Accounting Principles 11th Edition By Weygandt – Test Bank
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Sample Questions
TRUE-FALSE
STATEMENTS
1. A
worksheet is a mandatory form that must be prepared along with an income
statement and balance sheet.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
2. If a
worksheet is used, financial statements can be prepared before adjusting
entries are journalized.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
3. If
total credits in the income statement columns of a worksheet exceed total
debits, the enterprise has net income.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
4. 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: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
5. The
adjustments on a worksheet can be posted directly to the accounts in the ledger
from the worksheet.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
6. The adjusted
trial balance columns of a worksheet are obtained by subtracting the adjustment
columns from the trial balance columns.
Ans: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
LOlving, IMA: FSA
7. The
balance of the depreciation expense account will appear in the income statement
debit column of a worksheet.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
8. Closing
entries are unnecessary if the business plans to continue operating in the
future and issue financial statements each year.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
9. The
owner’s drawings account is closed to the Income Summary account in order to
properly determine net income (or loss) for the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
10. After
closing entries have been journalized and posted, all temporary accounts in the
ledger should have zero balances.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
11. Closing
revenue and expense accounts to the Income Summary account is an optional
bookkeeping procedure.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
12. Closing
the drawings account to Owner’s Capital is not necessary if net income is
greater than owner’s drawings during the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
13. The
owner’s drawings account is a permanent account whose balance is carried
forward to the next accounting period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
14. Closing
entries are journalized after adjusting entries have been journalized.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
15. The
amounts appearing on an income statement should agree with the amounts
appearing on the post-closing trial balance.
Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
16. The
post-closing trial balance is entered in the first two columns of a worksheet.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
17. A
business entity has only one accounting cycle over its economic existence.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
18. The
accounting cycle begins at the start of a new accounting period.
Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
19. Both
correcting entries and adjusting entries always affect at least one balance sheet
account and one income statement account.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
20. Correcting
entries are made any time an error is discovered even though it may not be at
the end of an accounting period.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
21. 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: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
22. In a
corporation, Retained Earnings is a part of owners’ equity.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
23. A
company’s operating cycle and fiscal year are usually the same length of time.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
24. Cash
and supplies are both classified as current assets.
Ans: T, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
25. Long-term
investments would appear in the property, plant, and equipment section of the
balance sheet.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
26. A
liability is classified as a current liability if the company is to pay it
within the forthcoming year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
27. A
company’s liquidity is concerned with the relationship between long-term
investments and long-term debt.
Ans: F, 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
28. Current
assets are customarily the first items listed on a classified balance sheet.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
29. The
operating cycle of a company is determined by the number of years the company
has been operating.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
a30. Reversing entries are an optional
bookkeeping procedure.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
31. After
a worksheet has been completed, the statement columns contain all data that are
required for the preparation of financial statements.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
32. To
close net income to owner’s capital, Income Summary is debited and Owner’s
Capital is credited.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
33. In
one closing entry, Owner’s Drawings is credited and Income Summary is debited.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
34. The
post-closing trial balance will contain only owner’s equity statement accounts
and balance sheet accounts.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
35. The
operating cycle of a company is the average time required to collect the
receivables resulting from producing revenues.
Ans: F, 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
36. Current
assets are listed in the order of liquidity.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
37. Current
liabilities are obligations that the company is to pay within the coming year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
Answers
to True-False Statements
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Item |
Ans. |
Item |
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Item |
Ans. |
Item |
Ans. |
Item |
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1. |
F |
7. |
T |
13. |
F |
19. |
F |
25. |
F |
31. |
T |
37. |
T |
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2. |
T |
8. |
F |
14. |
T |
20. |
T |
26. |
T |
32. |
T |
|
|
|
3. |
T |
9. |
F |
15. |
F |
21. |
F |
27. |
F |
33. |
F |
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|
|
4. |
F |
10. |
T |
16. |
F |
22. |
T |
28. |
T |
34. |
F |
|
|
|
5. |
F |
11. |
F |
17. |
F |
23. |
F |
29. |
F |
35. |
F |
|
|
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6. |
F |
12. |
F |
18. |
T |
24. |
T |
a30. |
T |
36. |
T |
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|
MULTIPLE
CHOICE QUESTIONS
38. Preparing
a worksheet involves
39. two
steps.
