in order to transfer net income (or loss) and dividends to the retained earnings account.
so that financial statements can be prepared.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing entries are
an optional step in the accounting cycle.
posted to the ledger accounts from the worksheet.
made to close permanent or real accounts.
journalized in the general journal.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The income summary account
is a permanent account.
appears on the balance sheet.
appears on the income statement.
is a temporary account.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
debit to the Retained Earnings account.
debit to the Dividends account.
credit to the Retained Earnings account.
credit to the Dividends account.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Closing entries are journalized and posted
before the financial statements are prepared.
after the financial statements are prepared.
at management’s discretion.
at the end of each interim accounting period.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing entries
are prepared before the financial statements.
reduce the number of permanent accounts.
cause the revenue and expense accounts to have zero balances.
summarize the activity in every account.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following is a true statement about closing the books of a corporation?
Expenses are closed to the Expense Summary account.
Only revenues are closed to the Income Summary account.
Revenues and expenses are closed to the Income Summary account.
Revenues, expenses, and the dividends account are closed to the Income Summary account.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Closing entries may be prepared from all but which one of the following sources?
Adjusted balances in the ledger
Income statement and balance sheet columns of the worksheet
Balance sheet
Income and retained earnings statements

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

In order to close the Dividends account, the
income summary account should be debited.
income summary account should be credited.
Retained Earnings account should be credited.
Retained Earnings account should be debited.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

In preparing closing entries
each revenue account will be credited.
each expense account will be credited.
the dividends account will be debited if there is net income for the period.
the dividends account will be debited.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The most efficient way to accomplish closing entries is to
credit the income summary account for each revenue account balance.
debit the income summary account for each expense account balance.
credit the dividends balance directly to the income summary account.
credit the income summary account for total revenues and debit the income summary account for total expenses.

Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The closing entry process consists of closing
all asset and liability accounts.
out the Retained Earnings account.
all permanent accounts.
all temporary accounts.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The final closing entry to be journalized is typically the entry that closes the
revenue accounts.
Dividends account.
Retained Earnings account.
expense accounts.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

An error has occurred in the closing entry process if
revenue and expense accounts have zero balances.
the Retained Earnings account is credited for the amount of net income.
the Dividends account is closed to the Retained Earnings account.
the balance sheet accounts have zero balances.

Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The Income Summary account is an important account that is used
during interim periods.
in preparing adjusting entries.
annually in preparing closing entries.
annually in preparing correcting entries.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The balance in the income summary account before it is closed will be equal to
the net income or loss on the income statement.
the beginning balance in the retained earnings account.
the ending balance in the retained earnings account.
zero.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to
the beginning retained earnings reported on the retained earnings statement.
the amount of the retained earnings reported on the balance sheet.
zero.
the net income for the period.

Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information:
Revenues $7,000

Expenses:

Salaries and Wages Expense $3,000

Rent Expense 1,000

Advertising Expense 800

Supplies Expense 300

Insurance Expense 100

Total expenses 5,200

Net income $1,800

The entry to close the revenue account includes a

debit to Income Summary for $1,800.
credit to Income Summary for $1,800.
debit to Income Summary for $7,000.
credit to Income Summary for $7,000.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information:
Revenues $7,000

Expenses:

Salaries and Wages Expense $3,000

Rent Expense 1,000

Advertising Expense 800

Supplies Expense 300

Insurance Expense 100

Total expenses 5,200

Net income $1,800

The entry to close the expense accounts includes a

debit to Income Summary for $1,800.
credit to Rent Expense for $1,000.
credit to Income Summary for $5,200.
debit to Wages Expense for $3,000.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information:
Revenues $7,000

Expenses:

Salaries and Wages Expense $3,000

Rent Expense 1,000

Advertising Expense 800

Supplies Expense 300

Insurance Expense 100

Total expenses 5,200

Net income $1,800

After the revenue and expense accounts have been closed, the balance in Income Summary will be

