Name:
Class:
Date:
ID: A
Testl- Chapterl2S4
Multiple Choice
Identify the choice that best completesthe statementor answers the question.
l.
Which of the following would 49! normallyoperateas a servicebusiness?
a. PetGroomers
b. Restaurant
c. Video Rentals
d. StylingSalon
2, Managerialaccountants
would be responsible
for providingthe following information:
a. Tax reportsto governmentagencies.
b. Profit reportsto owners and management.
c. Expansionof a productline reportto management,
d. Consumerreportsto customers.
3. DarnellCompanypurchased$88,000of computerequiprnentfrom JosephCompany. DarnellCompanypaid
for the equipmentusingcashthat had beenobtainedfrom the initial investmentby DonnieDarnell.The
transactioninvolvingthe computerequipmentshouldbe recordedon the accountingrecordsof which of the
following errtities?
a. Damell Companyand DonnieDarnell'spersonalrecords
b. JosephCompanyand DonnieDarnell'spersonalrecords
c. Darnell Companyand JosephCompany
d. JosephCompany
4. Equipmentwith an estimatedmarketvalueof $55,000is offeredfor saleat $75,000.The equipmentis
acquiredfor $20,000in cashand a notepayableof $40,000due in 30 days.The amountusedin the buyer's
accountingrecordsto recordthis acquisitionis
a. $55,000
b. $60.000
c. S20.000
d. $75,000
5. Which of the following is not true of accountingprinciples?
a. Financialaccountants
follow generallyacceptedaccountingprinciples(GAAP).
b. Following GAAP allows accountinginformation usersto compareone companyto
another.
c. A new accountingprinciplecan be adoptedwith stockholders
approval.
d. The FinancialAccountingStandards
Board(FASB) hasprimaryresponsibilityfor
developingaccountingprinciples.
e. Accounting principles developfrom research,acceptedaccountingpractices,and
pronouncements
of authoritativebodies.
Name:
ID: A
6. Whichof the followingis not a business
transaction?
a. makea salesoffer
b. sell goodsfor cash
c. receivecashfor servicesto be renderedlater
d. pay for supplies
7. How doesthe purcliaseofsupplieson accountaffectthe accountingequation?
a. assetsincrease;owner'sequitydecreases
b, assetsincrease;
liabilitiesincrease
c. assetsincrease;liabilitiesdecrease
d. liabilitiesincrease;
owner'sequitydecreases
8. How doesthe owner withdrawingcashfrom the br.rsiness
affectthe accountingequation?
a, assetsdecrease;
owner'sequitydecreases
b. assetsdecrease;
owner'sequity increases
c. assetsirrcrease;
liabilitiesdecrease
d. no effecton the assets,liabilities,or owner'sequity
9. Land,originallypurchasedfor S20,000,is sold for $75,000in cash.What is the effectof the saleon the
accounting
equation?
a. assetsincrease$75,000;owner'sequity increases
$75,000
b. assetsincrease
$55,000;owner'sequityincreases
$55,000
c. assetsincrease$75,000;liabilitiesdecrease
$20,000;owner'sequity increases
$55,000
d. assetsincrease$20,000;no changefor liabilities;owner'sequity increases
$75,000
10. Allen Marks is tlie soleowner and operatorof GreatMarks Company.As of the end of its accountingperiod,
December31,2009,GreatMarks Companyhasassetsof $940,000and liabilitiesof $300,000.During 2010,
Allen Marks investedan additional$65,000and withdrew$45,000from the business.What is the amountof
net incomedLrring
2010,assuming
thatas of December
3 l, 2010,assetswere$995,000,
and liabilitieswere
$270,000?
a. $ 65,000
b. $ 50,000
c . $1 0 5 , 0 0 0
d. $370,000
11. RamierezCompanyreceivedtheir first electricbill in the amountof $60 which will be paid nextmonth.
How will this transactionaffectthe accountingequation?
a. IncreaseLiabilities(AccountsPayable)and decrease
Owner's Equity (Utilities Expense)
b. lncreaseLiabilities(AccountsReceivable)and decrease
Owner's Equity (Utilities
Expense)
c. DecreaseAssets(Cash)and decreaseLiabilities(AccountsPayable)
d. Decrease
Assets(Cash)and decrease
Owner's EqLrity(Utilities Expense)
Name:
ID: A
12' If the owner wantedto know how money flowed into and out of the company,what financial statementwould
sheuse?
a. Income Statement
b. Statementof CashFlows
c. BalanceSheet
d. None are correct.
