PART I.MULTIPLE CHOICE.CIRCLE THE LETTER OF THE BEST RESPONSE.

1. A business had the following assets and liabilities at the

beginning and at the end of a year:

AssetsLiabilities

Beginning of year... $67,000$14,000

End of year.........78,00017,000

Determine the net income or net loss during the year under the

assumption that dividends total $19,200 and shareholders invested

an additional $10,000 in the business by yearend.

a.$51,800 net income.

b.$ 1,200 net loss.

c.$17,200 net income.

d.$ 8,000 net income.

2. The following transactions occurred during July:

1)Received $700 cash for photography services provided to

customer during the month.

2)Received $1,500 cash from Barbara Hanson, the owner of the

business.

3)Received $800 from a customer in partial payment of his

account receivable which arose as a result of sales during

June.

4)Rendered photography services to a customer on credit, $500.

5)Borrowed $2,500 from the bank by signing a promissory note.

6)Received $1,000 from a customer in payment for services to

be rendered next year.

What was the amount of revenue for July?

a. $7,000.

b. $5,500.

c. $3,000.

d. $2,000.

e. $1,200.

3. If the accountant failed to make the endofperiod adjustment to

remove from the Unearned Revenue account the amount of

revenue earned, the omission would cause:

a. An overstatement of net income.

b. An overstatement of assets.

c. An overstatement of liabilities.

d. An overstatement of owner's equity.

4. A company begins a year by purchasing a fiveyear insurance policy

for $1,800.If the purchase was charged to Prepaid Insurance, the

adjusting entry at the end of the first year is:

a. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.

b. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.

c. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.

d. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.

5. (would appear here)

6. The accounting principle that guides accountants to select the less

optimistic estimate when two estimates of amounts to be received or

paid are about equally likely is the:

a. Consistency principle.

b. Conservatism principle.

c. Objectivity principle.

d. Fulldisclosure principle.

e. Realization principle.

.... questions 7-10 would appear next.....

PART II.PROBLEMS

11. The adjusted trial balance of the Cox Company is as follows:

Adjusted

Trial Balance

DebitCredit

Cash ................................8,000

Prepaid insurance ...................2,400

Equipment ...........................18,000

Accumulated depreciation, equipment .3,600

Salaries payable ....................2,000

Unearned revenue................1,200

Service revenue..................23,800

Salaries expense ....................9,000

Depreciation expense ................1,800

Insurance expense ...................1,400

Dividends............................3,700

Retained earnings ...................700

Common stock ........................ 13,000

44,30044,300

In good form, present the closing entries for Cox

Company.

12. Use the following information to calculate the unknown amount.

On May 31, Beanstalk Company had a $6,000 balance in Accounts Receivable.During June, the company collected $5,000 from its credit customers.The June 30 balance in Accounts Receivable was $8,000.Determine the amount of sales on account that occurred in June.No other types of transactions affected Accounts Receivable.

The amount of sales on account that occurred in June was __________.

13. The following situation requires an adjusting journal entry to prepare financial statements as of June 30, 20X6.First, present the adjusting entry.Second, present the entry that would be made to record the payment of the accrued liability during July.Include dates in your entries but omit explanations and posting references.

The total weekly salaries expense for all employees is $5,000.This amount is paid at the end of the day on Friday of each week with five working days.June 30 falls on Wednesday of this year, which means that the employees had worked three days since the last payday.The next payday is July 2.

Present your answer in good form.

14. (would appear here)

15. Presented below are the yearend balances of the accounts for

Crimson Repair Service at December 31.All accounts have normal

balances.The bookkeeper decided to alphabetize the accounts.

Accounts receivable .............................$ 24,000

Accounts payable ................................38,000

Accumulated depreciation, trucks ................10,000

Accumulated depreciation, building ..............7,000

Advertising expense .............................3,000

Building ........................................50,000

Cash ............................................40,000

Depreciation expense, building ..................3,000

Depreciation expense, trucks ....................4,000

Insurance expense ...............................2,000

Land ............................................15,000

Dividends .......................................26,000

Common stock ....................................10,000

Retained earnings....... ........................46,000

Prepaid insurance ...............................500

Salaries payable ................................2,000

Salaries expense ................................42,000

Unearned repair service revenue .................2,500

Repair service revenue ..........................150,000

Supplies ........................................1,500

Supplies expense ................................8,000

Repairs expense, trucks .........................18,000

Trucks ..........................................25,000

Utilities expense ...............................3,500

In good form, prepare a balance sheet for Crimson Repair Service.

Show your work.The next page is blank and can help you show your work.