$0.
a debit balance of $1,800.
a credit balance of $1,800.
a credit balance of $7,000.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information:
Revenues $7,000

Expenses:

Salaries and Wages Expense $3,000

Rent Expense 1,000

Advertising Expense 800

Supplies Expense 300

Insurance Expense 100

Total expenses 5,200

Net income $1,800

The entry to close Income Summary to Retained Earnings includes

a debit to Revenues for $7,000.
credits to Expenses totalling $5,200.
a credit to Income Summary for $1,800
a credit to Retained Earnings for $1,800.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information:
Revenues $7,000

Expenses:

Salries and Wages Expense $3,000

Rent Expense 1,000

Advertising Expense 800

Supplies Expense 300

Insurance Expense 100

Total expenses 5,200

Net income $1,800

At June 1, 2013, Camera Obscura reported retained earnings of $35,000. The company paid no dividends during June. At June 30, 2013, the company will report retained earnings of

$29,800.
$35,000.
$36,800.
$42,000.

Ans: LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

The entry to close the revenue account includes a

debit to Income Summary for $5,500.
credit to Income Summary for $5,500.
debit to Revenues for $70,000.
credit to Revenues for $70,000.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

The entry to close the expense accounts includes a

debit to Income Summary for $5,500.
credit to Income Summary for $5,500.
debit to Income Summary for $75,500.
debit to Salaries and Wages Expense for $2,500.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

Multiple Choice 92. (Cont.)

After the revenue and expense accounts have been closed, the balance in Income Summary will be

$0.
a debit balance of $5,500.
a credit balance of $5,500.
a credit balance of $70,000.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

The entry to close Income Summary to Retained Earning includes

a debit to Revenue for $70,000.
credits to Expenses totalling $75,500.
a credit to Income Summary for $5,500.
a credit to Retained Earning for $5,500.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

At January 1, 2013, Fugazi reported retained earnings of $50,000. Divudends for the year totalled $10,000. At December 31, 2013, the company will report retained earning of

$15,500.
$34,500.
$40,000.
$45,500.

Ans: LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

After all closing entries have been posted, the Income Summary account will have a balance of

$0.
$5,500 debit.
$5,500 credit.
$34,500 credit.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The income statement for the year 2013 of Fugazi Co. contains the following information:
Revenues $70,000

Expenses:

Salaries and Wages Expense $45,000

Rent Expense 12,000

Advertising Expense 8,000

Supplies Expense 6,000

Utilities Expense 2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss) $(5,500)

After all closing entries have been posted, the revenue account will have a balance of

$0.
$70,000 credit.
$70,000 debit.
$5,500 credit.

Ans: LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A post-closing trial balance is prepared
after closing entries have been journalized and posted.
before closing entries have been journalized and posted.
after closing entries have been journalized but before the entries are posted.
before closing entries have been journalized but after the entries are posted.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

All of the following statements about the post-closing trial balance are correct except it
shows that the accounting equation is in balance.
provides evidence that the journalizing and posting of closing entries have been properly completed.
contains only permanent accounts.
proves that all transactions have been recorded.

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A post-closing trial balance will show
only permanent account balances.
only temporary account balances.
zero balances for all accounts.
the amount of net income (or loss) for the period.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A post-closing trial balance should be prepared
before closing entries are posted to the ledger accounts.
after closing entries are posted to the ledger accounts.
before adjusting entries are posted to the ledger accounts.
only if an error in the accounts is detected.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A post-closing trial balance will show
zero balances for all accounts.
zero balances for balance sheet accounts.
only balance sheet accounts.
only income statement accounts.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The purpose of the post-closing trial balance is to
prove that no mistakes were made.
prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
prove the equality of the income statement account balances that are carried forward into the next accounting period.
list all the balance sheet accounts in alphabetical order for easy reference.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The balances that appear on the post-closing trial balance will match the
income statement account balances after adjustments.
balance sheet account balances after closing entries.
income statement account balances after closing entries.
balance sheet account balances after adjustments.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which account listed below would be double ruled in the ledger as part of the closing process?
Cash
Retained
Dividends
Accumulated Depreciation—Equipment

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A double rule applied to accounts in the ledger during the closing process implies that
the account is a temporary account.
the account is a balance sheet account.
the account balance is not zero.
a mistake has been made, since double ruling is prescribed.

