1 The type of account and normal balance of Prepaid Insurance is a asset, debit b contra asset, credit c asset, credit d contra asset, debit 2 The income statement will present a revenues less expenses (ordered in alphabetical order) b revenues less expenses (order is not important) c revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last d revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last 3 Daniel Corporation's end of period spreadsheet at the end of July has $4,950 in the Balance Sheet Credit column for Accumulated Depreciation The end of period spreadsheet at the end of August has $7,600 in the Balance Sheet Credit column for Accumulated Depreciation What is the amount of the depreciation expense adjustment for the month of August a $4,950 b $7,600 c $2,650 d $12,550 4 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 a $159,000 increase c a $159,000 decrease d an $88,000 decrease 5 The adjusting entry to record the depreciation of a building for the fiscal period is a debit Accumulated Depreciation credit Depreciation Expense b debit Depreciation Expense credit Accumulated Depreciation c debit Depreciation Expense credit Building d debit Building credit Depreciation Expense 6 As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000 During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000 a $45,000 b $50,000 c $370,000 d $106,000 7 Which of the following are guidelines for behaving ethically I Identify the consequences of a decision and its effect on others II Consider your obligations and responsibilities to those affected by the decision III Identify your decision based on personal standards of honesty and fairness a I and III b I and II c II and III d I, II, and III 8 The income statement is prepared from a either the adjusted trial balance or the Income Statement columns of the end of period spreadsheet b the Income Statement columns of the end of period spreadsheet c both the adjusted trial balance and the Income Statement columns of the end of period spreadsheet d the adjusted trial balance 9 Which of the following is not a correct rule of debits and credits a Liabilities, revenues, and stockholders' equity are increased by credits b Assets are decreased by credits and have a normal debit balance c The normal balance for revenues and expenses is a credit d Assets, expenses, and dividends are increased by debits 10 Which of the following groups of companies are all examples of a merchandising business a GameStop, Sony, Dell b GameStop, Best Buy, Gap c Gap, Amazon, NIKE d Delta Airlines, Marriott, Gap 11 The chart of accounts for the Miguel Company includes the following Account Name Account Number Cash 11 Accounts Receivable 13 Prepaid Insurance 15 Accounts Payable 21 Unearned Revenue 24 Common Stock 31 Dividends 32 Fees Earned 41 Salaries Expense 54 Rent Expense 56 Page 5 of the journal contains the following transaction Salaries Expense 525 Cash 525 What is the posting reference that will be found in the salaries expense account a 21 b 5 c 11 d 54 12 Which of the accounts below would be closed by posting a debit to the account a Unearned Revenue b Dividends c Fees Earned d Miscellaneous Expense 13 The unearned rent account has a balance of $72,000 If $18,000 of the $72,000 is unearned at the end of the accounting period, the amount of the adjusting entry is a $90,000 b $36,000 c $18,000 d $54,000 14 Which of the following accounts would be increased with a credit a Accounts Payable Unearned Revenue Common Stock b Dividends Accounts Receivable Unearned Revenue c Cash Accounts Receivable Common Stock d Land Accounts Payable Dividends 15 Which one of the accounts below would likely be included in an accrual adjusting entry a Unearned Rent b Interest Expense c Insurance Expense d Prepaid Rent 16 Which account would normally not require an adjusting entry a Wages Expense b Cash c Accounts Receivable d Accumulated Depreciation 17 April 14 Equipment 15,000 Cash 5,000 Note Payable 10,000 Which is the best explanation for this journal entry a Purchased equipment paid cash of $5,000, with the remainder to be paid in the future b Purchased equipment with cash c Purchased equipment on account d Purchased equipment paid cash of $10,000, with the remainder to be received in the future 18 The posting process will include the transfer of which of the following data from the journal to the account a date, amount (debit or credit), journal page number b date, amount (debit or credit) c amount (debit or credit), account number d date, amount (debit or credit), account number 19 Goods purchased on account for future use in the business, such as supplies, are called a revenues b prepaid expenses c prepaid liabilities d liabilities 20 Debts listed as current liabilities are those that a are owed to the stockholders and will never be paid b will be paid in less than one year c are due to be paid in 5 to 10 years d are due to be paid in more than one year 21 Net income appears on the end of period spreadsheet in the a debit column of the Balance Sheet columns b debit column of the Income Statement columns c credit column of the Income Statement columns d debit column of the Adjustments columns 22 A credit balance in which of the following accounts would indicate a likely error a Fees Earned b Salary Expense c Accounts Payable d Common Stock 23 The net book value of a fixed asset is determined by the original cost a less market value b less accumulated depreciation c less accumulated depreciation plus depreciation expense d plus accumulated depreciation 24 Which of the following accounts should be closed to Income Summary at the end of the fiscal year a Prepaid Insurance b Equipment c Unearned Rent d Service Revenue 25 At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted Which of the following statements is true a total assets at the end of the year will be understated b insurance expense will be overstated