40. three
steps.
41. four
steps.
42. five
steps.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
39. The
adjustments entered in the adjustments columns of a worksheet are
40. not
journalized.
41. posted
to the ledger but not journalized.
42. not
journalized until after the financial statements are prepared.
43. journalized
before the worksheet is completed.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
40. The
information for preparing a trial balance on a worksheet is obtained from
41. financial
statements.
42. general
ledger accounts.
43. general
journal entries.
44. business
documents.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
41. 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
42. adjusted
trial balance.
43. post-closing
trial balance.
44. the
general journal.
45. adjustments
columns of the worksheet.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA
BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
42. If
the total debit column exceeds the total credit column of the income statement
columns on a worksheet, then the company has
43. earned
net income for the period.
44. an
error because debits do not equal credits.
45. suffered
a net loss for the period.
46. to
make an adjusting entry.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
43. A
worksheet is a multiple column form that facilitates the
44. identification
of events.
45. measurement
process.
46. preparation
of financial statements.
47. analysis
process.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
44. Which
of the following companies would be least likely to use a worksheet to
facilitate the adjustment process?
45. Large
company with numerous accounts
46. Small
company with numerous accounts
47. All
companies, since worksheets are required under generally accepted accounting
principles
48. Small
company with few accounts
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
45. A
worksheet can be thought of as a(n)
46. permanent
accounting record.
47. optional
device used by accountants.
48. part
of the general ledger.
49. part
of the journal.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
46. The
account, Supplies, will appear in the following debit columns of the worksheet.
47. Trial
balance
48. Adjusted
trial balance
49. Balance
sheet
50. All
of these answer choices are correct
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
47. 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?
48. They
should be inserted in alphabetical order into the trial balance accounts
already given.
49. They
should be inserted in chart of account order into the trial balance already
given.
50. They
should be inserted on the lines immediately below the trial balance totals.
51. They
should not be inserted on the trial balance until the next accounting period.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
48. When
using a worksheet, adjusting entries are journalized
49. after
the worksheet is completed and before financial statements are prepared.
50. before
the adjustments are entered on to the worksheet.
51. after
the worksheet is completed and after financial statements have been prepared.
52. before
the adjusted trial balance is extended to the proper financial statement
columns.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
49. Assuming
that there is a net loss for the period, debits equal credits in all but which
section of the worksheet?
50. Income
statement columns
51. Adjustments
columns
52. Trial
balance columns
53. Adjusted
trial balance columns
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
50. Adjusting
entries are prepared from
51. source
documents.
52. the
adjustments columns of the worksheet.
53. the
general ledger.
54. last
year’s worksheet.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
51. The
net income (or loss) for the period
52. is
found by computing the difference between the income statement credit column
and the balance sheet credit column on the worksheet.
53. cannot
be found on the worksheet.
54. is
found by computing the difference between the income statement columns of the
worksheet.
55. is
found by computing the difference between the trial balance totals and the
adjusted trial balance totals.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
52. The
worksheet does not show
53. net
income or loss for the period.
54. revenue
and expense account balances.
55. the
ending balance in the owner’s capital account.
56. the
trial balance before adjustments.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
53. If
the total debits exceed total credits in the balance sheet columns of the
worksheet, owner’s equity
54. will
increase because net income has occurred.
55. will
decrease because a net loss has occurred.
56. is in
error because a mistake has occurred.
57. will
not be affected.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
54. 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
$44,000
$60,000 $88,000
The net income (or loss) for the period is
1. $44,000
income.
2. $28,000
income.
3. $28,000
loss.
4. not
determinable.