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The heading for a post-closing trial balance has a date line that is similar to the one found on
a balance sheet.
an income statement.
a retained earnings statement.
the worksheet.

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which one of the following is usually prepared only at the end of a company’s annual accounting period?
Preparing financial statements
Journalizing and posting adjusting entries
Journalizing and posting closing entries
Preparing an adjusted trial balance

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is
analyzing transactions.
journalizing and posting adjusting entries.
preparing a post-closing trial balance.
posting to ledger accounts.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which one of the following is an optional step in the accounting cycle of a business enterprise?
Analyze business transactions
Prepare a worksheet
Prepare a trial balance
Post to the ledger accounts

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The final step in the accounting cycle is to prepare
closing entries.
financial statements.
a post-closing trial balance.
adjusting entries.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following steps in the accounting cycle would not generally be performed daily?
Journalize transactions
Post to ledger accounts
Prepare adjusting entries
Analyze business transactions

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following steps in the accounting cycle may be performed most frequently?
Prepare a post-closing trial balance
Journalize closing entries
Post closing entries
Prepare a trial balance

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which of the following depicts the proper sequence of steps in the accounting cycle?
Journalize the transactions, analyze business transactions, prepare a trial balance
Prepare a trial balance, prepare financial statements, prepare adjusting entries
Prepare a trial balance, prepare adjusting entries, prepare financial statements
Prepare a trial balance, post to ledger accounts, post adjusting entries

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The two optional steps in the accounting cycle are preparing
a post-closing trial balance and reversing entries.
a worksheet and post-closing trial balances.
reversing entries and a worksheet.
an adjusted trial balance and a post-closing trial balance.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The first required step in the accounting cycle is
reversing entries.
journalizing transactions in the book of original entry.
analyzing transactions.
posting transactions.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Correcting entries
always affect at least one balance sheet account and one income statement account.
affect income statement accounts only.
affect balance sheet accounts only.
may involve any combination of accounts in need of correction.

Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Merriweather Post Pavillion received a $840 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $480 and a credit to Service Revenue $480. The correcting entry is
debit Cash, $840; credit Accounts Receivable, $840.
debit Cash, $360 and Accounts Receivable, $480; credit Service Revenue, $840.
debit Cash, $360 and Service Revenue, $480; credit Accounts Receivable, $840.
debit Accounts Receivable, $840; credit Cash, $360 and Service Revenue, $480.

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

If errors occur in the recording process, they
should be corrected as adjustments at the end of the period.
should be corrected as soon as they are discovered.
should be corrected when preparing closing entries.
cannot be corrected until the next accounting period.

Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A correcting entry
must involve one balance sheet account and one income statement account.
is another name for a closing entry.
may involve any combination of accounts.
is a required step in the accounting cycle.

Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

An unacceptable way to make a correcting entry is to
reverse the incorrect entry.
erase the incorrect entry.
compare the incorrect entry with the correct entry and make a correcting entry to correct the accounts.
correct it immediately upon discovery.

Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Zen Arcade paid the weekly payroll on January 2 by debiting Salaries and Wages Expense for $47,000. The accountant preparing the payroll entry overlooked the fact that Salaries and Wages Expense of $27,000 had been accrued at year end on December 31. The correcting entry is
Salaries and Wages Payable…………………………………………. 27,000
Cash………………………………………………………………… 27,000

Cash…………………………………………………………………………… 20,000
Salaries and Wages Expense……………………………… 20,000

Salaries and Wages Payable…………………………………………. 27,000
Salaries and Wages Expense……………………………… 27,000

Cash…………………………………………………………………………… 27,000
Salaries and Wages Expense……………………………… 27,000

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Jawbreaker Company paid $640 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $460 and a credit to Accounts Receivable, $460. The correcting entry is
Accounts Payable………………………………………………………… 640
Cash………………………………………………………………… 640

Accounts Receivable……………………………………………………. 460
Cash………………………………………………………………… 460

Accounts Receivable……………………………………………………. 460
Accounts Payable……………………………………………… 460

Accounts Receivable……………………………………………………. 460
Accounts Payable………………………………………………………… 640

Cash………………………………………………………………… 1,100

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

A lawyer collected $720 of legal fees in advance. He erroneously debited Cash for $270 and credited Accounts Receivable for $270. The correcting entry is
Cash…………………………………………………………………………… 270
Accounts Receivable……………………………………………………. 450

Unearned Service Revenue………………………………… 720

Cash…………………………………………………………………………… 720
Service Revenue………………………………………………. 720

Cash…………………………………………………………………………… 450
Accounts Receivable……………………………………………………. 270

Unearned Service Revenue………………………………… 720

Cash…………………………………………………………………………… 450
Accounts Receivable…………………………………………. 450

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

On May 25, Yellow House Company received a $650 check from Grizzly Bean for services to be performed in the future. The bookkeeper for Yellow House Company incorrectly debited Cash for $650 and credited Accounts Receivable for $650. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should:
debit Cash $650 and credit Unearned Service Revenue $650.
debit Accounts Receivable $650 and credit Service Revenue $650.
debit Accounts Receivable $650 and credit Cash $650.
debit Accounts Receivable $650 and credit Unearned Service Revenue $650.

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

On March 8, Black Candy Company bought supplies on account from the Arcade Fire Company for $880. Black Candy Company incorrectly debited Equipment for $800 and credited Accounts Payable for $800. The entries have been posted to the ledger. the correcting entry should be:
Supplies……………………………………………………………………… 880
Accounts Payable…………………………………………………… 880

Supplies……………………………………………………………………… 880
Accounts Payable…………………………………………………… 800

Equipment………………………………………………………………. 80

Supplies……………………………………………………………………… 880
Equipment………………………………………………………………. 880

Supplies……………………………………………………………………… 880
Equipment………………………………………………………………. 800

Accounts Payable…………………………………………………… 80

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The following information is for Sunny Day Real Estate:
Sunny Day Real Estate

Balance Sheet

December 31, 2013

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 30,000 Salaries and Wages Payable 15,000

Accounts Receivable 50,000 Mortgage Payable 85,000

Inventory 70,000 Total Liabilities $160,000

Land Held for Investment 85,000

Land 120,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (20,000) 80,000

Trademark 70,000 Total Liabilities and

Total Assets $530,000 Stockholders’ Equity $530,000

The total dollar amount of assets to be classified as current assets is

$105,000.
$175,000.
$190,000.
$260,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Sunny Day Real Estate:
Sunny Day Real Estate

Balance Sheet

December 31, 2013

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 30,000 Salaries and Wages Payable 15,000

Accounts Receivable 50,000 Mortgage Payable 85,000

Inventory 70,000 Total Liabilities $160,000

Land Held for Investment 85,000

Land 120,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (20,000) 80,000

Trademark 70,000 Total Liabilities and

Total Assets $530,000 Stockholders’ Equity $530,000

The total dollar amount of assets to be classified as property, plant, and equipment is

$200,000.
$220,000.
$285,000.
$305,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Sunny Day Real Estate:
Sunny Day Real Estate

Balance Sheet

December 31, 2013

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 30,000 Salaries and Wages Payable 15,000

