Question 1

Accrual accounting states that:

Select one:

a. Expenses should be recognized when you pay for them

b. Revenue should be recognized when you get paid

c. Revenue and expenses should be recognized in the period they occur regardless of when cash paid or received

Question 2

Suppose an entry was made on March 1, 2016 to prepay a one-year insurance policy for $1,800. Instead of debiting the prepaid insurance account, the bookkeeper debited the prepaid rent account instead. What is the correct entry to reverse this error?

Select one:

a. Debit Prepaid Rent for $1,800; Credit Cash for $1,800.

b. Debit Cash for $1,800; Credit Prepaid Insurance for $1,800.

c. Debit Prepaid Insurance for $1,800; Credit Cash for $1,800.

d. Debit Prepaid Insurance for $1,800; Credit Prepaid Rent for $1,800.

Question 3

AAA Company has a December 31 year end. On January 1, 2016, AAA Company took out a $50,000 bank loan. The loan has an interest rate of 10% annually. The loan and the interest will be paid at the end of five years. What adjusting entry is necessary on December 31, 2016?

Select one:

a. Decrease cash $5,000; decrease bank loan payable $5,000

b. Increase interest payable $5,000; increase interest expense $5,000

c. No entry is required

d. Decrease bank loan payable $5,000; increase interest expense $5,000

Question 4

Which of the following liabilities is generally listed first in a balance sheet?

Select one:

a. Bond's payable

b. Accounts Payable

c. Bank loan payable

d. Long-term loans payable

Question 5

Entries are recorded in the journal:

Select one:

a. Alphabetically

b. Randomly

c. Chronologically (by date)

d. In the order of account numbers used

Question 6

Which of the following are a disadvantage to benefits versus wages?

Select one:

a. Many benefits are non-taxable in the hands of the employee

b. Benefits are only valuable if they are used.

c. benefits are tax deductible for the employer.

d. Benefits are often associated with higher employee satisfaction.

Question 7

Which of the following is not a common method to estimate future earnings for a defined benefit plan?

Select one:

a. Flat Benefit

b. Early Career Average Earnings

c. Final Average Earnings

d. Career Average Earnings

Question 8

For a Defined Benefit Pension Plan, a debit balance in the T-account is equal to:

Select one:

a. Pension Liability = Underfunded

b. Pension Asset = Underfunded

c. Pension Asset = Overfunded

d. Pension Liability = Overfunded

Question 9

All of the following statements regarding characteristics of defined benefit plans are TRUE, EXCEPT:

Select one:

a. A specified benefit is promised to be paid at retirement

b. The employer assumes the investment risk.

c. Younger employees require higher contributions than older employees given the same benefit level.

d. The benefits are usually expressed as a dollar amount to be paid as an annuity

Question 10

Investors are usually most interested in evaluating

Select one:

a. liquidity and solvency.

b. profitability and solvency.

c. solvency and marketability.

d. liquidity and profitability.