The Retained Earnings account had a beginning balance of $20,000 and an ending balance of $40,000. If $5,000 of dividends were paid during the period, net income must have been a) $25,000 b)$40,00 c) $10,000 d) $30,000 The Unearned Revenue account is a(n) a) contra asset b) revenue c) liability d) asset e) operating expense Transactions are first recorded in the a) trial balance b) journal c) general ledger d) balance sheet A debit will reduce ___, but increase ____, a) sale; accounts payable b) expenses; accounts payable c) accounts payable; common stock d) common stock; prepaid insurance A debit will reduce ___, but increase ____, a) sale; accounts payable b) expenses; accounts payable c) accounts payable; common stock d) common stock; prepaid insurance The Revenue Recognition Principle says under accrual accounting 2 events must occur before you record revenue. What are they? a) Substantially complete me earnings process, and 2) collect the cash b) An exchange takes place, and 2) collect the cash c) Substantially complete the earnings process, and 2) an exchange takes place d) Merchandise is purchased, and 2) merchandise a sold. e) Merchandise is sold, and 2) cash is collected. Jim Co is a retailer and uses a perpetual inventory system. Which statement a correct? a) When Jim returned a purchase to a supplier, he would credit Merchandise Inventory b) A sale Jim made was returned by the customer. He should credit Merchandise Inventory C) Freight paid to get merchandise inventory to Jim Co 's store a debited to Freight In d) When a customer (a poor sale) takes the discount, Jim would credit Merchandise Inventory Same as above except Jim uses a periodic inventory system. Which statement is correct? a) When Jim returned a purchase to a supplier. Merchandise Inventory would be credited b) A sale Jim made was returned by the customer. Jim would credit Merchandise Inventory c) Freight paid to get merchandise inventory to Jim Co's store is debited to Freight in. d) When a customer (a poor sale) takes the discount. Jim should credit Merchandise Inventory e) All of the above are true. Murray Company debited Prepaid Insurance tor $864 on July 1 for a one-year fire insurance policy. If the company prepares yearly financial statements failure to make an adjusting entry on Dec 31 for the amount of insurance that has expired would cause (note overstate means too high) a) assets to be overstated by $864 and expenses to be understated by $864 b) assets to be overstated by $432 and expenses to be understated by $432 c) expenses to be overstated by $432 and assets to be understated by $432 d) expenses to be overstated by $864 and assets to be understated by $864 e) None of the above The entry needed would be a closing entry, not an adjusting entry Which of the following is a false statement about the cash basis of accounting? a) It is not acceptable under GAAP. b) Most individuals use it c) Most publicity traded companies use it d) Revenue is not considered 'earned' at the same time as under accrual accounting e) Expenses are not necessarily recorded in the same time period as the related revenues