Current Liabilities:

A. Are listed in order of liquidity.

B. Are closed at the end of the accounting period to current assets.

C. Are due to be settled within the shorter of one year or the operating cycle.

D. Are listed in the order in which they are to be paid, with the first one listed to be paid first.

2. Reversing entries:

A. Are optional.

B. Are mandatory.

C. Fix errors in journal entries. D. Are required by CRA.

3. The current ratio:

A. Is used to measure a company's profitability.

B. Is used to measure the relationship between assets and long-term debt. C. Measures the effect of operating income on profit.

D. Is used to evaluate a company's ability to pay its short-term obligations.

4. Which statement is true about liquidity? Prepaid Rent is: A. Less liquid than land.

B. Less liquid than rent revenue.

C. Less liquid than inventories.

D. More liquid than cash.

5. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:

A. Income Summary account.

B. Closing account.

C. Balance column account. D. Contra account.

6. If an accountant forgot to record depreciation on office equipment at the end of an accounting period, what is the effect on the statements prepared at that time?

A. Assets, profit, and equity are overstated.

B. Assets and equity are both understated.

C. Assets are overstated, profit is understated, and equity is overstated. D. Assets, profit, and equity are understated.

7. Throughout an accounting period, the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Service Revenue. If the accountant fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be:

A. An overstatement of equity.

B. An understatement of equity.

C. An understatement of assets.

D. An understatement of liabilities.

8. In reviewing the accounts of Tumblers Co., you discovered that a credit of $1,000 to prepaid insurance was wrongly credited to accounts receivable, and an $800 prepayment was remitted for a radio advertisement that was not posted. Which of the following statements reflects the effect of the errors?

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A. There is no overstatement or understatement in the total assets and the owner's equity. B. Total assets is understated by $200 and owner's equity is understated by $200.

C. Total assets is overstated by $300 and owner's equity is overstated by $300.

D. Total assets is overstated by $500 and owner's equity is overstated by $500.

9. Which of the following statements is incorrect?

A. An adjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments.

B. Interim financial reports can be based on one-month or three-month accounting periods.

C. The fiscal year is any 12 consecutive months used by a business as its annual accounting period.

D. The cash basis of accounting is consistent with GAAP.

10. A $6,440 debit to interest expense was incorrectly posted as a $644 debit. What is the effect of this error on the trial balance and the interest expense accounts?

A. The debit column of the trial balance would be $5,796 overstated and interest expense would be understated by $5,796.

B. The debit column of the trial balance would be $5,796 overstated and interest expense would be overstated by $5,796.

C. The debit column of the trial balance would be $5,796 understated and interest expense would be understated by $5,796.

D. The debit column of the trial balance would be $5,796 understated and interest expense would be overstated by $5,796.

11. Internal documents prepared by accountants when organizing the information presented in formal reports to internal and external decision makers are called:

A. Adjusting papers.

B. Statement papers.

C. Working papers. D. Closing papers.

12. The eight recurring steps performed each accounting period, starting with recording transactions in the journal and continuing through the post-closing trial balance, is called the:

A. Accounting period.

B. Operating cycle.

C. Accounting cycle. D. Closing cycle.

13. A classified balance sheet:

A. Measures a company's ability to pay its bills on time.

B. Organizes assets and liabilities into important subgroups. C. Presents revenues, expenses and profit.

D. Shows operating, investing, and financing activities.

14. Current liabilities become due:

A. Within one year.

B. Within the operating cycle of a business. C. When bills have to be paid.

D. A or B, whichever is longer.

15. HCF, a finance company, lends Able Business $12,000 at 5% on December 1, 2015. HCF's adjusting entry on December 31, 2015, should include:

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A. A debit to Interest Earned for $50.

B. A credit to Interest Receivable for $50. C. A credit to Interest Earned for $50.

D. A debit to Cash for $600.

16. In January, Denton Mabrey College received $120,000 in Unearned Tuition Revenue from its students for the spring semester, which lasts four months. On January 31, the college should recognize which amount for tuition revenue?

A. $30,000.

B. $60,000. C. $80,000. D. $90,000.

17. Laurey's Pet Emporium purchased equipment on January 1 for $35,000. The equipment will be used for five years, after which the estimated residual value will be $2,000. Using straight-line depreciation, what is the depreciation expense for the first year of the asset's life?

A. $4,000

B. $5,600

C. $6,600

D. $7,000

18. April 1, 2018, Stable Insurance Company sold a two year policy to a customer and recorded the premium payment received by debiting cash and crediting premium revenue for $1,440. It is now December 31, 2018, Stable's year end, and the company needs to prepare its adjusting entries.

Premium revenue for 2018 is:

A. $540 B. $1,440 C. $900 D. $60

19. Due to an oversight, the company bookkeeper made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would:

A. Understate profit by $24,000.

B. Have no effect on profit

C. Overstate profit by $24,000. D. Overstate liabilities.

20. After all appropriate closing entries to the following accounts have been made, what will be the balance in the Jeff Corvette, Capital account?

Service fees revenue Various Expenses

Jeff Corvette, Capital

Jeff Corvette, Withdrawals

A. $65,000. B. $80,000. C. $130,000. D. $145,000.

140,000 60,000 80,000 15,000

21. The Income Summary account is used:

A. To adjust and update asset accounts.

B. To close the revenue and expense accounts.

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C. To determine the appropriate withdrawal amount.

D. To replace the income statement under certain circumstances.

22. Which statement is incorrect?

A. Revenue accounts are closed to Income Summary. B. Expense accounts are closed to Income Summary. C. Income Summary is closed to Capital.

D. Withdrawals are closed to Income Summary.

23. After all closing entries are made and posted, the balance in the owners' capital account in the ledger will be equal to:

A. Profit or loss for the year.

B. The balance of owners' capital on the post-closing trial balance.

C. Zero.

D. The beginning balance in owners' capital in the statement of changes in equity.

24. A trial balance prepared after the adjusting and closing entries have been posted, and which is the final step in the accounting cycle, is a(n):

A. Unadjusted trial balance.

B. Post-closing trial balance.

C. Book of final entry. D. Adjusted trial balance.

25. A post-closing trial balance shows:

A. All ledger accounts with a balance, none of which can be temporary accounts.

B. All ledger accounts with a balance, none of which can be real accounts.

C. All ledger accounts with a balance, which include some temporary and some real accounts.

D. Only revenue and expense accounts.

26. On July 1, 2015, Nuby Trucking Company purchased a new truck for $52,000. The truck is estimated to have a useful life of six years and a residual value of $10,000. How much depreciation expense will be recorded for the truck during the year ended December 31, 2015?

A. $3,000.

B. $3,500.

C. $4,000.

D. $6,000.

27. For a prepaid expense, the adjusting entry would:

A. Result in a debit to an expense account and a credit to an asset account. B. Cause a prepaid expense to be overstated and liabilities to be understated. C. Result in a credit to an expense account and a debit to an asset account. D. Result in a debit to a liability account and a credit to an asset account.

28. Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are called

A. Operating expenses.

B. Accrued expenses.

C. Unearned expenses. D. Accounts payable.

29. Which of the following accounts is most likely to be associated with an accrued expense? A. Depreciation expense.

B. Salaries Payable.

C. Unearned revenue.

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D. Accounts receivable.

30. A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is:

A. Debit Unpaid Salaries $120 and credit Salaries Payable $120.

B. Debit Salaries Payable $240 and credit Office Salaries Expense $240. C. Debit Office Salaries Expense $120 and credit Salaries Payable $120. D. Debit Office Salaries Expense $240 and credit Salaries Payable $240.