Accounts Receivable 50,000 Mortgage Payable 85,000

Inventory 70,000 Total Liabilities $160,000

Land Held for Investment 85,000

Land 120,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (20,000) 80,000

Trademark 70,000 Total Liabilities and

Total Assets $530,000 Stockholders’ Equity $530,000

The total dollar amount of assets to be classified as investments is

$0.
$70,000.
$85,000.
$155,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Sunny Day Real Estate:
Sunny Day Real Estate

Balance Sheet

December 31, 2013

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 30,000 Salaries and Wages Payable 15,000

Accounts Receivable 50,000 Mortgage Payable 85,000

Inventory 70,000 Total Liabilities $160,000

Land Held for Investment 85,000

Land 120,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (20,000) 80,000

Trademark 70,000 Total Liabilities and

Total Assets $530,000 Stockholders’ Equity $530,000

The total dollar amount of liabilities to be classified as current liabilities is

$15,000.
$60,000.
$75,000.
$160,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies

Balance Sheet

December 31, 2013

Cash $ 20,000 Accounts Payable $ 65,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000

Accounts Receivable 50,000 Mortgage Payable 75,000

Inventory 70,000 Total Liabilities $165,000

Land Held for Investment 90,000

Land 125,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (30,000) 70,000

Trademark 70,000 Total Liabilities and

Total Assets $535,000 Stockholders’ Equity $535,000

The total dollar amount of assets to be classified as current assets is

$70,000.
$110,000.
$180,000.
$250,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies

Balance Sheet

December 31, 2013

Cash $ 20,000 Accounts Payable $ 65,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000

Accounts Receivable 50,000 Mortgage Payable 75,000

Inventory 70,000 Total Liabilities $165,000

Land Held for Investment 90,000

Land 125,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (30,000) 70,000

Trademark 70,000 Total Liabilities and

Total Assets $535,000 Stockholders’ Equity $535,000

The total dollar amount of assets to be classified as property, plant, and equipment is

$195,000.
$225,000.
$285,000.
$315,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies

Balance Sheet

December 31, 2013

Cash $ 20,000 Accounts Payable $ 65,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000

Accounts Receivable 50,000 Mortgage Payable 75,000

Inventory 70,000 Total Liabilities $165,000

Land Held for Investment 90,000

Land 125,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (30,000) 70,000

Trademark 70,000 Total Liabilities and

Total Assets $535,000 Stockholders’ Equity $535,000

The total dollar amount of assets to be classified as investments is

$0.
$70,000.
$90,000.
$125,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies

Balance Sheet

December 31, 2013

Cash $ 20,000 Accounts Payable $ 65,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000

Accounts Receivable 50,000 Mortgage Payable 75,000

Inventory 70,000 Total Liabilities $165,000

Land Held for Investment 90,000

Land 125,000

Building $100,000 Common Sock $120,000

Less Accumulated Retained Earnings 250,000 370,000

Depreciation (30,000) 70,000

Trademark 70,000 Total Liabilities and

Total Assets $535,000 Stockholders’ Equity $535,000

The total dollar amount of liabilities to be classified as current liabilities is

$25,000.
$65,000.
$90,000.
$165,000.

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

All of the following are property, plant, and equipment except
supplies.
machinery.
land.
buildings.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The first item listed under current liabilities is usually
accounts payable.
notes payable.
salaries and wages payable.
taxes payable.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Office Equipment is classified in the balance sheet as
a current asset.
property, plant, and equipment.
an intangible asset.
a long-term investment.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

A current asset is
the last asset purchased by a business.
an asset which is currently being used to produce a product or service.
usually found as a separate classification in the income statement.
an asset that a company expects to convert to cash or use up within one year.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

An intangible asset
does not have physical substance, yet often is very valuable.
is worthless because it has no physical substance.
is converted into a tangible asset during the operating cycle.
cannot be classified on the balance sheet because it lacks physical substance.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Liabilities are generally classified on a balance sheet as
small liabilities and large liabilities.
present liabilities and future liabilities.
tangible liabilities and intangible liabilities.
current liabilities and long-term liabilities.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which of the following would not be classified a long-term liability?
Current maturities of long-term debt
Bonds payable
Mortgage payable
Lease liabilities

