Practice Quiz 2
1.
Which T-account is incorrect?
a. Depreciation Expense
+
|
-
b. Interest Receivable
+
|
-
c. Capital Stock______
-
|
+
d. Unearned Rent______
+
2.
|
-
Information related to the Jones Company for the calendar year 2007 follows:
Liabilities, December 31, 2007
Assets, December 31, 2007
Dividends Distributed during 2007
$300
700
90
Liabilities, December 31, 2006
250
Assets, December 31, 2006
500
Assuming no capital stock was issued during 2007, the net income earned by the Jones
Company during 2007 was
a. $ 60
b. $150
c. $240
d. $290
3.
Which of the following statements regarding a post-closing trial balance is not true?
a. post-closing trial balances only contain permanent accounts
b. a post-closing trial balance is prepared as of the end of the company's fiscal year
c. post-closing trial balances only contain temporary accounts
d. a post-closing trial balance verifies that the total of the debit balances equals the total of the
credit balances of all accounts in the general ledger
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4.
Which of the following is an economic resource that should be depreciated over the
accounting periods estimated to be benefited?
a. salaries incurred but unpaid at year-end
b. rent collected in advance for a three-year rental period
c. equipment purchased for use in the business operations
d. interest revenue accrued on investment in bonds
5.
Which of the following errors will be detected by a trial balance?
a. posting a credit to Sales instead of to Accounts Payable
b. incorrectly computing the balance of the cash account
c. not journalizing a complete sales transaction
d. forgetting to post a complete purchase transaction
6.
What relationship exists between the general journal and the general ledger?
a. The general ledger accounts contain the same information as in the general journal, just in a
different format.
b. The balances in the general ledger will always equal those in the general journal.
c. After posting from the general journal the debits in the general ledger must equal the credits.
d. the number of accounts in the general journal will always be larger than the number of
accounts in the general ledger.
7.
Which of the following adjusting entries involves the recognition of an accrued expense?
a. recording depreciation on a long-lived asset
b. writing off the portion of an insurance policy that has expired
c. recognition of salaries owed to employees for work done during the current period that will
be paid during the next accounting period
d. recognition of bad debt losses that are expected to result from making sales on credit terms
8.
The Maddox Company uses the cash basis of accounting. Maddox Company made
$500,000 in payments to its suppliers during the year. Maddox's beginning Inventory was
$20,000, and its ending Inventory was $35,000. In addition, Maddox had a beginning Accounts
Payable of $50,000 and an ending Accounts Payable of $70,000. What is Maddox's Cost of
Goods Sold under the accrual basis of accounting?
a. $465,000
b. $495,000
c. $505,000
d. $535,000
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9.
On June 1, 2006, Whiting Corporation received $4,104 in advance for a two-year rental of
some land, and credited Unearned Rent. In the adjusting entry at December 31, 2006, there
would be a
a. debit to Unearned Rent for $1,026
b. credit to Unearned Rent for $1,197
c. credit to Rent Revenue for $1,197
d. debit to Unearned Rent for $2,907
10. On May 1, 2007, Zachary Corporation borrowed $2,500 on a two-year, 6% note payable.
Interest is due and payable at the end of each six months. Zachary makes all interest payments
on schedule. The correct December 31, 2007, adjusting entry would be
a. Interest Expense
25
Interest Payable
b. Interest Payable
25
100
Cash
100
c. Interest Expense
25
Cash
25
d. Interest Expense
100
Interest Payable
100
11. Posting is the procedure of transferring information from the
a. journal to the ledger
b. trial balance to the worksheet
c. ledger to the journal
d. worksheet to the financial statements
12. The balance in deferred (unearned) revenue accounts represents amounts that are
Earned
Collected
a. Yes
No
b. Yes
Yes
c. No
No
d. No
Yes
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13. Rental receipts for the period July 1, 2007 through June 30, 2008, were collected on June
30, 2007. The effect of this transaction on the 2007 financial statements for unearned revenue
and rent revenue is
Unearned Revenue
Rent Revenue
a. Increase
Increase
b. Increase
Decrease
c. Decrease
No effect
d. Decrease
Increase
14. The Reed Company uses the straight-line method to depreciate its equipment. On May 1,
2007, the company purchased some equipment for $200,000. The equipment is estimated to
have a useful life of ten years and a salvage value of $20,000. How much depreciation expense
should Reed record for the equipment in the adjusting entry on December 31, 2007?
