Question 1

Which of the following is true?

Accepted Answer

A)  Prepaid expenses are increased by a credit.
B)  Gains are increased by a debit.
C)  Losses are increased by a credit.
D)  Accumulated depreciation is increased by a credit. D

Question 2

Record the following transactions and events of Royal Wulff Company in general journal form.If the item does not require a journal entry,write "no entry."
(a)Sold merchandise costing $4,500 for $1,000 cash and $7,000 on open account.A perpetual inventory system is used.
(b)Purchased land and building for $100,000 cash and a $300,000 mortgage.The land was recently appraised at $60,000 and the building at $340,000.
(c)Received payment on account,$12,000.
(d)Estimated that utilities expense for the coming six months will total $7,600.
(e)Declared a cash dividend totaling $13,500.The dividend will be paid in six weeks.

Accepted Answer

The answer of Record the following transactions and events of...

Question 3

Which of the following is presented in a balance sheet?

Accepted Answer

A)  Prepaid expenses
B)  Revenues
C)  Net income
D)  Gains A

Question 4

A trial balance is useful because it indicates that

Accepted Answer

A)  owners' equity is correct.
B)  net income is correct.
C)  all entries were made correctly.
D)  total debits equal total credits.

Question 5

Teller Inc.reported an allowance for doubtful accounts of $30,000 (credit)at December 31,2013,before performing an aging of accounts receivable.As a result of the aging,Teller Inc.determined that an estimated $52,000 of the December 31,2013,accounts receivable would prove uncollectible.The adjusting entry required at December 31,2013,would be

Accepted Answer

The answer of Teller Inc.reported an allowance for doubtful accounts...

Question 6

Carbon Company's accounting records provided the following information (all amounts in thousands of dollars):

All assets and liabilities of the firm are reported in the schedule above.Working capital of $92 remained unchanged from 2012 to 2013.Net income in 2011 was $64.No dividends were declared during 2013 and there were no other changes in owners' equity.Total long-term liabilities at the end of 2013 would be

Accepted Answer

A)  $340.
B)  $432.
C)  $580.
D)  $616.

Question 7

The following errors were made in preparing a trial balance: the $1,350 balance of Inventory was omitted; the $450 balance of Prepaid Insurance was listed as a credit; and the $300 balance of Salaries Expense was listed as Utilities Expense.The debit and credit totals of the trial balance would differ by

Accepted Answer

A)  $1,350.
B)  $1,800.
C)  $2,100.
D)  $2,250.

Question 8

The following account balances pertain to the Henryville Manufacturing Co.at December 31,2013 (before adjusting entries).
  
Additional information:
(a)Prepaid insurance in the trial balance represents an advance payment for 5 months of insurance made on November 1,2013.
(b)In July,the accountant debited accounts payable for a $10,000 fine for a pollution violation; "Environmental Expense" should have been debited.
(c)Rent expense in the trial balance represents an advance payment for 6 months rent paid on October 1,2013.The Company begins occupying the property on that date.
(d)Unpaid and unrecorded wages earned by employees at December 31,2013,were
$60,000.
(e)The income tax liability for the year is $100,000,payable April 15,2014.
Required:
(1)Prepare adjusting entries to Henryville Co.'s accounts at December 31,2013.Each entry should be made in general journal format.Identify each entry by using the letter of the paragraph containing the additional information for the entry.
(2)Prepare the current year income statement
.
(3)Prepare the current year retained earnings statement.
(4)Prepare the current year balance sheet.
(5)Prepare the closing entries.

Accepted Answer

The answer of The following account balances pertain to the...

Question 9

If an inventory account is understated at year end,the effect will be to overstate the

Accepted Answer

A)  net purchases.
B)  gross margin.
C)  cost of goods available for sale.
D)  cost of goods sold.

Question 10

An example of a nominal account would be

Accepted Answer

A)  Allowance for Doubtful Accounts.
B)  Notes Payable.
C)  Prepaid Expense.
D)  Cost of Goods Sold.

Question 11

The balance in a deferred revenue account represents an amount that is

Accepted Answer

The answer of The balance in a deferred revenue account...

Question 12

What is the correct order of the following events in the accounting process?
I.Financial statements are prepared.
II.Adjusting entries are recorded.
III.Nominal accounts are closed.

Accepted Answer

A)  I, II, III
B)  II, I, III
C)  III, II, I
D)  II, III, I

Question 13

Total net income over the life of an enterprise is

Accepted Answer

A)  higher under the cash basis than under the accrual basis.
B)  lower under the cash basis than under the accrual basis.
C)  the same under the cash basis as under the accrual basis.
D)  not susceptible to measurement.

Question 14

Failure to record the expired amount of prepaid rent expense would not

Accepted Answer

A)  understate expense.
B)  overstate net income.
C)  overstate owners' equity.
D)  understate liabilities.

Question 15

Winston Company sells magazine subscriptions for one- to three-year subscription periods.Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance,and this account had a balance of $9,600,000 at December 31,2013,before year-end adjustment.Outstanding subscriptions at December 31,2013,expire as follows:

In its December 31,2013,balance sheet,what amount should Winston report as the balance for magazine subscriptions collected in advance?

Accepted Answer

A)  $2,000,000
B)  $3,800,000
C)  $7,600,000
D)  $9,600,000

Question 16

Sky Company collected $12,350 in interest during 2013.Sky showed $1,850 in interest receivable on its December 31,2013,balance sheet and $5,300 on December 31,2012.The interest revenue on the income statement for 2013 was

Accepted Answer

A)  $3,450.
B)  $8,900.
C)  $12,350.
D)  $14,200.

Question 17

Which of the following errors will be detected when a trial balance is properly prepared?

Accepted Answer

A)  An amount that was entered in the wrong account
B)  A transaction that was entered twice
C)  A transaction that had been omitted
D)  None of these

Question 18

The following balances have been excerpted from Edwards' balance sheets:

Edwards Company paid or collected during 2013 the following items:

The interest revenue on the income statement for 2013 was

Accepted Answer

A)  $90,500.
B)  $112,700.
C)  $117,500.
D)  $156,500.

Question 19

Pheasant Tail Company's total equity increased by $32,000 during 2013.New stockholder investment during the year totaled $65,000.Total revenues during the year were $500,000 and total expenses were $460,000.Cash on hand decreased by $7,500 during the year.What amount of dividends did Pheasant Tail declare during 2013?

Accepted Answer

The answer of Pheasant Tail Company's total equity increased by...

Question 20

The last step in the accounting cycle is to

Accepted Answer

A)  prepare a post-closing trial balance.
B)  journalize and post closing entries.
C)  prepare financial statements.
D)  journalize and post adjusting entries.

Exam 2: A Review of the Accounting Cycle