Ans: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
55. 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
1. income
statement debit column and the balance sheet credit column.
2. income
statement credit column and the balance sheet debit column.
3. income
statement debit column and the income statement credit column.
4. balance
sheet debit column and the balance sheet credit column.
Ans: B, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
56. Closing
entries are necessary for
57. permanent
accounts only.
58. temporary
accounts only.
59. both
permanent and temporary accounts.
60. permanent
or real accounts only.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
57. Each
of the following accounts is closed to Income Summary except
58. Expenses.
59. Owner’s
Drawings.
60. Revenues.
61. All
of these are closed to Income Summary.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
58. Closing
entries are made
59. in
order to terminate the business as an operating entity.
60. so
that all assets, liabilities, and owner’s capital accounts will have zero
balances when the next accounting period starts.
61. in
order to transfer net income (or loss) and owner’s drawings to the owner’s
capital account.
62. so
that financial statements can be prepared.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
59. Closing
entries are
60. an
optional step in the accounting cycle.
61. posted
to the ledger accounts from the worksheet.
62. made
to close permanent or real accounts.
63. journalized
in the general journal.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
60. The
income summary account
61. is a
permanent account.
62. appears
on the balance sheet.
63. appears
on the income statement.
64. is a
temporary account.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
61. 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
62. debit
to the owner’s capital account.
63. debit
to the owner’s drawings account.
64. credit
to the owner’s capital account.
65. credit
to the owner’s drawings account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
62. Closing
entries are journalized and posted
63. before
the financial statements are prepared.
64. after
the financial statements are prepared.
65. at
management’s discretion.
66. at
the end of each interim accounting period.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
63. Closing
entries
64. are
prepared before the financial statements.
65. reduce
the number of permanent accounts.
66. cause
the revenue and expense accounts to have zero balances.
67. summarize
the activity in every account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
64. Which
of the following is a true statement about closing the books of a
proprietorship?
65. Expenses
are closed to the Expense Summary account.
66. Only
revenues are closed to the Income Summary account.
67. Revenues
and expenses are closed to the Income Summary account.
68. Revenues,
expenses, and the owner’s drawings account are closed to the Income Summary
account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
65. Closing
entries may be prepared from all of the following except
66. Adjusted
balances in the ledger
67. Income
statement and balance sheet columns of the worksheet
68. Balance
sheet
69. Income
and owner’s equity statements
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
66. In
order to close the owner’s drawings account, the
67. income
summary account should be debited.
68. income
summary account should be credited.
69. owner’s
capital account should be credited.
70. owner’s
capital account should be debited.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
67. In
preparing closing entries
68. each
revenue account will be credited.
69. each
expense account will be credited.
70. the
owner’s capital account will be debited if there is net income for the period.
71. the owner’s
drawings account will be debited.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
68. The
most efficient way to accomplish closing entries is to
69. credit
the income summary account for each revenue account balance.
70. debit
the income summary account for each expense account balance.
71. credit
the owner’s drawings balance directly to the income summary account.
72. credit
the income summary account for total revenues and debit the income summary
account for total expenses.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
69. The
closing entry process consists of closing
70. all
asset and liability accounts.
71. out
the owner’s capital account.
72. all
permanent accounts.
73. all
temporary accounts.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
70. The
final closing entry to be journalized is typically the entry that closes the
71. revenue
accounts.
72. owner’s
drawings account.
73. owner’s
capital account.
74. expense
accounts.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
71. An
error has occurred in the closing entry process if
72. revenue
and expense accounts have zero balances.
73. the
owner’s capital account is credited for the amount of net income.
74. the
owner’s drawings account is closed to the owner’s capital account.
75. the
balance sheet accounts have zero balances.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
72. The
Income Summary account is an important account that is used
73. during
interim periods.
74. in
preparing adjusting entries.
75. annually
in preparing closing entries.
76. annually
in preparing correcting entries.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
73. The
balance in the income summary account before it is closed will be equal to
74. the
net income or loss on the income statement.
