Objectives of financial reporting

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Question 1

The objectives of financial reporting are met in large part by a set of financial statements. Of the following which is not one of these statements?

Select one:

a. Statement of Cash Flows

b. Statement of Financial Position

c. Federal Income Tax Return

d. Income Statement

Question 2

The primary assurance that financial statements issued by management are complete and reliable is by:

Select one:

a. An audit performed by a certified public accountant

b. An audit performed by the IRS

c. Internal controls

d. Generally accepted accounting principles

Question 3

During the current year, the assets of The Big Dial increase by $132,000, and the liabilities increase by $80,000. As a result, owners' equity:

Select one:

a. Increases by $52,000 during the year

b. Decreases by $52,000 during the year

c. Increases by $212,000 during the year

d. Is $52,000 at the end of the year

Question 4

A business purchases land and building, giving in exchange $225,000 cash and a note payable for $95,000. This transaction:

Select one:

a. Increases owners' equity

b. Decreases total assets

c. Decreases total liabilities

d. Increases total assets

Question 5

The account balances for HydroTech as of May 31, 2001, are listed below in random order:

Accounts Payable............$10,000

Accounts Receivable.........12,000

Building...........................40,000

Cash................................6,000

Equipment.......................16,000

Land...............................50,000

Notes Payable..................28,000

Capital Stock...................86,000

Refer to the above data. The balance in the Asset account is:

Select one:

a. $86,000

b. $124,000

c. $144,000

d. Some other amount

Question 6

The account balances for HydroTech as of May 31, 2001, are listed below in random order:

Accounts Payable............$10,000

Accounts Receivable.........12,000

Building...........................40,000

Cash................................6,000

Equipment.......................16,000

Land...............................50,000

Notes Payable..................28,000

Capital Stock...................86,000

On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash.

Refer to the above data. On June 4, the balance in the Cash account is:

Select one:

a. Some other amount

b. $11,400

c. $9,000

d. $5,400

Question 7

The account balances for HydroTech as of May 31, 2001, are listed below in random order:

Accounts Payable............$10,000

Accounts Receivable.........12,000

Building...........................40,000

Cash................................6,000

Equipment.......................16,000

Land...............................50,000

Notes Payable..................28,000

Capital Stock...................86,000

On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. On June 4, another $3,000 of stock was issued for cash.

Refer to the above data. On June 5, the balance in the Capital Stock Account is:

Select one:

a. $79,000

b. Some other amount

c. $81,400

d. $91,400

Question 8

The account balances for HydroTech as of May 31, 2001, are listed below in random order:

Accounts Payable............$10,000

Accounts Receivable.........12,000

Building...........................40,000

Cash................................6,000

Equipment.......................16,000

Land...............................50,000

Notes Payable..................28,000

Capital Stock...................86,000

On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. One June 4, another $3,000 of stock was issued for cash. On June 5, new equipment costing $5,000 was acquired. A cash payment was made for $1,000 and a Note Payable of $4,000 was issued for the balance. In a trial balance prepared on June 5, the sum of the credit column is:

Note: Be sure to take into account all transactions from June 3, 4 and 5.

Select one:

a. $123,000

b. $125,000

c. $129,400

d. Some other amount

Question 9

The account balances for HydroTech as of May 31, 2001, are listed below in random order:

Accounts Payable............$10,000

Accounts Receivable.........12,000

Building...........................40,000

Cash................................6,000

Equipment.......................16,000

Land...............................50,000

Notes Payable..................28,000

Capital Stock...................86,000

On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. One June 4, another $3,000 of stock was issued for cash. On June 5, new equipment costing $5,000 was acquired. A cash payment was made for $1,000 and a Note Payable of $4,000 was issued for the balance. The trial balance prepared on June 5, would, therefore, be as follows:

HydroTech

Trial Balance

June 5, 2001

 Debit

 Credit

 Cash

 13,400

 Accounts Receivable

 5,000

 Equipment

 21,000

 Land

 50,000

 Building

 40,000

 Accounts Payable

 6,000

 Notes Payable

 32,000

 Capital Stock

 91,400

TOTAL

 129,400

 129,400

On June 6, the bookkeeper for HydroTech makes this entry:

 Supplies

 6,300

 Cash

 1,500

 Accounts Payable

 4,800

 As a result of this transaction:

Select one:

a. Increases total assets $6,300

b. Decreases total assets

c. Involves the sale of supplies for $6,300

d. Increases liabilities

Question 10

On March 2, purchased auto cleaning supplies from Pip Boys for $240 on account. How would this transaction be recorded in the two-column journal for Marc’s Detailing?

