1. A company has a $4,000 balance in Unearned Revenue on its unadjusted trial balance. At the end of the year, the company has earned all but one- fourth of the revenue. The adjusting journal entry necessary at year-end would include:
a. a debit to Service Revenue of $4,000.
b. a credit to Unearned Revenue for $3,000.
c. a debit to Unearned Revenue for $3,000.
d. a credit to Service Revenue of $1,000.
2. A company fails to record the expiration of insurance that it purchased previously. Because of this error, the company's assets and equity are:
a. Overstated.
b. Understated.
c. Unaffected.
d. Cannot tell from the given information.
3. A company's unadjusted trial balance shows a $12,000 balance in Salaries Expense while the adjusted trial balance shows a balance of $13,000. Which of the following best describes the reason for the difference?
a. An adjusting entry to reduce Salaries Expense by $1,000 was prepared
b. An adjusting entry to reduce Salaries Payable by $1,000 was prepared
c. An adjusting entry to record the payment of $1,000 of salaries was prepared
d. An adjusting entry to increase Salaries Expense by $1,000 was prepared
4. Tom and Judy's Bed and Breakfast received the following bills for December utilities:
i. Electricity - $500 on December 31, 2011
ii. Water - $750 on December 29, 2011
iii. Telephone - $375 on January 1, 2012
On the December 31, 2011, financial statements,
Tom and Judy's should show accrued expenses of:
a. $1,625.
b. $1,250.
c. $500.
d. None of the above.
5. The closing process:
a. Updates the retained earnings account.
b. Prepares all revenue and expense accounts for the next period.
c. Puts any dividend account to zero.
d. All of the above.
6. Claw's Irrigation, Inc. paid $2,000 of dividends in the prior year and $4,500 of dividends in the current year. The closing entry for the current year would include:
a. A debit to Retained Earnings for $6,500.
b. A credit to dividends for $6,500.
c. A credit to Dividends for $4,500.
d. A credit to Retained Earnings for $4,500
7. Collins Construction Co. uses the accrual basis of accounting. During the year, Collins reported $45,000 of revenue, $12,500 of expenses, and $1,200 of divi¬dends. On December 31, Collins prepares all closing entries. The net effect on Retained Earnings is a:
a. Decrease of $1,200.
b. Increase of $42,500.
c. Increase of $31,300.
d. Decrease of $13,700.
8. Which of the following is not a possible closing entry?
a. A debit to Retained Earnings and a credit to Dividends
b. A debit to Revenue and a credit to Retained Earnings
c. A debit to Retained Earnings and a credit to Expense
d. A debit to Expense and a credit to Retained Earnings
9. Which of the following is not a step in the accounting cycle?
a. Prepare an adjusted trial balance
b. Prepare and post closing entries
c. Prepare financial statements
d. Each of the above is a step in the accounting cycle
10. Which of the following best summarizes the order of the accounting cycle?
a. Journalize, post, adjust, close
b. Journalize, adjust, post, close
c. Journalize, close, adjust, post
d. Journalize, post, close, adjust