75. the
beginning balance in the owner’s capital account.
76. the
ending balance in the owner’s capital account.
77. zero.
Ans: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA
BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
74. After
closing entries are posted, the balance in the owner’s capital account in the
ledger will be equal to
75. the
beginning owner’s capital reported on the owner’s equity statement.
76. the
amount of the owner’s capital reported on the balance sheet.
77. zero.
78. the
net income for the period.
Ans: B, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
75. The
income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues
$7,000
Expenses:
Salaries and Wages
Expense
$3,000
Rent
Expense
1,500
Advertising
Expense
800
Supplies
Expense
300
Insurance
Expense
100
Total
expenses
5,700
Net
income
$1,300
The entry to close the revenue account includes a
300.
debit to Income Summary for $1,300.
301.
credit to Income Summary for $1,300.
302.
debit to Income Summary for $7,000.
303.
credit to Income Summary for $7,000.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
76. The
income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues
$7,000
Expenses:
Salaries and Wages
Expense
$3,000
Rent
Expense
1,500
Advertising
Expense
800
Supplies Expense
300
Insurance
Expense
100
Total
expenses
5,700
Net
income
$1,300
The entry to close the expense accounts includes a
300.
debit to Income Summary for $1,300.
301.
credit to Rent Expense for $1,500.
302.
credit to Income Summary for $5,700.
303.
debit to Salaries and Wages Expense for $3,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
77. The
income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues
$7,000
Expenses:
Salaries and Wages Expense
$3,000
Rent
Expense
1,500
Advertising
Expense
800
Supplies
Expense
300
Insurance
Expense
100
Total
expenses
5,700
Net income
$1,300
After the revenue and expense accounts have been closed, the
balance in Income Summary will be
1. $0.
2. a
debit balance of $1,300.
3. a
credit balance of $1,300.
4. a
credit balance of $7,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $7,000 – $5,700 = $1,300
78. The
income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues
$7,000
Expenses:
Salaries and Wages
Expense
$3,000
Rent
Expense
1,500
Advertising
Expense
800
Supplies
Expense
300
Insurance
Expense
100
Total
expenses
5,700
Net
income
$1,300
The entry to close Income Summary to Owner’s, Capital includes
1. a
debit to Revenues for $7,000.
2. credits
to Expenses totalling $5,700.
3. a
credit to Income Summary for $1,300
4. a
credit to Owner’s Capital for $1,300.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
79. The
income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues
$7,000
Expenses:
Salries and Wages
Expense
$3,000
Rent
Expense
1,500
Advertising
Expense
800
Supplies
Expense
300
Insurance
Expense
100
Total
expenses
5,700
Net
income
$1,300
At June 1, 2014, Camera Obscura reported owner’s equity of
$35,000. The company had no owner drawings during June. At June 30, 2014, the
company will report owner’s equity of
300.
$29,300.
301.
$35,000.
302.
$36,300.
303.
$42,000.
Ans: C, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $35,000 + $1,300 = $36,300
80. The income
statement for the year 2014 of Fugazi Co. contains the following information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies
Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses
77,500
Net income
(loss) $
(7,500)
The entry to close the revenue account includes a
500.
debit to Income Summary for $7,500.
501.
credit to Income Summary for $7,500.
502.
debit to Revenues for $70,000.
503.
credit to Revenues for $70,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
81. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies
Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses
77,500
Net income
(loss) $
(7,500)
The entry to close the expense accounts includes a
500.
debit to Income Summary for $7,500.
501.
credit to Income Summary for $7,500.
502.
debit to Income Summary for $77,500.
503.
debit to Utilities Expense for $2,500.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
82. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses 77,500
Net income
(loss) $
(7,500)
After the revenue and expense accounts have been closed, the balance
in Income Summary will be
1. $0.
2. a
debit balance of $7,500.
3. a
credit balance of $7,500.