Select one:

a. None of the above

b. Debit Supplies for 240, credit Accounts Receivable for 240

c. Debit Accounts Receivable for 240, credit Supplies for 240

d. Debit Supplies for 240, credit Accounts Payable for 240

Question 11

On March 4, collected an account receivable of $470 from a customer, At-Your-Service Limousines. How would this transaction be recorded in the two-column journal for Marc’s Detailing?

Select one:

a. None of the above

b. Debit Accounts Payable for 470, credit Cash for 470

c. Debit Accounts Receivable for 470, credit Cash for 470

d. Debit Cash for 470, credit Accounts Receivable for 470

Question 12

On March 5, Paid $320 in partial payment of an account payable to Sears for equipment purchased in February.How would this transaction be recorded in the two-column journal for Marc’s Detailing?

Select one:

a. Debit Accounts Payable for 320, Credit Cash for 320

b. Debit Accounts Receivable for 320, Credit Cash for 320.

c. Debit Cash for 320, Credit Accounts Payable for 320

d. Debit Equipment for 320, Credit Accounts Payable for 320

Question 13

On March 7, Issued capital stock in exchange for $2,500 cash. How would this transaction be recorded in the two-column journal for Marc’s Detailing?

Select one:

a. Debit Accounts Payable for 2,500, credit Drawing for 2,500

b. Debit Cash for 2,500, credit Capital Stock 2,500

c. Debit Accounts Receivable for 2,500, credit Capital Stock for 2,500.

d. Debit Capital Stock for 2,500, credit Cash for 2,500.

Question 14

On March 9, purchased office equipment from Jerome’s Warehouse for $3,300; paid $1,000 cash and issued a note payable due in 90 days for the balance. How would this transaction be recorded in the two-column journal for Marc’s Detailing?

Select one:

a. Debit Office Equipment for 3,300, credit Cash for 1,000, credit Notes Payable for 2,300.

b. Debit Cash for 1,000, debit Accounts Receivable for 2,300, credit Office Equipment for 3,300.

c. Debit Cash for 1,000, debit Notes Payable for 2,300, credit Office Equipment for 3,300.

d. Debit Office Equipment for 3,300, credit Cash for 1,000, credit Notes Receivable for 2,300

Question 15

West Coast Potters purchased a kiln on February 1 for $7,200 which is guaranteed to have a useful life of 10 years. Assuming adjusting entries are prepared monthly, what is the book value of the kiln on June 30?

Select one:

a. $7,200

b. $6,480

c. $300.

d. $6,900.

Question 16

Village Square Cinema sells books of movie tickets for $100, which contain tickets to admission to 20 movies. During July, 50 books of tickets were sold for $5,000 and this amount was credited to Unearned Admissions Revenue. By the end of July, it was determined that 400 movie tickets had been used by customers who had purchased the ticket books. The July 31 adjusting entry is:

Select one:

a. Debit Admissions Revenue $2,000 and credit Unearned Admissions Revenue $2,000

b. Debit Unearned Admissions Revenue $4,000 and credit Admissions Revenue $4,000.

c. Debit Admissions Revenue $3,000 and credit Unearned Admissions Revenue $3,000.

d. Debit Unearned Admissions Revenue $2,000 and credit Admissions Revenue $2,000.

Question 17

A December 31 trial balance (before December adjustments) shows Office Supplies of $600 and Office Supplies Expense of $1,010. A December adjusting entry recorded office supplies expense of $170. After the December adjusting entries have been posted, what is the proper balance in the Office Supplies account on December 31?

Select one:

a. $840.

b. $770.

c. $1,180.

d. $430.

Question 18

Net income of Samurai Company was $40,000 before any year-end adjusting entries were made. The following adjustments are necessary: interest accrued on a company savings account, $110; portion of insurance expiring, $300; portion of fees collected in advance now earned, $2,400. Net income as shown in the income statement for the current year should be:

Select one:

a. $42,210

b. $38,010

c. $41,990

d. $37,410

Question 19

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Question text

The adjusting entry to recognize interest owed by Bradley Tools to the bank for May was omitted in month-end procedures. As a result of this error, Bradley’s

Select one:

a. May net income is overstated and May 31 liabilities understated

b. May expenses are understated and May 31 ownerâ??s equity understated.

c. May net income is understated and May 31 assets overstated.

d. May expenses are understated and May 31 assets overstated.

