Accounting 3200A - Intermediate Financial Accounting & Reporting I » Spring 2022 » Chapter 2
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Question #1
One of the purposes of adjusting entries is to
A.
make assets equal liabilities plus owners' equity.
B.
record all external transactions at the end of the year.
C.
recognize all revenues earned during the period.
D.
ensure debits equal credits.
Question #2
The left side of the accounting equation represents _____, while the right side represents _____.
A.
the total economic resources of the company; the total claims against the company
B.
the total liabilities of the company; the total assets of the company
C.
the total claims against the company; the total economic resources of the company
D.
the total assets of the company; the total invested in the company
Question #3
On June 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the December 31 income statement for Year 1?
A.
$12,000
B.
$6,000
C.
$7,000
D.
$5,000
Question #4
Accruals occur when cash flow comes:
A.
after expense recognition and after revenue recognition
B.
before expense recognition and before revenue recognition
C.
after expense recognition and before revenue recognition
D.
before expense recognition and after revenue recognition
Question #5
A ______ liability is a liability that will be satisfied in more than 1 year or operating cycle, whichever is longer, in the future.
A.
current
B.
noncurrent
Question #6
Retained earnings equals net income plus distributions to shareholders.
A.
True
B.
False
Question #7
Adjusting entries help a company accurately measure
A.
the company's financial performance, revenues and expenses for the period.
B.
the company's financial performance, the cash received and paid during the year
C.
the cash received and paid during the year, revenues and expenses for the period.
Question #8
The accounting equation is: Assets = _____________ + Owners' Equity.
A.
Investments
B.
Liabilities or liability
C.
Income
Question #9
On September 1, Year 1, Great Lakes Equipment receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Great Lakes Equipment should recognize on the income statement for the year ending December Year 1?
A.
$3,000
B.
$24,000
C.
$4,000
D.
$12,000
Question #10
Recognizing revenue before cash flow is an example of:
A.
an accrual adjusting entry
B.
a prepayment adjusting entry
C.
an estimate adjusting entry
Question #11
Which of the following make up shareholders' equity of a corporation?
A.
paid-in capital and long-term liabilities
B.
current assets. property and equipment
C.
paid-in capital and retained earnings
D.
current assets and long-term liabilities
Question #12
Adjusting journal entries are needed to record
A.
expense incurred, but not yet paid and revenue earned, but not yet received
B.
cash that has been paid for expenses and cash that has been collected from customers
C.
expense incurred, but not yet paid and cash that has been collected from customers
D.
revenue earned, but not yet received and cash that has been collected from customers
Question #13
Which of the following items is prepared at the end of the accounting period immediately before the financial statements are prepared?
A.
unadjusted trial balance
B.
adjusted trial balance
C.
post-closing trial balance
Question #14
Muller Company does not report other comprehensive income items. Muller Company
A.
must use the one statement approach
B.
is not required to report comprehensive income
C.
must use the two statement approach
Question #15
Place the steps at the end of the accounting period in the correct order.
A.
1.Prepare an unadjusted trial balance. 2.Prepare financial statements. 3.Prepare an adjusted trial balance. 4.Record adjusting entries. 5.Close the temporary accounts.
B.
1.Close the temporary accounts. 2.Prepare financial statements. 3.Prepare an adjusted trial balance. 4.Record adjusting entries. 5.Prepare an unadjusted trial balance.
C.
1.Prepare an unadjusted trial balance. 2.Record adjusting entries. 3.Prepare an adjusted trial balance. 4.Prepare financial statements. 5.Close the temporary accounts.
Question #16
A statement of comprehensive income is not needed, if the company does not have
A.
non-operating revenue and expense items
B.
other comprehensive income items
C.
positive net income
Question #17
Common stock and _____ _____ are included in shareholders’ equity.
A.
retained assets
B.
retained earnings
C.
accrued invesments
Question #18
Which of the following steps occurs only at the end of the year?
A.