4. a
credit balance of $70,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
83. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses 77,500
Net income
(loss) $
(7,500)
The entry to close Income Summary to Owner’s Capital includes
1. a
debit to Revenue for $70,000.
2. credits
to Expenses totalling $77,500.
3. a
credit to Income Summary for $7,500.
4. a
credit to Owner’s Capital for $7,500.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
84. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies
Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses
77,500
Net income
(loss) $
(7,500)
At January 1, 2014, Fugazi reported owner’s equity of
$50,000. Owner drawings for the year totalled $10,000. At December
31, 2014, the company will report owner’s equity of
500.
$17,500.
501.
$32,500.
502.
$40,000.
503.
$42,500.
Ans: B, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $50,000 – $10,000 – $7,500 = $32,500
85. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies
Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses
77,500
Net income
(loss) $
(7,500)
After all closing entries have been posted, the Income Summary
account will have a balance of
1. $0.
2. $7,500
debit.
3. $7,500
credit.
4. $77,500
credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
86. The
income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues
$70,000
Expenses:
Salaries and Wages
Expense
$45,000
Rent
Expense
12,000
Advertising
Expense
10,000
Supplies
Expense
6,000
Utilities
Expense
2,500
Insurance
Expense
2,000
Total expenses
77,500
Net income
(loss) $
(7,500)
After all closing entries have been posted, the revenue account
will have a balance of
1. $0.
2. $70,000
credit.
3. $70,000
debit.
4. $7,500
credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
87. A
post-closing trial balance is prepared
88. after
closing entries have been journalized and posted.
89. before
closing entries have been journalized and posted.
90. after
closing entries have been journalized but before the entries are posted.
91. before
closing entries have been journalized but after the entries are posted.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
88. All
of the following statements about the post-closing trial balance are
correct except it
89. shows
that the accounting equation is in balance.
90. provides
evidence that the journalizing and posting of closing entries have been
properly completed.
91. contains
only permanent accounts.
92. proves
that all transactions have been recorded.
Ans: D, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
89. A
post-closing trial balance will show
90. only
permanent account balances.
91. only
temporary account balances.
92. zero
balances for all accounts.
93. the
amount of net income (or loss) for the period.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
90. A
post-closing trial balance should be prepared
91. before
closing entries are posted to the ledger accounts.
92. after
closing entries are posted to the ledger accounts.
93. before
adjusting entries are posted to the ledger accounts.
94. only
if an error in the accounts is detected.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
91. A
post-closing trial balance will show
92. zero
balances for all accounts.
93. zero
balances for balance sheet accounts.
94. only
balance sheet accounts.
95. only
income statement accounts.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
92. The
purpose of the post-closing trial balance is to
93. prove
that no mistakes were made.
94. prove
the equality of the balance sheet account balances that are carried forward
into the next accounting period.
95. prove
the equality of the income statement account balances that are carried forward
into the next accounting period.
96. list
all the balance sheet accounts in alphabetical order for easy reference.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
93. The
balances that appear on the post-closing trial balance will match the
94. income
statement account balances after adjustments.
95. balance
sheet account balances after closing entries.
96. income
statement account balances after closing entries.
97. balance
sheet account balances after adjustments.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
94. Which
account listed below would be double ruled in the ledger as part of the closing
process?
95. Cash
96. Owner’s
Capital
97. Owner’s
Drawings
98. Accumulated
Depreciation—Equipment
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
95. A
double rule applied to accounts in the ledger during the closing process
implies that
96. the
account is a temporary account.
97. the
account is a balance sheet account.
98. the
account balance is not zero.
99. a
mistake has been made, since double ruling is prescribed.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
96. The
heading for a post-closing trial balance has a date line that is similar to the
one found on
97. a
balance sheet.
98. an
income statement.
99. an
owner’s equity statement.
100.
the worksheet.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
97. Which
one of the following is usually prepared only at the end of a company’s annual
accounting period?
98. Preparing
financial statements
99. Journalizing
and posting adjusting entries
100.