Question 20

The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:

 Debit

 Credit

Cash

 5,400

Accounts Receivable

 4,200

Unexpired Insurance

 1,800

Office Equipment

 18,000

Unearned Cosulting Fees

 3,000

Capital Stock

 15,300

Retained Earnings, January 1, 2000

 0

Dividends

 3,000

Consulting Fees Earned

 25,000

Salaries Expense

 7,400

Utilities Expense

 1,400

Rent Expense

 1,800

Supplies Expense

 300

 TOTALS

 43,000

 43,300

What adjusting journal entry should be made to record consulting services rendered to a client in January, not yet billed or recorded, $1,900?

Select one:

a. Debit Unearned Consulting Fees Earned for 1,900.and credit Consulting Fees Earned for 1,900.

b. Debit Cash for 1,900 and credit Consulting Fees Earned for 1,900.

c. Debit Accounts Receivable for 1,900 and credit Consulting Fees Earned for 1,900.

d. Debit Accounts Receivable for 1,900 and credit Unearned Consulting Fees Earned.for 1,900.

Question 21

The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:

 Debit

 Credit

Cash

 5,400

Accounts Receivable

 4,200

Unexpired Insurance

 1,800

Office Equipment

 18,000

Unearned Cosulting Fees

 3,000

Capital Stock

 15,300

Retained Earnings, January 1, 2000

 0

Dividends

 3,000

Consulting Fees Earned

 25,000

Salaries Expense

 7,400

Utilities Expense

 1,400

Rent Expense

 1,800

Supplies Expense

 300

 TOTALS

 43,000

 43,300

What adjusting journal entry should be made to record the posrtion of insurance expiring in January, $150?

Select one:

a. Debit Insurance Expense for 150 and credit Cash for 150.

b. None of the above.

c. Debit Insurance Expense for 150 and credit Unexpired Insurance for 150.

d. Debit Unexpired Insurance for 150 and credit Insurance Expense for 150.

Question 22

The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:

 Debit

 Credit

Cash

 5,400

Accounts Receivable

 4,200

Unexpired Insurance

 1,800

Office Equipment

 18,000

Unearned Cosulting Fees

 3,000

Capital Stock

 15,300

Retained Earnings, January 1, 2000

 0

Dividends

 3,000

Consulting Fees Earned

 25,000

Salaries Expense

 7,400

Utilities Expense

 1,400

Rent Expense

 1,800

Supplies Expense

 300

 TOTALS

 43,000

 43,300

What adjusting journal entry should be made to record the portion of Income Taxes Expense for January of $2,000.

Select one:

a. Debit Income Taxes Payable and credit Cash for 2,000.

b. Debit Income Taxes Expense for 2,000 and credit Income Taxes Payable for 2,000

c. Debit Prepaid Taxes and credit Cash for 2,000.

d. None of the above.

Question 23

Presented below is the adjusted trial balance of TWK, Inc. at December 31:

 Debit

 Credit

Cash

10

Accounts Receivable

20

Equipment

 200

Accounts Payable

 15

Capital Stock

 100

Retained Earnings

50

Dividends

 5

Service Revenue

 180

Salaries Expense

 80

Depreciation Expense

 20

Refer to the above data. Which accounts are closed to income summary?

Select one:

a. All accounts that are not nominal.

b. All accounts.

c. Revenues and expenses

d. Revenues, expenses, and dividends.

Question 24

Presented below is the adjusted trial balance of TWK, Inc. at December 31:

 Debit

 Credit

Cash

10

Accounts Receivable

20

Equipment

 200

Accounts Payable

 15

Capital Stock

 100

Retained Earnings

50

Dividends

 5

Service Revenue

 180

Salaries Expense

 60

Depreciation Expense

 20

Refer to the above data. What is the balance in income summary before it is closed to retained earnings?

Select one:

a. $100

b. $65

c. $180.

d. $75

Question 25

Presented below is the adjusted trial balance of TWK, Inc. at December 31:

 Debit

 Credit

Cash

10

Accounts Receivable

20

Equipment

 200

Accounts Payable

 15

Capital Stock

 100

Retained Earnings

50

Dividends

 5

Service Revenue

 180

Salaries Expense

 80

Depreciation Expense

 20

Supplies Expense

10 

Refer to the above data. What is the balance in retained earnings at December 31?

Select one:

a. $115

b. $70

c. $50.

d. $65.


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