Record adjusting entries and post to the general ledger accounts
B.
Obtain information about external transactions from source documents
C.
Close the temporary accounts to retained earnings
D.
Prepare the financial statements
Question #19
Accruals involve transactions where the cash outflow or inflow takes place in a period ______ expense or revenue recognition.
A.
before
B.
the same as
C.
after
Question #20
The type of system that integrates the information of departments and functions of a company into a single computer system is called a(n)
A.
Accounting Data system.
B.
Enterprise Resource Planning (ERP) system.
C.
Electronic Data Processing system.
Question #21
Which of the following make up the major components of retained earnings?
A.
gains, revenues, losses, and expenses
B.
liabilities, revenues, assets, and expenses
C.
liabilities, losses, assets, and expenses
Question #22
A(n) _____ event is any event that directly affects the financial position of the company.
A.
economic
B.
domestic
C.
external
Question #23
Place the steps in the accounting process in the correct order.
A.
1.Analyze the transaction. 2.Record the transaction. 3.Prepare the unadjusted trial balance. 4.Post from the journal to the general ledger.
B.
1.Analyze the transaction. 2.Record the transaction. 3.Post from the journal to the general ledger. 4.Prepare the unadjusted trial balance.
C.
1.Prepare the unadjusted trial balance. 2.Analyze the transaction. 3.Post from the journal to the general ledger. 4.Record the transaction.
Question #24
Each economic event, or transaction, affecting the accounting equation has a(n) _____ effect because resources must always equal claims.
A.
minimal
B.
considerable
C.
dual or double
Question #25
The objective of an Enterprise Resource Planning (ERP) system is to create a customized software program that integrates the information of departments and functions of a company into a single computer system.
A.
True
B.
False
Question #26
Economic events cause changes in the:
A.
operating activities of a company
B.
financial position of a company
C.
operating results of a company
D.
cash position of a company
Question #27
An event that has a dual effect on the accounting equation is referred to as a(n)
A.
transaction.
B.
direct effect.
C.
investment.
D.
indirect effect.
Question #28
The type of information included in an account includes
A.
the account number, the sum of daily transactions, columns for increases and decreases.
B.
the account number, the account title, columns for increases and decreases.
C.
the sum of daily transactions, the account title.
Question #29
Beginning inventory was $50,000. Inventory purchased during the year cost $75,000. Inventory on hand at year-end was $40,000. Cost of goods sold was
A.
$125,000
B.
$85,000
C.
$75,000
D.
$165,000
E.
$65,000
Question #30
Entries made at the end of the accounting period before the financial statements are prepared are called ______ entries.
A.
balanced
B.
adjusting
C.
offset
Question #31
The double entry system of accounting means each transaction
A.
has a dual effect on the accounting equation
B.
cannot effect more than one account
C.
effects only a single account
Question #32
An account that is used for instructional purposes instead of drawing a formal general ledger account is referred to as a(n) ______.
A.
dual account
B.
bank account
C.
T-account
D.
general account
Question #33
Which of the following are economic events?
A.
The payment of employee salaries for the week. A proposal to purchase $1,000 of inventory from supplier.
B.
The payment of employee salaries for the week. Borrowing $10,000 from the bank.
C.
A proposal to purchase $1,000 of inventory from supplier. Borrowing $10,000 from the bank.
Question #34
When are adjusting entries recorded?
A.
When any external transaction or event occurs.
B.
At the end of a period when preparing financial statements.
C.
At the beginning of each reporting period.
D.
After closing entries are prepared for the period.
Question #35
A transaction is an event that
A.
has a single effect on the accounting equation
B.
increases or decreases total assets
C.
increases or decreases income
D.
has a dual effect on the accounting equation
Question #36
The accounting system that refers to the effect that each transaction has on the accounting system is called a(n)
A.
double-entry system
B.
enterprise resource planning system
C.
database accounting system
Question #37
A T-account has space at the top for the account title and two sides for recording ______ and ______ to the account.
