Question 1: Shown below is an adjusted trial balance for Novelty Toys, Incorporated, on December 31, Year 1:

Novelty Toys, Incorporated
Adjusted Trial Balance
December 31, Year 1
	Debit	Credit
Cash	$ 7,750
Accounts Receivable	6,375
Office Equipment	11,250
Accumulated Depreciation		$ 3,000
Accounts Payable		3,875
Capital Stock		11,250
Retained Earnings		-0-
Dividends	3,750
Fees Earned		22,750
Salaries Expense	8,000
Advertising Expense	1,625
Depreciation Expense	2,125
Totals	$ 40,875	$ 40,875

The entry to close Salaries Expense account will:

Multiple Choice

• Transfer the total of Salaries Expense directly to Retained Earnings.

• Include a debit to Income Summary.

• Include a debit to Salaries Expense.

• Include a credit to Capital Stock.

Question 2: Shown below is the adjusted Trial Balance for Simon Incorporated, on December 31, after the first year of operations, after adjusting entries:

Simon, Incorporated
Adjusted Trial Balance
December 31
	Debit	Credit
Cash	$ 1,600
Accounts Receivable	4,000
Office Equipment	16,800
Accumulated Depreciation		$ 1,600
Capital Stock		2,400
Retained Earnings		2,720
Dividends	960
Service Fees Earned		21,920
Wages Expense	3,200
Supplies Expense	1,120
Depreciation Expense	960
Totals	$ 28,640	$ 28,640

The entry to close Depreciation Expense account will:

Multiple Choice

• Transfer the balance of Depreciation Expense directly to Retained Earnings.

• Include a debit to Income Summary.

• Include a debit to Depreciation Expense.

• Include a credit to Capital Stock.

Question 3: Shown below is an adjusted trial balance for Novelty Toys, Incorporated, on December 31, Year 1:

Novelty Toys, Incorporated
Adjusted Trial Balance
December 31, Year 1
	Debit	Credit
Cash	$ 7,750
Accounts Receivable	6,375
Office Equipment	11,250
Accumulated Depreciation		$ 3,000
Accounts Payable		3,875
Capital Stock		11,250
Retained Earnings		-0-
Dividends	3,750
Fees Earned		22,750
Salaries Expense	8,000
Advertising Expense	1,625
Depreciation Expense	2,125
Totals	$ 40,875	$ 40,875

The entry to close the Fees Earned account will:

Multiple Choice

• Produce a zero balance in that account when posted.

• Include a debit to Income Summary.

• Include a credit to Fees Earned.

• Include a debit to Capital Stock.

Question 4: If Income Summary has a net credit balance, it signifies:

Multiple Choice

• A net loss.

• Net income.

• A reduction of net worth.

• Dividends have been declared.

Question 5: Shown below is an adjusted trial balance for Cornell Products, Incorporated, on December 31:

Cornell Products, Incorporated
Adjusted Trial Balance
December 31, Year 1
	Debit	Credit
Cash	$ 15,350
Accounts Receivable	12,675
Office Equipment	22,200
Accumulated Depreciation		$ 5,850
Accounts Payable		7,675
Capital Stock		22,350
Retained Earnings		-0-
Dividends	7,350
Service Fees Earned		44,750
Salaries Expense	15,700
Advertising Expense	3,175
Depreciation Expense	4,175
Totals	$ 80,625	$ 80,625

The total debits in the After-Closing Trial Balance will equal:

Multiple Choice

• $80,625.

• $57,575.

• $50,225.

• $35,875.

Question 6: Return on equity is calculated by:

Multiple Choice

• Dividing net income by total revenue.

• Dividing net income by average stockholders' equity.

• Dividing net income by working capital.

• Dividing dividends by stockholders' equity.

Question 7: Return on equity measures:

Multiple Choice

• Solvency.

• Profitability.

• Leverage.

• Both solvency and leverage.

Question 8: The section of the annual report titled "Management Discussion and Analysis" is:

Multiple Choice

• Required by the Securities and Exchange Commission (SEC).

• Not required, but it may be included by management.

• Required by generally accepted accounting principles (GAAP).

• Reported to the Securities and Exchange Commission (SEC), but it is not included in the annual report.

Question 9: Which of the following amounts appears in both the Income Statement debit column and the Balance Sheet credit column of a worksheet?

Multiple Choice

• Net income.

• Net loss.

• Dividends.

• Retained earnings.