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which of the following liabilities are not related to the operating cycle?
Wages payable
Accounts payable
Utilities payable
Bonds payable

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Intangible assets include each of the following except
copyrights.
goodwill.
land improvements.
patents.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

It is not true that current assets are assets that a company expects to
realize in cash within one year.
sell within one year.
use up within one year.
acquire within one year.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The operating cycle of a company is the average time that is required to go from cash to
sales in producing revenues.
cash in producing revenues.
inventory in producing revenues.
accounts receivable in producing revenues.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

On a classified balance sheet, current assets are customarily listed
in alphabetical order.
with the largest dollar amounts first.
in the order of liquidity.
in the order of acquisition.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Intangible assets are
listed under current assets on the balance sheet.
not listed on the balance sheet because they do not have physical substance.
long-lived assets that are often very valuable.
listed as a long-term investment on the balance sheet.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The relationship between current assets and current liabilities is important in evaluating a company’s
profitability.
liquidity.
market value.
accounting cycle.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

The most important information needed to determine if companies can pay their current obligations is the
net income for this year.
projected net income for next year.
relationship between current assets and current liabilities.
relationship between short-term and long-term liabilities.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Depreciation expense 12,000

Dividends 14,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

What is the company’s net income for the year ending December 31, 2013?

$6,000
$20,000
$34,000
$125,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

What is the balance that would be reported for stockholders’ equity at December 31, 2013?

$91,000
$105,000
$125,000
$139,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Depreciation expense 12,000

Dividends 14,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

What are total current assets at December 31, 2013?

$26,000
$28,000
$32,000
$38,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Equipment 190,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Patents 20,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

What is the book value of the equipment at December 31, 2013?

$150,000
$162,000
$178,000
$190,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

What are total current liabilities at December 31, 2013?

$19,000
$70,000
$89,000
$106,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

What are total long-term liabilities at December 31, 2013?

$0
$19,000
$70,000
$89,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Equipment 190,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Patents 20,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

What is total liabilities and stockholders’ equity at December 31, 2013?

$194,000
$214,000
$228,000
$231,000

Ans: LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Equipment 190,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Patents 20,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

The sub-classifications for assets on the company’s classified balance sheet would include all of the following except:

Current Assets.
Property, Plant, and Equipment.
Intangible Assets.
Long-term Assets.

Ans: LO: 6, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013:
Accounts payable $ 19,000

Accounts receivable 11,000

Accumulated depreciation – equipment 28,000

Advertising expense 21,000

Cash 11,000

Common stock 40,000

Dividends 14,000

Depreciation expense 12,000

Insurance expense 3,000

Note payable, due 6/30/14 70,000

Prepaid insurance (12-month policy) 6,000

Rent expense 17,000

Retained earnings (1/1/13) 65,000

Salaries and wages expense 32,000

Service revenue 125,000

Supplies 4,000

Supplies expense 6,000

Equipment 210,000

The current assets should be listed on Postal Service’s balance sheet in the following order:

cash, accounts receivable, prepaid insurance, equipment.
cash, prepaid insurance, supplies, accounts receivable.
cash, accounts receivable, prepaid insurance, supplies.
equipment, supplies, prepaid insurance, accounts receivable, cash.

Ans: LO: 6, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which statement about long-term investments is not true?
They will be held for more than one year.
They are not currently used in the operation of the business.
They include investments in stock of other companies and land held for future use.
They can never include cash accounts.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

What is the order in which assets are generally listed on a classified balance sheet?
Current and long-term
Current; property, plant, and equipment; long-term investments; intangible assets
Current; property, plant, and equipment; intangible assets; long-term investments
Current; long-term investments; property, plant, and equipment; intangible assets

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

These are selected account balances on December 31, 2013.
Land (location of the corporation’s office building) $100,000

Land (held for future use) 150,000

Corporate Office Building 600,000

Inventory 200,000

Equipment 450,000

Office Furniture 150,000

Accumulated Depreciation 425,000

What is the total amount of property, plant, and equipment that will appear on the balance sheet?