A.
income; loss
B.
payables; receivables
C.
assets; liabilities
D.
increases; decreases
Question #38
Adjusting entries are recorded:
A.
after the financial statements have been prepared
B.
when the financial statements are prepared
C.
at the beginning of an accounting period
D.
after closing entries have been prepared
Question #39
A.
offset
B.
accruals
C.
rebates
Question #40
An account should have an account title, account number, a place for the date of the transaction, and two columns for
A.
closing and post-closing.
B.
revenues and expenses.
C.
increases and decreases.
D.
assets and liabilities.
Question #41
Prepayments are transactions in which the cash flow follows the expense or revenue recognition.
A.
False
B.
True
Question #42
Prepayments are:
A.
transactions in which cash flow precedes revenue recognition, transactions in which cash flow precedes expense recognition.
B.
transactions in which cash flow follows revenue recognition , transactions in which cash flow follows expense recognition.
C.
transactions in which cash flow precedes expense recognition, transactions in which cash flow follows revenue recognition.
D.
transactions in which cash flow precedes revenue recognition, transactions in which cash flow follows expense recognition.
Question #43
Which of the following are examples of prepayments?
A.
Expense paid when it is incurred
B.
Revenue collected when it is earned
C.
Purchasing supplies that will be used later
Question #44
A company paying rent in advance for the month of April records:
A.
revenue
B.
a liability
C.
an asset
D.
an expense
Question #45
Prepaid expenses are the cost of _____ acquired in one accounting period and _____ in a future period.
A.
liabilities …. Revenue
B.
asset/s ... expense
C.
expense ... asset/s
Question #46
Supplies expense is ______ and supplies is ______ for the amount of supplies used during the period that were originally recorded as an asset when purchased.
A.
debited, credited
B.
credited, credited
C.
debited, debited
D.
credited, debited
Question #47
To adjust for rent used up during the year that was recorded to the prepaid rent account when paid for,
A.
rent expense is debited, prepaid rent is credited
B.
rent expense is debited, prepaid rent is debited
C.
prepaid rent is debited, rent expense is credited
D.
prepaid rent is credited, rent expense is credited
Question #48
When rent is paid in advance for 2 years, it is appropriately recorded as a(n) _____ , whereas when rent is paid and used during one month, it is appropriately recorded as a(n) _____ .
A.
expense, asset
B.
liability, income
C.
asset, expense
Question #49
Prepaid expenses are:
A.
expenses paid at the time incurred
B.
expensed in a later period than cash was paid
C.
expenses incurred before cash is paid
Question #50
Logan Corp. purchases supplies on account and appropriately records the transaction in an asset account. The adjusting journal entry at year-end when accounting for supplies used will require a
A.
credit to supplies and credit to supplies expense
B.
debit to supplies and credit to supplies expense
C.
credit to supplies and debit to supplies expense
D.
debit to supplies and debit to supplies expense
Question #51
On October 1, Arcelia Corp. pays $24,000 for two years of rent. The transaction is appropriately recorded in a prepaid rent account. On December 31, of the same year Arcelia should make an adjusting entry for the rent expired, which includes
A.
debit to rent expense for $3,000 and credit to prepaid rent $3,000
B.
credit to rent expense $3,000 and debit to rent expense for $9,000.
C.
credit to rent expense $9,000 and debit to prepaid rent for $3,000.
Question #52
Cost of assets acquired in one accounting period and expensed in a future accounting period are ______ _____
A.
interest expense
B.
income loss
C.
prepaid expenses
Question #53
On April 1, Larken Corp. pays $36,000 for 3 years of rent. The transaction is appropriately recorded as prepaid rent. The adjusting entry on December 31, of the same year, will require a
A.
credit to rent expense and debit to prepaid rent
B.
debit to rent expense and debit to prepaid rent
C.
credit to rent expense and credit to prepaid rent
D.
debit to rent expense and credit to prepaid rent
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