Journalizing and posting closing entries
101.
Preparing an adjusted trial balance
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
98. The
step in the accounting cycle that is performed on a periodic basis (i.e.,
monthly, quarterly) is
99. analyzing
transactions.
100.
journalizing and posting adjusting entries.
101.
preparing a post-closing trial balance.
102.
posting to ledger accounts.
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
99. Which
one of the following is an optional step in the accounting cycle of a business
enterprise?
100.
Analyze business transactions
101.
Prepare a worksheet
102.
Prepare a trial balance
103.
Post to the ledger accounts
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
100.
The final step in the accounting cycle is to prepare
101.
closing entries.
102.
financial statements.
103.
a post-closing trial balance.
104.
adjusting entries.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
101.
Which of the following steps in the accounting cycle would not generally
be performed daily?
102.
Journalize transactions
103.
Post to ledger accounts
104.
Prepare adjusting entries
105.
Analyze business transactions
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
102.
Which of the following steps in the accounting cycle may be
performed most frequently?
103.
Prepare a post-closing trial balance
104.
Journalize closing entries
105.
Post closing entries
106.
Prepare a trial balance
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
103.
Which of the following depicts the proper sequence of steps in
the accounting cycle?
104.
Journalize the transactions, analyze business transactions,
prepare a trial balance
105.
Prepare a trial balance, prepare financial statements, prepare
adjusting entries
106.
Prepare a trial balance, prepare adjusting entries, prepare
financial statements
107.
Prepare a trial balance, post to ledger accounts, post adjusting
entries
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
104.
The two optional steps in the accounting cycle are preparing
105.
a post-closing trial balance and reversing entries.
106.
a worksheet and post-closing trial balances.
107.
reversing entries and a worksheet.
108.
an adjusted trial balance and a post-closing trial balance.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
105.
The first required step in the accounting cycle is
106.
reversing entries.
107.
journalizing transactions in the book of original entry.
108.
analyzing transactions.
109.
posting transactions.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
106.
Correcting entries
107.
always affect at least one balance sheet account and one income
statement account.
108.
affect income statement accounts only.
109.
affect balance sheet accounts only.
110.
may involve any combination of accounts in need of correction.
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
107.
Merriweather Post Pavillion received a $820 check from a
customer for the balance due. The transaction was erroneously recorded as a
debit to Cash $280 and a credit to Service Revenue $280. The correcting entry
is
108.
debit Cash, $820; credit Accounts Receivable, $820.
109.
debit Cash, $540 and Accounts Receivable, $280; credit Service
Revenue, $820.
110.
debit Cash, $540 and Service Revenue, $280; credit Accounts
Receivable, $820.
111.
debit Accounts Receivable, $820; credit Cash, $560 and Service
Revenue, $280.
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $820 – $280 = $540
108.
If errors occur in the recording process, they
109.
should be corrected as adjustments at the end of the period.
110.
should be corrected as soon as they are discovered.
111.
should be corrected when preparing closing entries.
112.
cannot be corrected until the next accounting period.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
109.
A correcting entry
110.
must involve one balance sheet account and one income statement
account.
111.
is another name for a closing entry.
112.
may involve any combination of accounts.
113.
is a required step in the accounting cycle.
Ans: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
110.
An unacceptable way to make a correcting entry is to
111.
reverse the incorrect entry.
112.
erase the incorrect entry.
113.
compare the incorrect entry with the correct entry and make a
correcting entry to correct the accounts.
114.
correct it immediately upon discovery.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
111.
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
112.
Salaries and Wages Payable…………………………………………. 27,000
Cash…………………………………………………………………
27,000
1. Cash……………………………………………………………………………
20,000
Salaries and Wages Expense………………………………
20,000
1. Salaries
and Wages Payable…………………………………………. 27,000
Salaries and Wages Expense………………………………
27,000
1. Cash……………………………………………………………………………
27,000
Salaries and Wages Expense………………………………
27,000
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
112.