c stockholders' equity at the end of the year will be understated d net income for the year will be overstated 26 An account is said to have a debit balance if a there are more entries on the credit side than on the debit side b there are more entries on the debit side than on the credit side c the first entry of the accounting period was posted on the debit side d the amount of the debits exceeds the amount of the credits 27 The chart of accounts is designed to a summarize the transactions and determine ending account balances b alphabetize the accounts to make reading easier for financial statement users c meet the information needs of a company's managers and other users of its financial statements d organize accounts in order of dollar amount to simplify the accounting information for users 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 28 Determine the total assets a $24,030 b $22,930 c $16,830 d $25,130 29 Prior to the adjusting process, accrued revenue has a been earned and cash received b not been recorded as revenue but cash has been received c been earned and not recorded as revenue d not been earned but recorded as revenue 30 Which of the following accounts is a liability a Accounts Receivable b Accounts Payable c Wages Expense d Service Revenue 31 When the end of period spreadsheet is complete, the adjustment columns should have a total debits greater than total credits if a net loss was incurred b total debits are equal to total credits c total credits greater than total debits if a net income was earned d total debits greater than total credits if a net income was earned 32 The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n) a retained earnings statement b prior period statement c balance sheet d income statement 33 After posting the second closing entry to the income summary account, the balance will be equal to a zero b stockholders' equity c the net income or net loss for the period d revenues for the period 34 The assets and liabilities of a company are $128,000 and $84,000, respectively Stockholders' equity should equal a $84,000 b $212,000 c $128,000 d $44,000 35 Within the United States, the dominant body in the primary development of accounting principles is the a American Institute of Certified Public Accountants (AICPA) b Institute of Management Accountants (IMA) c Financial Accounting Standards Board (FASB) d American Accounting Association (AAA) 36 Which one of the fixed asset accounts listed below will not have a related contra asset account a Land b Building c Office Equipment d Delivery Equipment 37 As time passes, fixed assets other than land lose their capacity to provide useful services To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called a depreciation b matching c equipment allocation d accumulation 38 The account type and normal balance of Prepaid Expense is a asset, debit b expense, debit c liability, credit d revenue, credit 39 Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means a only that the debit dollar amounts equal the credit dollar amounts b all of the information from the journal was correctly transferred to the ledger c only the journal is accurate the ledger may be incorrect d all accounts have their correct balances in the ledger 40 The type of account and normal balance of Unearned Consulting Fees is a revenue, credit b liability, debit c expense, debit d liability, credit 41 The use of reversing entries is a required b required whenever adjusting entries are omitted c optional d optional unless computerized accounting systems are used 42 The classified balance sheet will show which liability subsections a present liabilities and tomorrows liabilities b current liabilities and long term liabilities c current liabilities and other liabilities d other liabilities and long term liabilities 43 A fiscal year for a business a ordinarily begins on the first day of a month and ends on the last day of the following twelfth month b is determined by the federal government c should end at the height of the business's annual operating cycle d always begins on January 1 and ends on December 31 of the same year 44 The statement of retained earnings should be prepared a before the income statement and after the balance sheet b after the income statement and before the balance sheet c before the income statement and balance sheet d after the income statement and balance sheet 45 During the end of period processing, which of the following best describes the logical order of steps a preparation of income statement, adjusted trial balance, balance sheet b preparation of adjusted trial balance, cross referencing, journalizing c preparation of adjustments, adjusted trial balance, posting d preparation of adjustments, adjusted trial balance, financial statements 46 Debts owed by a business are referred to as a stockholders' equity b expenses c liabilities d accounts receivables 47 Transactions affecting stockholders' equity include a capital contributions, earning of revenues, incurrence of expenses, and collection of accounts receivable b stockholder dividends, earning of revenues, incurrence of expenses, and purchase of supplies on account c capital contributions and payment of liabilities d capital contributions, stockholder dividends, earning of revenues, and incurrence of expenses 48 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 decreases d liabilities increase stockholders' equity increases 49 The following adjusting journal entry does not include an explanation Select the best explanation for the entry Unearned Revenue 7,500 Fees Earned 7,500 a Record fees that have not been earned at the end of the month b Record payment of fees to be earned c Record payment of fees earned d Record fees earned at the end of the month 50 The account type and normal balance of Unearned Revenue is a expense, debit b liability, credit c asset, debit d revenue, credit

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1. The type of account and normal balance of Prepaid Insurance is a. asset, debit b. contra asset, credit c. asset, credit d. contra asset,

1. The type of account and normal balance of Prepaid Insurance is

	a.	asset, debit
	b.	contra asset, credit
	c.	asset, credit
	d.	contra asset, debit

2. The income statement will present

	a.	revenues less expenses (ordered in alphabetical order)
	b.	revenues less expenses (order is not important)
	c.	revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last
	d.	revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last

3. Daniel Corporation's end-of-period spreadsheet at the end of July has $4,950 in the Balance Sheet Credit column for Accumulated Depreciation. The end-of-period spreadsheet at the end of August has $7,600 in the Balance Sheet Credit column for Accumulated Depreciation. What is the amount of the depreciation expense adjustment for the month of August?

	a.	$4,950
	b.	$7,600
	c.	$2,650
	d.	$12,550

4. 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.	a $159,000 increase
	c.	a $159,000 decrease
	d.	an $88,000 decrease

5. The adjusting entry to record the depreciation of a building for the fiscal period is

	a.	debit Accumulated Depreciation; credit Depreciation Expense.
	b.	debit Depreciation Expense; credit Accumulated Depreciation.
	c.	debit Depreciation Expense; credit Building.
	d.	debit Building; credit Depreciation Expense.

6. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?

	a.	$45,000
	b.	$50,000
	c.	$370,000
	d.	$106,000

7. Which of the following are guidelines for behaving ethically?

	I.	Identify the consequences of a decision and its effect on others.
	II.	Consider your obligations and responsibilities to those affected by the decision.
	III.	Identify your decision based on personal standards of honesty and fairness.

	a.	I and III.
	b.	I and II.
	c.	II and III.
	d.	I, II, and III.

8. ?The income statement is prepared from

	a.	?either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet
	b.	?the Income Statement columns of the end-of-period spreadsheet
	c.	?both the adjusted trial balance and the Income Statement columns of the end-of-period spreadsheet
	d.	?the adjusted trial balance

9. Which of the following is not a correct rule of debits and credits?

	a.	Liabilities, revenues, and stockholders' equity are increased by credits.
	b.	Assets are decreased by credits and have a normal debit balance.
	c.	The normal balance for revenues and expenses is a credit.
	d.	Assets, expenses, and dividends are increased by debits.

10. Which of the following groups of companies are all examples of a merchandising business?

	a.	GameStop, Sony, Dell
	b.	GameStop, Best Buy, Gap
	c.	Gap, Amazon, NIKE
	d.	Delta Airlines, Marriott, Gap

11. The chart of accounts for the Miguel Company includes the following:

Account Name	Account Number
Cash	11
Accounts Receivable	13
Prepaid Insurance	15
Accounts Payable	21
Unearned Revenue	24
Common Stock	31
Dividends	32
Fees Earned	41
Salaries Expense	54
Rent Expense	56

Page 5 of the journal contains the following transaction:

Salaries Expense	525
Cash		525

What is the posting reference that will be found in the salaries expense account?

	a.	21
	b.	5
	c.	11
	d.	54

12. Which of the accounts below would be closed by posting a debit to the account?

	a.	Unearned Revenue
	b.	Dividends
	c.	Fees Earned
	d.	Miscellaneous Expense

13. The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is unearned at the end of the accounting period, the amount of the adjusting entry is

	a.	$90,000
	b.	$36,000
	c.	$18,000
	d.	$54,000

14. Which of the following accounts would be increased with a credit?

	a.	Accounts Payable; Unearned Revenue; Common Stock
	b.	Dividends; Accounts Receivable; Unearned Revenue
	c.	Cash; Accounts Receivable; Common Stock
	d.	Land; Accounts Payable; Dividends

15. Which one of the accounts below would likely be included in an accrual adjusting entry?

	a.	Unearned Rent
	b.	Interest Expense
	c.	Insurance Expense
	d.	Prepaid Rent

16. Which account would normally not require an adjusting entry?

	a.	Wages Expense
	b.	Cash
	c.	Accounts Receivable
	d.	Accumulated Depreciation

17.

April	14	Equipment	15,000
		Cash		5,000
		Note Payable		10,000
		????????????.

Which is the best explanation for this journal entry?

	a.	Purchased equipment; paid cash of $5,000, with the remainder to be paid in the future.
	b.	Purchased equipment with cash.
	c.	Purchased equipment on account.
	d.	Purchased equipment; paid cash of $10,000, with the remainder to be received in the future.

18. The posting process will include the transfer of which of the following data from the journal to the account?

	a.	date, amount (debit or credit), journal page number
	b.	date, amount (debit or credit)
	c.	amount (debit or credit), account number
	d.	date, amount (debit or credit), account number

19. Goods purchased on account for future use in the business, such as supplies, are called

	a.	revenues
	b.	prepaid expenses
	c.	prepaid liabilities
	d.	liabilities

20. Debts listed as current liabilities are those that

	a.	are owed to the stockholders and will never be paid
	b.	will be paid in less than one year
	c.	are due to be paid in 5 to 10 years
	d.	are due to be paid in more than one year

21. Net income appears on the end-of-period spreadsheet in the

	a.	debit column of the Balance Sheet columns
	b.	debit column of the Income Statement columns
	c.	credit column of the Income Statement columns
	d.	debit column of the Adjustments columns

22. A credit balance in which of the following accounts would indicate a likely error?

	a.	Fees Earned
	b.	Salary Expense
	c.	Accounts Payable
	d.	Common Stock

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

	a.	less market value
	b.	less accumulated depreciation
	c.	less accumulated depreciation plus depreciation expense
	d.	plus accumulated depreciation

24. Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

	a.	Prepaid Insurance
	b.	Equipment
	c.	Unearned Rent
	d.	Service Revenue

25. At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?

	a.	total assets at the end of the year will be understated.
	b.	insurance expense will be overstated
	c.	stockholders' equity at the end of the year will be understated.
	d.	net income for the year will be overstated.

26. An account is said to have a debit balance if

	a.	there are more entries on the credit side than on the debit side
	b.	there are more entries on the debit side than on the credit side
	c.	the first entry of the accounting period was posted on the debit side
	d.	the amount of the debits exceeds the amount of the credits

27. The chart of accounts is designed to

	a.	summarize the transactions and determine ending account balances
	b.	alphabetize the accounts to make reading easier for financial statement users
	c.	meet the information needs of a company's managers and other users of its financial statements
	d.	organize accounts in order of dollar amount to simplify the accounting information for users

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

28. Determine the total assets.

	a.	$24,030
	b.	$22,930
	c.	$16,830
	d.	$25,130

29. Prior to the adjusting process, accrued revenue has

	a.	been earned and cash received
	b.	not been recorded as revenue but cash has been received
	c.	been earned and not recorded as revenue
	d.	not been earned but recorded as revenue

30. Which of the following accounts is a liability??

	a.	?Accounts Receivable
	b.	?Accounts Payable
	c.	?Wages Expense
	d.	?Service Revenue

31. When the end-of-period spreadsheet is complete, the adjustment columns should have

	a.	total debits greater than total credits if a net loss was incurred
	b.	total debits are equal to total credits
	c.	total credits greater than total debits if a net income was earned
	d.	total debits greater than total credits if a net income was earned

32. The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)

	a.	retained earnings statement
	b.	prior period statement
	c.	balance sheet
	d.	income statement

33. After posting the second closing entry to the income summary account, the balance will be equal to

	a.	zero
	b.	stockholders' equity
	c.	the net income or net loss for the period
	d.	revenues for the period

34. The assets and liabilities of a company are $128,000 and $84,000, respectively. Stockholders' equity should equal

	a.	$84,000
	b.	$212,000
	c.	$128,000
	d.	$44,000

35. Within the United States, the dominant body in the primary development of accounting principles is the

	a.	American Institute of Certified Public Accountants (AICPA)
	b.	Institute of Management Accountants (IMA)
	c.	Financial Accounting Standards Board (FASB)
	d.	American Accounting Association (AAA)

36. Which one of the fixed asset accounts listed below will not have a related contra asset account?

	a.	Land
	b.	Building
	c.	Office Equipment
	d.	Delivery Equipment

37. As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

	a.	depreciation
	b.	matching
	c.	equipment allocation
	d.	accumulation

38. The account type and normal balance of Prepaid Expense is

	a.	asset, debit
	b.	expense, debit
	c.	liability, credit
	d.	revenue, credit

39. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means

	a.	only that the debit dollar amounts equal the credit dollar amounts
	b.	all of the information from the journal was correctly transferred to the ledger
	c.	only the journal is accurate; the ledger may be incorrect
	d.	all accounts have their correct balances in the ledger

40. The type of account and normal balance of Unearned Consulting Fees is

	a.	revenue, credit
	b.	liability, debit
	c.	expense, debit
	d.	liability, credit

41. The use of reversing entries is:?

	a.	?required.
	b.	?required whenever adjusting entries are omitted.
	c.	?optional.
	d.	?optional unless computerized accounting systems are used.

42. The classified balance sheet will show which liability subsections?

	a.	present liabilities and tomorrows liabilities
	b.	current liabilities and long-term liabilities
	c.	current liabilities and other liabilities
	d.	other liabilities and long-term liabilities

43. A fiscal year for a business

	a.	ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
	b.	is determined by the federal government
	c.	should end at the height of the business's annual operating cycle
	d.	always begins on January 1 and ends on December 31 of the same year

44. The statement of retained earnings should be prepared

	a.	before the income statement and after the balance sheet
	b.	after the income statement and before the balance sheet
	c.	before the income statement and balance sheet
	d.	after the income statement and balance sheet

45. During the end-of-period processing, which of the following best describes the logical order of steps?

	a.	?preparation of income statement, adjusted trial balance, balance sheet
	b.	?preparation of adjusted trial balance, cross-referencing, journalizing
	c.	?preparation of adjustments, adjusted trial balance, posting
	d.	?preparation of adjustments, adjusted trial balance, financial statements

46. Debts owed by a business are referred to as

	a.	stockholders' equity
	b.	expenses
	c.	liabilities
	d.	accounts receivables

47. Transactions affecting stockholders' equity include

	a.	capital contributions, earning of revenues, incurrence of expenses, and collection of accounts receivable
	b.	stockholder dividends, earning of revenues, incurrence of expenses, and purchase of supplies on account
	c.	capital contributions and payment of liabilities
	d.	capital contributions, stockholder dividends, earning of revenues, and incurrence of expenses

48. 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 decreases
	d.	liabilities increase; stockholders' equity increases

49. The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

Unearned Revenue	7,500
Fees Earned		7,500
????????????????

	a.	Record fees that have not been earned at the end of the month.
	b.	Record payment of fees to be earned.
	c.	Record payment of fees earned.
	d.	Record fees earned at the end of the month.