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1. Indicate whether the following items would appear on the balance sheet (BS), income statement (IS), or retained earnings statement (RE). 1. Advertising expense 2. Account receivable 3. Dividends 4. Rent revenue 5. Salaries and wages payable 6. Supplies 2. B) C) D) Book value is also referred to as A) accumulated depreciation. carrying value. fair value. original cost. 3. A) B) C) D) The fiscal year of a business is usually determined by the IRS. a lottery. the business. the SEC. 4. An accounting record where transactions are initially recorded in chronological order is called a ________________. 5. A) B) 6. A) B) An account is often referred to as a T-account because of the way it is constructed. True False Which one of the following is not an application of revenue recognition? Recording revenue as an adjusting entry on the last day of the accounting period. Accepting cash from an established customer for services to be performed over the next three months. Page 1 C) Billing customers on June 30 for services completed during June. D) Receiving cash for services performed. 7. B) C) D) Liabilities of a company would not include A) notes payable. accounts payable. salaries and wages payable. cash. 8. The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2015 includes the following accounts: Accumulated Depreciation, $6,000; Depreciation Expense, $2,000; Notes Payable $7,500; Interest Expense $150; Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600; Salaries and Wages Expense, $6,000; Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600. Prepare an income statement for the month of December. 9. A) B) C) D) 10. The economic entity assumption states that economic events of different entities can be combined if all the entities are corporations. must be reported to the IASB. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. of every entity can be separately identified and accounted for. Pavement Company purchased a truck from Bee Thousand Corp. by issuing a 6-month, 8% note payable for $90,000 on November 1. On December 31, the accrued expense adjusting entry is A) No entry is required. B) Interest Expense 7,200 Interest Payable 7,200 C) Interest Expense Interest Payable 3,600 Interest Expense Interest Payable 1,200 3,600 D) 1,200 Page 2 11. For each transaction given, enter in the tabulation given below a "D" for debit and a "C" for credit to reflect the increases and decreases of the assets, liabilities, and stockholders' equity accounts. In some cases there may be a "D" and a "C" in the same box. 1. Transactions: Invests cash in exchange for stock. 2. Pays insurance in advance for six months. 3. Pays secretary's salary. 4. Purchases supplies on account. 5. Pays electricity bill. 6. Borrows money from local bank. 7. Makes payment on account. 8. Receives cash due from customers. 9. Provides services on account. 10. The company pays a dividends. Transaction # 1 12. A) B) C) D) 13. 1. 2. 3. 4. 2 3 4 5 6 7 8 9 Assets Liabilities Common stock Dividends Revenues Expenses During 2015, its first year of operations, Neko's Bakery had revenues of $60,000 and expenses of $35,000. The business paid dividends of $20,000. What is the amount of stockholders' equity at December 31, 2015? $0 $5,000 credit $25,000 credit $20,000 debit Prepare journal entries for each of the following transactions. Performed services for customers on account $8,000. Purchased $20,000 of equipment on account. Received $3,000 from customers in transaction 1. The company paid dividends of $2,000. Page 3 10 14. A two column list of all accounts and their balances at a given time is a ______________. 15. Black Keys Company began the year with stockholders' equity of $280,000. During the year, the company recorded revenues of $375,000, expenses of $285,000, and paid dividends of $30,000. What was Black Keys' stockholders' equity at the end of the year? A) $280,000. B) $340,000. C) $370,000. D) $400,000. 16. For the accounts listed below, indicate if the normal balance of the account is a debit or credit. Normal Balance Accounts Debit or Credit 1. Service Revenue ___________________ 2. Rent Expense ___________________ 3. Accounts Receivable ___________________ 4. Accounts Payable ___________________ 5. Retained Earnings ___________________ 6. Supplies ___________________ 7. Insurance Expense ___________________ 8. Dividends ___________________ 9. Buildings ___________________ 10 Notes Payable ___________________ . 