Jawbreaker Company paid $940 on account to a creditor. The
transaction was erroneously recorded as a debit to Cash of $490 and a credit to
Accounts Receivable, $490. The correcting entry is
113.
Accounts Payable………………………………………………………… 940
Cash…………………………………………………………………
940
1. Accounts
Receivable……………………………………………………. 490
Cash…………………………………………………………………
490
1. Accounts
Receivable……………………………………………………. 490
Accounts Payable………………………………………………
490
1. Accounts
Receivable……………………………………………………. 490
Accounts Payable…………………………………………………………
940
Cash…………………………………………………………………
1,430
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution: $940 + $490 = $1,430
113.
A lawyer collected $710 of legal fees in advance. He erroneously
debited Cash for $170 and credited Accounts Receivable for $170. The correcting
entry is
114.
Cash…………………………………………………………………………… 170
Accounts Receivable…………………………………………………….
540
Unearned Service Revenue………………………………..
710
1. Cash……………………………………………………………………………
710
Service Revenue……………………………………………….
710
1. Cash……………………………………………………………………………
540
Accounts Receivable…………………………………………………….
170
Unearned Service Revenue………………………………..
710
1. Cash……………………………………………………………………………
540
Accounts Receivable………………………………………….
540
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution: $710 – $170 = $540
114.
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:
115.
debit Cash $650 and credit Unearned Service Revenue $650.
116.
debit Accounts Receivable $650 and credit Service Revenue $650.
117.
debit Accounts Receivable $650 and credit Cash $650.
118.
debit Accounts Receivable $650 and credit Unearned Service
Revenue $650.
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
115.
On March 8, Black Candy Company bought supplies on account from
the Arcade Fire Company for $550. Black Candy Company incorrectly debited
Equipment for $500 and credited Accounts Payable for $500. The entries have
been posted to the ledger. the correcting entry should be:
116.
Supplies……………………………………………………………………… 550
Accounts Payable……………………………………………………
550
1. Supplies………………………………………………………………………
550
Accounts Payable……………………………………………………
500
Equipment………………………………………………………………
50
1. Supplies………………………………………………………………………
550
Equipment………………………………………………………………
550
1. Supplies………………………………………………………………………
550
Equipment………………………………………………………………
500
Accounts Payable……………………………………………………
50
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution: $550 – $500 = $50
116.
The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
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
Less
Accumulated
Owner’s Capital
370,000
Depreciation (20,000)
80,000
Trademark 70,000
Total Liabilities and
Total
Assets $530,000
Owner’s Equity $530,000
The total dollar amount of assets to be classified as current
assets is
1. $105,000.
2. $175,000.
3. $190,000.
4. $260,000.
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $25,000 + $30,000 + $50,000 + $70,000 = $175,000
117.
The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
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
Less
Accumulated
Owner’s
Capital
370,000
Depreciation (20,000)
80,000
Trademark 70,000
Total Liabilities and
Total
Assets $530,000
Owner’s Equity $530,000
The total dollar amount of assets to be classified as property,
plant, and equipment is
1. $200,000.
2. $220,000.
3. $285,000.
4. $305,000.
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $120,000 + $80,000 = $200,000
118.
The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
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
Less
Accumulated
Owner’s
Capital
370,000
Depreciation (20,000)
80,000
Trademark 70,000
Total Liabilities and
Total
Assets $530,000
Owner’s Equity $530,000
The total dollar amount of assets to be classified as
investments is
1. $0.
2. $70,000.
3. $85,000.
4. $155,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
119.
The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
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
Less Accumulated
Owner’s
Capital
370,000
Depreciation (20,000)
80,000
Trademark 70,000
Total Liabilities and
Total Assets $530,000
Owner’s Equity $530,000
The total dollar amount of liabilities to be classified as
current liabilities is
1. $15,000.
2. $60,000.
3. $75,000.
4. $160,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $60,000 + $15,000 = $75,000
120.
