Question 1

Which of the following statements about the closing process is correct?

Accepted Answer

A) Closing entries are recorded at the end of each reporting period,which could be monthly,quarterly,or annually. 
B) After closing entries are posted,the balances of the income statement accounts will be zero. 
C) Closing entries are made to zero out the balances of the permanent accounts on the balance sheet. 
D) After closing entries are posted,the only temporary account with a balance is the Dividends account.

Question 2

Accruing a revenue or expense in accounting means that the amount:

Accepted Answer

A) will not be reported in the accounting records. 
B) will be reported as a revenue or an expense in the current period. 
C) will be reported as a revenue or an expense in a later period. 
D) was reported as a revenue or an expense in a prior period.

Question 3

Which of the following errors causes net income to be understated?

Accepted Answer

A) Employee wages that have not been paid are not recorded. 
B) Depreciation Expense is not recorded. 
C) Collection of an accounts receivable is not recorded. 
D) Revenue that has been earned but not yet collected has not been recorded.

Question 4

Eagle Company reported Salaries and Wages Payable of $1,500 at the beginning of the year and $5,000 at the end of the year.The income statement for the year reported Salaries and Wages Expense of $112,400.How much cash was paid for salaries and wages during the year?

Accepted Answer

A) $105,900 
B) $112,400 
C) $108,900 
D) $107,400

Question 5

Which of the following would understate net income?

Accepted Answer

A) Failing to post an adjusting entry to accrue revenue. 
B) Understating the amount of Depreciation Expense recorded. 
C) Failing to prepare an adjusting entry to recognize the portion of prepaid rent that has expired. 
D) Overstating the year-end balance of the Supplies account.

Question 6

The balance of which of the following accounts appears in the credit column of an adjusted trial balance?

Accepted Answer

A) Common Stock 
B) Equipment 
C) Dividends 
D) Accounts Receivable

Question 7

In a deferral adjustment for revenues collected in advance that are now earned:

Accepted Answer

A) a liability is decreasing because cash is being paid for an expense incurred at the time of the adjustment. 
B) the liability recorded when cash was received is increased by the adjustment for the revenue being earned. 
C) the liability recorded when cash was received is decreased by the adjustment for revenue being earned. 
D) a liability is increasing because cash will be paid for an expense in the future.

Question 8

Which of the following statements about the statement of retained earnings is correct?

Accepted Answer

A) Dividends increase net income and are added to calculate the ending balance of Retained Earnings. 
B) Dividends are subtracted to calculate the ending balance of Retained Earnings. 
C) Dividends are not used to calculate the ending balance of Retained Earnings. 
D) Dividends are not reported on the statement of retained earnings.

Question 9

The annual depreciation taken on a vehicle totals $4,350.The vehicle has been in service for three full years and the adjusting entries have been completed for the year.At the end of the third year,the balance in the Depreciation Expense account is $________ and the balance in the Accumulated Depreciation account is $________.

Accepted Answer

A) $4,350;$4,350 
B) $4,350;$13,050 
C) $13,050;$4,350 
D) $13,050;$13,050

Question 10

Which line item is reported on both the income statement and statement of retained earnings?

Accepted Answer

A) Net Income 
B) Revenues 
C) Expenses 
D) Dividends

Question 11

The Prepaid Insurance account has a normal balance of $5,625 at the beginning of the month.The company used $1,470 of insurance coverage during the month.Which of the following statements is correct?

Accepted Answer

A) The company should credit Insurance Expense for $1,470 and debit Prepaid Insurance for $1,470. 
B) Retained earnings will decrease and stockholders' equity will increase. 
C) The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470. 
D) Retained earnings and stockholders' equity will both increase.

Question 12

Match the term and its definition.There are more definitions than terms.
-Closing Journal Entry

Accepted Answer

A) Also known as balance sheet accounts. 
B) Lists the balances of all temporary and permanent accounts to provide a check on the equality of the debits and credits. 
C) Lists the balances of all accounts to check that revenues equal expenses. 
D) The level of profit prior to considering income tax. 
E) An account that is paired with another account and acts to reduce its book value.
F)Converts some of an asset's or a liability's book value into an expense or a revenue.
G)An account that must have a zero balance after closing entries have been made.
H)Adds new values into the balance sheet and income statement accounts.
I)The amount at which an asset or liability is reported in the financial statements.
J)Lists the balances of all permanent accounts to check that debits equal credits.
K)A journal entry that transfers net income or loss to the Retained Earnings account.
L)When revenue minus expenses is a negative number.
M)Entries made to update existing accounts and record new events.

Exam 4: Adjustments,Financial Statements,and Financial Results