17. Electrelane Company showed the following balances at the end of its first year: Cash $ 4,000 Prepaid insurance 7,000 Accounts receivable 5,000 Accounts payable 4,000 Notes payable 6,000 Common stock 2,000 Dividends 1,000 Revenues 32,000 Expenses 25,000 Page 4 What did Electrelene Company show as total credits on its trial balance? A) $9,000 B) $44,000 C) $45,000 D) $49,000 18. The ledger account balances for Galaxie 500 Company are listed below. Accounts Payable $ 6,000 7,000 5,200 11,000 4,000 20,800 30,000 2,000 12,000 Accounts Receivable Cash Common stock Dividends Salaries and Wages Expense Service Revenue Unearned Service Revenue Utilities Expense Instructions Prepare a trial balance in proper form for Galaxie at December 31, 2015. 19. Misra Company compiled the following financial information as of December 31, 2015: Revenues $340,000 Retained earnings (1/1/15) 60,000 Equipment 80,000 Expenses 250,000 Cash 90,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 70,000 Common stock 80,000 Misra's assets on December 31, 2015 are A) $180,000. B) $250,000. C) $360,000. D) $490,000. Page 5 20. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction? A) The appointment of a new CPA firm to perform an audit. B) The purchase of a new computer. C) The sale of store equipment. D) Payment of income taxes. 21. The trial balances before and after adjustments for Old Julian Calendars at the end of its fiscal year are presented below. Old Julian Calendars Trial Balance September 31, 2014 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation - Equip Accounts Payable Salaries and Wages Payable Unearned Sales Revenue Unearned Rent Revenue Common stock Service Revenue Rent Revenue Salaries and Wages Expense Supplies Expense Insurance Expense Depreciation Expense Before Adjustment Dr. Cr. $ 15,080 14,960 2,760 5,800 13,300 $ 5,220 9,860 2,175 2,100 18,395 48,800 1,575 36,225 0 0 $ 88,125 Instructions Page 6 _______ $ 88,125 After Adjustment Dr. Cr. $ 15,080 16,110 885 1,450 13,300 $ 6,960 9,860 4,500 1,150 525 18,395 50,975 3,150 40,725 1,875 4,350 1,740 _______ $ 95,515 $ 95,515 Prepare the adjusting entries that were made. 22. B) C) D) 23. The right side of an account A) is the correct side. reflects all transactions for the accounting period. shows all the balances of the accounts in the system. is the credit side. Match the items below by entering the appropriate code letter in the space provided. Time period assumption F. Accrued revenues Fiscal year G. Depreciation Revenue recognition principle H. Accumulated depreciation Prepaid expenses I. Accrued expenses Expense recognition principleJ. Book value _____ _____ _____ _____ _____ _____ _____ 24. A) B) C) D) 1.A twelve month accounting period 2.Expenses paid before they are incurred 3.Cost less accumulated depreciation 4.Divides the economic life of a business into artificial time periods 5.Efforts are related to accomplishments 6. A contra asset account 7.Recognition of revenue when the performance obligation is satisfied _____ 8.Revenues earned but not yet received _____ 9.Expenses incurred but not yet paid _____ 10.A cost allocation process A credit to a liability account indicates an increase in the amount owed to creditors. indicates a decrease in the amount owed to creditors. is an error. must be accompanied by a debit to an asset account. 25. B) C) D) The first step in the recording process is to A) prepare financial statements. analyze each transaction for its effect on the accounts. post to a journal. prepare a trial balance. Page 7 26. A) B) C) D) A list of accounts and their balances at a given time is called a(n) journal. posting. trial balance. income statement. 27. If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit A) Cash. B) Prepaid Rent. C) Unearned Rent Revenue. D) Rent Revenue. 28. The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement. A) True B) False 29. The ledger is merely a bookkeeping device and therefore does not provide much useful data for management. A) True B) False 30. B) C) D) An accumulated depreciation account A) is a contra-liability account. increases on the debit side. is offset against total assets on the balance sheet. has a normal credit balance. Page 8