$875,000
$1,025,000
$1,075,000
$1,300,000

Ans: LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The following selected account balances appear on the December 31, 2013 balance sheet of Superchunk Co.
Land (location of the corporation’s office building) $150,000

Land (held for future use) 225,000

Corporate Office Building 900,000

Inventory 300,000

Equipment 675,000

Office Furniture 225,000

Accumulated Depreciation 640,000

What is the total amount of property, plant, and equipment that will be reported on the balance sheet?

$1,310,000
$1,535,000
$1,610,000
$1,950,000

Ans: LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

a162. A reversing entry

reverses entries that were made in error.
is the exact opposite of an adjusting entry made in a previous period.
is made when a business disposes of an asset it previously purchased.
is made when a company sustains a loss in one period and reverses the effect with a profit in the next period.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

a 163. If a company utilizes reversing entries, they will

be made at the beginning of the next accounting period.
not actually be posted to the general ledger accounts.
be made before the post-closing trial balance.
be part of the adjusting entry process.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

The steps in the preparation of a worksheet do not include
analyzing documentary evidence.
preparing a trial balance on the worksheet.
entering the adjustments in the adjustment columns.
entering adjusted balances in the adjusted trial balance columns.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Balance sheet accounts are considered to be
temporary stockholders’ accounts.
permanent accounts.
nominal accounts.
equity accounts.

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Income Summary has a credit balance of $17,000 after closing revenues and expenses. The entry to close Income Summary is
credit Income Summary $17,000, debit Retained Earnings $17,000.
credit Income Summary $17,000, debit Dividends $17,000.
debit Income Summary $17,000, credit Dividends $17,000.
debit Income Summary $17,000, credit Retained Earnings $17,000.

Ans: LO: 2, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

The post-closing trial balance contains only
income statement accounts.
balance sheet accounts.
balance sheet and income statement accounts.
income statement, balance sheet, and stockholders’ equity statement accounts.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Which of the following is an optional step in the accounting cycle?
Adjusting entries
Closing entries
Correcting entries
Reversing entries

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Which one of the following statements concerning the accounting cycle is incorrect?
The accounting cycle includes journalizing transactions and posting to ledger accounts.
The accounting cycle includes only one optional step.
The steps in the accounting cycle are performed in sequence.
The steps in the accounting cycle are repeated in each accounting period.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Correcting entries are made
at the beginning of an accounting period.
at the end of an accounting period.
whenever an error is discovered.
after closing entries.

Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

On September 23, Sebagoh Company received a $350 check from Surfer Rosa Inc. for services to be performed in the future. The bookkeeper for Sebadoh Company incorrectly debited Cash for $350 and credited Accounts Receivable for $350. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should
debit Cash $350 and credit Unearned Service Revenue $350.
debit Accounts Receivable $350 and credit Unearned Service Revenue $350.
debit Accounts Receivable $350 and credit Cash $350.
debit Accounts Receivable $350 and credit Service Revenue $350.

Ans: LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

All of the following are stockholders’ equity accounts except
Retained Earnings
Common Stock
Investment in Stock.
Dividends

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Current liabilities
are obligations that the company is to pay within the forthcoming year.
are listed in the balance sheet in order of their expected maturity.
are listed in the balance sheet, starting with accounts payable.
should not include long-term debt that is expected to be paid within the next year.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

a174. The use of reversing entries

is a required step in the accounting cycle.
changes the amounts reported in the financial statements.
simplifies the recording of subsequent transactions.
is required for all adjusting entries.

Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting