Name: _________________________________
Section: A or B
ACCT 207-Exam 2
61 Points
True/False (12 points, 1 point each)
1. Net income results when expenses exceed revenues.
____ ____
2. One application of accrual accounting is adjusting the accounts.
___ ____
3. Accrual accounting recognizes revenues and expenses at the point that cash changes hands.
_____ _____
4. Depreciation Expense–Equipment is an example of a contra account.
___ ___
5. In the accounting cycle, closing entries are prepared before adjusting entries. ____ ___
6. Temporary account balances are reduced to zero by closing entries.
____ ____
7. Accounts Receivable is closed to Income Summary as part of the closing process.
8. Supplies Expense is a temporary account.
____ ___
____ _____
9. After all closing entries have been recorded, the balance of the Income Summary account will be
zero.
_____ ______
10. A revenue account is closed with a debit to the revenue account and a credit to Income Summary.
_____ _______
11. Income Summary is closed with a debit to Income Summary and a credit to the Withdrawals
account.
____ _____
12. An adjusted trial balance provides all the data needed to record the closing entries. ___ ___
Multiple Choices (14 points, 1 point each)
1. Which of the following is not an application of accrual accounting?
a. Recognizing revenues when earned and expenses when incurred.
b. Applying the matching rule.
c. Adjusting the accounts.
d. Recording on the basis of actual receipt and payment of cash.
Name: _________________________________
Section: A or B
2. What is the adjusting entry for that portion of revenue received in advance which has now
been earned?
a. Unearned Revenue – Debit; Cash – Credit
b. Unearned Revenue – Debit; Service Revenue – Credit
c. Service Revenue – Debit; Unearned Revenue – Credit
d. Cash – Debit; Unearned Revenue – Credit
3. An adjusting entry made to record salaries earned but not yet paid or recorded is made with
which of the following entries?
a. Salaries Expense – Debit; Cash – Credit
b. Salaries Payable – Debit; Salaries Expense – Credit
c. Salaries Expense – Debit; Salaries Payable – Credit
d. Cash – Debit; Salaries Expense – Credit
4. Which of the following accounts is a contra account?
a. Accumulated Depreciation–Office Furniture
b. Interest Payable
c. Depreciation Expense–Office Furniture
d. Unearned Revenue
5. The Supplies account had a $720 debit balance at the end of the accounting period before
adjustment for supplies used, and an inventory of $160 of unused supplies was on hand. Which
of the following is the required adjusting entry?
a. Debit Supplies Expense $160 and credit Supplies $160.
b. Debit Supplies Expense $560 and credit Supplies $560.
c. Debit Supplies $160 and credit Supplies Expense $160.
d. Debit Supplies $560 and credit Supplies Expense $560.
6. Use this information pertaining to ABC Company to answer the following question.
The company received a $3,600 advance payment during the year on services to be performed.
By the end of the year, 1/3 of the services had been performed (Hint: What is 1/3 of 3,600).
The adjusting entry to record the amount of service revenue earned during the accounting period
is
a. Service Revenue 2,400
Unearned Revenue
2,400
b. Unearned Revenue
1,200
Name: _________________________________
Section: A or B
Service Revenue
1,200
c. Service Revenue 1,200
Unearned Revenue
1,200
d. Unearned Revenue
2,400
Service Revenue
2,400
7. Which of the following accounts is a Permanent account?
a. Building
b. Depreciation Expense–Buildings
c. Interest Expense
d. Service Revenue
8. Closing entries are made
a. to clear revenue and expense accounts of their balances.
b. to clear withdrawals of its balance.
c. to summarize a period’s revenues and expenses.
d. All of these choices.
9. An important purpose of closing entries is to
a. set temporary account balances to zero to begin the next period.
b. adjust the accounts in the ledger.
c. help in preparing financial statements.
d. set permanent account balances to zero to begin the next period.
10. Closing entries ultimately will affect
a. total liabilities.
b. the Cash account.
c. the owner's Capital account.
d. total assets.
11. Use the following adjusted trial balance to answer the question below.
John’s Jet Skis
Adjusted Trial
Bala December nce
31, 20
x5
Name: _________________________________
Cash
Section: A or B
$ 25,000
Accounts Receivable
35,000
Supplies
15,000
Prepaid Insurance
25,000
Building
142,000
Accumulated Depreciation–Building
$ 30,000
Accounts Payable
60,000
John Clair, Capital
100,000
John Clair, Withdrawals
40,000
Jet Ski Rentals
192,000
Depreciation Expense-Building
10,000
Wages Expense
70,000
Insurance Expense
20,000
$382,000
_______
$382,000
The entry to close the John Clair, Withdrawals account is:
a. John Clair, Withdrawals 40,000
Income Summary
40,000
b. John Clair, Withdrawals 40,000
John Clair, Capital
40,000
c. John Clair, Withdrawals 40,000
Income Summary
40,000
d. John Clair, Capital
40,000
John Clair, Withdrawals
40,000
13. Use the following adjusted trial balance to answer the question below.
John’s Jet Skis
Adjusted Trial
Bala December nce
31, 20
x5
Cash
$ 25,000
Name: _________________________________
Section: A or B
Accounts Receivable
35,000
Supplies
15,000
Prepaid Insurance
25,000
Building
142,000
Accumulated Depreciation–Building
$ 30,000
Accounts Payable
60,000
John Clair, Capital
100,000
John Clair, Withdrawals
40,000
Rentals Revenue
192,000
Depreciation Expense-Building
10,000
Wages Expense
70,000
Insurance Expense
20,000
$382,000
_______
$382,000
The entry to close the Jet Ski Rentals account is
a. Income Summary 192,000
Rentals Revenue
192,000
b. Rentals Revenue
192,000
John Clair, Withdrawals
192,000
c. John Clair, Capital
192,000
Rentals Revenue
192,000
d. Rentals Revenue
192,000
Income Summary
192,000
14. The post-closing trial balance would not include which of the following accounts?
a. Unearned Legal Revenue
b. Accumulated Depreciation–Office Equipment
c. Withdrawals
d. Owner's Capital
Name: _________________________________
Section: A or B
Problem (35 points)
1. Indicate with an X in the appropriate column the type of entry to be made to close the following
accounts: (3 points)
a. Design Revenue
b. Telephone Expense
c. Withdrawals
d. Cash
e. Depreciation ExpenseBuilding
f. Owner's Capital
Debit
____
____
____
____
____
Credit
____
____
____
____
____
Not Closed
____
____
____
____
____
____
____
____
2. In the journal provided, prepare adjusting entries for the following items. Omit explanations. (If
no entry is required for a transaction/event, write "No Journal Entry Required".) (12
points)
List of accounts: Supplies, Acct. Rec., Acct. Pay., Wage Expense, Equipment Expense, Cash,
Service Revenue, Unearned Service Revenue, Owner’s capital, Supplies Expense, Depreciation
Expense, Wage payable, Accumulated Depreciation
a. Depreciation on machinery is $940 for the accounting period.
b. Office supplies of $600 were on hand at the beginning of the period. Purchases of office
supplies during the period totaled $200. At the end of the period, $80 in office supplies
remained.
c. Wages of $4,000 are paid every Friday for a five-day workweek. If July 1 falls on a
Wednesday, the adjusting entry for wages would be recorded at what amount?
Transaction
a.
b.
General Journal
$$
$$
Name: _________________________________
Section: A or B
c.
3. In the journal provided, prepare Sterling's closing entries. Omit explanations. (20 points)
Below are the adjusted accounts of Sterling Company for the month ended May 31, 20x5, listed
in alphabetical order:
Accounts Payable
Accounts Receivable
Accumulated DepreciationOffice Equipment
Cash
Commissions Revenue
Depreciation ExpenseOffice Equipment
$ 6,000 Office Equipment
24,000 Prepaid Rent
Salaries Expense
30,000 Paul Sterling, Capital
12,000 Paul Sterling, Withdrawals
54,000 Utilities Expense
$75,000
11,000
18,000
60,000
7,500
1,000
1,500
List of accounts: Commissions Revenue, Acct. Rec., Acct. Pay., Wage Expense, Equipment
Expense, Cash, Service Revenue, Salaries Expense , Unearned Service Revenue, Paul Sterling,
Capital, Supplies Expense, Depreciation Expense, Income Summary, Wage payable, Paul
Sterling, Withdrawals, Depreciation Expense–Office Equipment, Utilities Expense
Transaction
Step 1
Step 2
Step 3
General Journal
$$
$$
Name: _________________________________
Step 4
Section: A or B
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