1. The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is:

a debit Rent Expense, $8,000; credit Prepaid Rent, $8,000

b. debit Prepaid Rent, $24,000; credit Rent Expense, $8,000

c. debit Rent Expense, $24,000; credit Prepaid Rent, $8,000

d. debit Prepaid Rent, $8,000; credit Rent Expense, $8,000

2. The net book value of a fixed asset is determined by the original cost

a. less accumulated depreciation

b. less depreciation expense

c. less accumulated depreciation plus depreciation expense

d. plus accumulated depreciation

3. If total assets decreased by $88,000 during a period of time and stockholders' equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is

a. a $17,000 increase

b. an $88,000 decrease

c. a $159,000 increase

d. a $159,000 decrease

4. On which financial statement will Income Summary be shown?

a. retained earnings statement b. balance sheet

c. income statement

d. no financial statement

5. Which of the items below is not a business entity?

a. entrepreneurship b. proprietorship c. partnership

d. corporation

6. Use the adjusted trial balance for Stockton Company below to answer the questions that follow.

Stockton Company
Adjusted Trial Balance
December 31
Cash	7,530
Accounts Receivable	2,100
Prepaid Expenses	700
Equipment	13,700
Accumulated Depreciation		1,100
Accounts Payable		1,900
Notes Payable		4,300
Common Stock		1,000
Retained Earnings		12,940
Dividends	790
Fees Earned		9,250
Wages Expense	2,500
Rent Expense	1,960
Utilities Expense	775
Depreciation Expense	250
Miscellaneous Expense	185
Totals	30,490	30,490

Determine the net income (loss) for the period.

a. net income $9,250

b. net loss $790

c. net loss $5,670

d. net income $3,580

7. Net income will result when

a. revenues (credits) > expenses (debits)

b. revenues (debits) > expenses (credits)

c. expenses (credits) = revenues (debits)

d. revenues (credits) = expenses (debits)

8. How does receiving a bill to be paid next month for services received affect the accounting equation? a.assets decrease; stockholders' equity decreases

b. assets increase; liabilities increase

c. liabilities increase; stockholders' equity increases

d. liabilities increase; stockholders' equity decreases

9. Which of the following statements is not true about liabilities?

a. Liabilities are debts owed to outsiders.

b. Account titles of liabilities often include the term payable.

c. Cash received before a service is performed creates a liability.

d. Liabilities do not include wages owed to employees of the company.

10. On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for sale at $140,000. On May 30, White Repair Service accepted the sellers counteroffer of $115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in White Repair Services records?

a. $108,000

b. $95,000

c. $140,000

d. $115,000