a. $ 6,000
b. $12,000
c. $13,500
d. $18,000
15. Which of the following is not a type of adjusting entry?
a. depreciation of long-term physical assets
b. allocation of unearned revenue
c. correction of an error in the general journal
d. recording of accrued revenue
16. The accountant failed to make the adjusting entry to record the amount of interest owed on
a note to the bank at the end of the year. This error would cause an overstatement of:
a. assets
b. expenses
c. liabilities
d. owners' equity
17. The accountant failed to make the adjusting entry to record the unpaid wages of its
employees as of December 31. This error will cause
a. an overstatement of assets, liabilities, and owners' equity
b. an understatement of expenses, liabilities, and owners' equity
c. an understatement of liabilities and an overstatement of owners' equity
d. an understatement of assets and liabilities
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18. The accountant failed to make the adjusting entry to record the depreciation for the year.
This error would cause
a. an overstatement of assets
b. an overstatement of expenses
c. an understatement of liabilities
d. an understatement of owners' equity
19. Closing entries help to
a. update a periodic Inventory account for credit sales
b. update the Retained Earnings account on a daily basis
c. apportion prepaid expenses and unearned revenues to bring the accounts up to date
d. reduce all temporary accounts to zero
20. Which of the following accounts would not be closed to Income Summary during the
year-end closing entry process?
a. Loss of Sale of Land
b. Prepaid Rent
c. Freight-in
d. Sales Discounts
21. If the credit subtotal is greater than the debit subtotal in the income statement columns of
a worksheet, the difference
a. indicates that the company incurred an operating loss during the period
b. could represent payment of dividends by the entity during the period
c. indicates that an error has been made in the accounting process
d. indicates that the company earned a net income during the period
22. On a worksheet, which account will not be extended to the balance sheet columns?
a. Unearned Rent
b. Inventory, January 1
c. Capital Stock
d. Accumulated Depreciation
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23. Marge's Company has all of the special journals that were described in your text (other
than the voucher register) as a part of its accounting system. Which of the following journal
entries would therefore be recorded in Marge's general journal?
a. an entry to record the sale of merchandise on credit
b. an entry to record the sale of inventory on credit
c. an entry to record the return of defective purchased merchandise for credit
d. an entry to record a cash purchase of inventory
24. The Joy Company uses the accrual basis of accounting. Joy Company's Insurance
Expense account had a $10,000 balance at the end of the year. The Prepaid Insurance account
had a $3,000 balance at the beginning of the year and a $5,000 balance at the end of the year.
How much cash was paid for insurance during the year?
a. $ 8,000
b. $10,000
c. $12,000
d. $15,000
25. The Peace Company uses the accrual basis of accounting. Peace Company's Wages
Expense account had a $510,000 balance at the end of the year. The Wages Payable account
had a $23,000 balance at the beginning of the year and a $45,000 balance at the end of the year.
How much cash was paid for wages during the year?
a. $488,000
b. $510,000
c. $532,000
d. $555,000
26. The Smith Company uses the cash basis of accounting. Smith Company collected
$700,000 from its customers during the year. Smith had $50,000 in Accounts Receivable at the
beginning of the year, and $90,000 in Accounts Receivable at the end of the year. What is
Smith's Sales Revenue under the accrual basis of accounting?
a. $660,000
b. $700,000
c. $740,000
d. $790,000
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27. On March 31, 2004, the Tricot Company purchased a two-year fire insurance policy.
Tricot recorded the purchase by debiting Prepaid Insurance and crediting Cash for $12,000.
Which of the following adjusting entries should Tricot use at the end of 2004 to match
insurance expense against revenues?
a. Prepaid Insurance
4,500
Insurance Expense
b. Insurance Expense
4,500
4,500
Prepaid Insurance
c. Prepaid Insurance
4,500
7,500
Insurance Expense
d. Insurance Expense
Prepaid Insurance
7,500
7,500
7,500
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