MULTIPLE CHOICE QUESTIONS

1. For a publicly owned company, indicate which of the following accounting activities are likely to occur at or shortly after year-end. (More than one answer may be correct.)

a.Preparation of income tax returns.

b.Adjusting and closing of the accounts.

c.Drafting of disclosures that accompany the financial statements.

d.An audit of the financial statements by an independent CPA firm.

2. Which of the following financial statements is generally prepared first?

a.Income statement.

b.Balance sheet.

c.Statement of retained earnings.

d.Statement of cash flows.

3. Which of the following accounts would never be reported in the income statement as an expense?

a.Depreciation expense.

b.Income taxes expense.

c.Interest expense.

d.Dividends expense.

4. Which of the following accounts would never appear in the after-closing trial balance? (More than one answer may be correct.)

a.Unearned revenue.

b.Dividends.

c.Accumulated depreciation.

d.Income taxes expense.

5. Which of the following journal entries is required to close the Income Summary account of a profitable company?

a.Debit Income Summary, credit Retained Earnings.

b.Credit Income Summary, debit Retained Earnings.

c.Debit Income Summary, credit Capital Stock.

d.Credit Income Summary, debit Capital Stock.

6. Indicate those items for which generally accepted accounting principles require disclosure in notes accompanying the financial statements. (More than one answer may be correct.)

a.A large lawsuit was filed against the company two days after the balance sheet date.

b.The depreciation method in use, given that several different methods are acceptable under generally accepted accounting principles.

c.Whether small but long-lived itemssuch as electric pencil sharpeners and handheld calculatorsare charged to asset accounts or to expense accounts.

d.As of year-end, the chief executive officer had been hospitalized because of chest pains.

7. Ski West adjusts its accounts at the end of each month but closes them only at the end of the calendar year (December 31). The ending balances in the Equipment Rental Revenue account and the Cash account in February and March appear below.

Ski West prepares financial statements showing separately the operating results of each month. In the financial statements prepared for the month ended March 31, Equipment Rental Revenue and Cash should appear as follows:

a.Equipment Rental Revenue, $18,400; Cash, $26,500.

b.Equipment Rental Revenue, $18,400; Cash, $12,300.

c.Equipment Rental Revenue, $6,300; Cash, $26,500.

d.Equipment Rental Revenue, $6,300; Cash, $12,300.

8. Which of the following accounts is not closed to the Income Summary account at the end of the accounting period? (More than one answer may be correct.)

a.Rent Expense.

b.Accumulated Depreciation.

c.Unearned Revenue.

d.Supplies Expense.