The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash
$
40,000
Accounts
Payable
$ 130,000
Prepaid
Insurance
80,000
Salaries and Wages Payable
50,000
Accounts
Receivable
100,000
Mortgage Payable
150,000
Inventory
140,000
Total
Liabilities
330,000
Land Held for
Investment
180,000
Land
250,000
Building
$200,000
Less
Accumulated
Owner’s
Capital
740,000
Depreciation (60,000)
140,000
Trademark 140,000
Total Liabilities and
Total
Assets $1,070,000
Owner’s Equity $1,070,000
The total dollar amount of assets to be classified as current
assets is
1. $140,000.
2. $220,000.
3. $360,000.
4. $500,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $40,000 + $80,000 + $100,000 + $140,000 = $360,000
121.
The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash
$ 40,000
Accounts
Payable
$ 130,000
Prepaid
Insurance
80,000
Salaries and Wages Payable
50,000
Accounts
Receivable
100,000
Mortgage
Payable
150,000
Inventory
140,000
Total
Liabilities
330,000
Land Held for
Investment
180,000
Land
250,000
Building
$200,000
Less
Accumulated
Owner’s
Capital
740,000
Depreciation (60,000)
140,000
Trademark 140,000
Total Liabilities and
Total
Assets $1,070,000
Owner’s Equity $1,070,000
The total dollar amount of assets to be classified as property,
plant, and equipment is
1. $390,000.
2. $450,000.
3. $570,000.
4. $630,000.
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $250,000 + $140,000 = $390,000
122.
The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash
$
40,000
Accounts Payable
$ 130,000
Prepaid
Insurance
80,000
Salaries and Wages Payable
50,000
Accounts
Receivable
100,000
Mortgage Payable
150,000
Inventory
140,000
Total
Liabilities
330,000
Land Held for
Investment
180,000
Land
250,000
Building
$200,000
Less
Accumulated
Owner’s
Capital
740,000
Depreciation (60,000)
140,000
Trademark 140,000
Total Liabilities and
Total
Assets $1,070,000
Owner’s Equity $1,070,000
The total dollar amount of assets to be classified as
investments is
1. $0.
2. $140,000.
3. $180,000.
4. $250,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
123.
The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash
$
40,000
Accounts
Payable
$ 130,000
Prepaid Insurance
80,000
Salaries and Wages Payable
50,000
Accounts
Receivable
100,000
Mortgage Payable
150,000
Inventory
140,000
Total
Liabilities
330,000
Land Held for
Investment
180,000
Land
250,000
Building
$200,000
Less Accumulated
Owner’s
Capital
740,000
Depreciation (60,000)
140,000
Trademark 140,000
Total Liabilities and
Total Assets $1,070,000
Owner’s Equity $1,070,000
The total dollar amount of liabilities to be classified as
current liabilities is
1. $50,000.
2. $130,000.
3. $180,000.
4. $330,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution: $130,000 + $50,000 = $180,000
124.
All of the following are property, plant, and equipment except
125.
supplies.
126.
machinery.
127.
land.
128.
buildings.
Ans: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
125.
The first item listed under current liabilities is usually
126.
accounts payable.
127.
notes payable.
128.
salaries and wages payable.
129.
taxes payable.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
126.
Equipment is classified in the balance sheet as
127.
a current asset.
128.
property, plant, and equipment.
129.
an intangible asset.
130.
a long-term investment.
Ans: B, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
127.
A current asset is
128.
the last asset purchased by a business.
129.
an asset which is currently being used to produce a product or
service.
130.
usually found as a separate classification in the income
statement.
131.
an asset that a company expects to convert to cash or use up
within one year.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
128.
An intangible asset
129.
does not have physical substance, yet often is very valuable.
130.
is worthless because it has no physical substance.
131.
is converted into a tangible asset during the operating cycle.
132.
cannot be classified on the balance sheet because it lacks
physical substance.
Ans: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
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