13. Accountsare classifiedin the ledger
a. chronologically
b. alphabetically
c. irr accordance
with their appearance
in the financialstatements
d. so that accountsusedmost often are listed first
14, Which of the following accountsis an owner'sequity account?
a. Cash
b. AccountsPayable
c. PrepaidInsurance
d. RossMorris, Capital
15. The grossincreases
in owner'sequity attributableto businessactivitiesare called
a. assets
b. liabilities
c. revenues
d. net income
16. A debitmay signify a(n)
a. decreasein assetaccounts
b. decreasein liability accounts
c. increasein the capitalaccount
d. decreasein the drawingaccount
17. In which of the following types of accountsare increasesrecordedby debits?
a. assets,liabilities
b. drawing,liabilities
c. expenses,liabilities
d. assets,expenses
I 8. In which of the following typesof accountsare decreases
recordedby credits?
a. liabilities
b. owner'scapital
c. drawing
d. revenues
Name:
ID: A
19. Which of the following entriesrecordsthe investmentof cashby Ron York, owner of a proprietorship?
a. debit Ron York, Capital;creditAccountsReceivable
b. debit Cash;creditRon York, Capital
c. debit Ron York, Drawing; creditCash
d. debitCash;credit Ron York, Drawing
20. Whichof the followingentriesrecordsthe acquisition
of equiprnent
on account?
a. Equipment,
debit;AccountsPayable,
credit
b, Equipment,
debit;Cash,credit
c. AccountsPayable,
debit;Equiprnent,
credit
d, AccountsPayable,debit;NotesPayable,
credit
21. Which of the following is not a correctrule of debitsand credits?
a. assets,expensesand withdrawalsare increasedby debits
b. assetsare decreased
by creditsand havea normaldebit balance
c. liabilities,revelluesand owner'sequityare increasedby credits
d. the normalbalancefor revenuesand expensesis a credit
22. The chartof accountsis designedto
a. alphabetized
the accountsto makereadingeasierfor its financialstatementusers.
b. analyzethe accot"tnts
and organizethem in orderof dollar amountto simplify the
accountinginformationfor users.
c. summarizethe transactions
and determinetheir endingbalances.
d. meetthe infonnationneedsof a companyand otherfinarrcialstatementusers.
23. Of the following which is true aboutassets
a. Assetsinch"rde
physicaland intangibleassets.
b. Assetsincludeonly physicalassets.
c. Assetsare ownedsolely by the owner of the company
d. Assetsare the resultof sellingproductsor servicesto cllstomers.
24. Which of the following groupof accountsare increased
with a debit?
a. assets,
liabilities,owner'sequity
b. assets,drawing,expenses
c. assets,revenues,expenses
d. assets,
Iiabilities,revenues
25. Which of the following groupof accountsincreasewith a credit?
a. Capital,revetlLles,
expenses
b. Assets,capital,revenlles
c. Liabilities,capital,revenues
d. None of these
Name:
ID: A
26.
March
6
Cash
UnearnedFees
375
375
?2??????????
a.
b.
c.
d.
Receivedcashfor servicesperfonned
Receivedcashfor servicesto be perfonnedin the future.
Paidcashin advancefor servicesto be done.
Paidcashfor servicesto be performed.
27. The postingprocesswill includethe transferof the following informationfrom thejournal to the account.
a. date,amourrt(debit or credit)
b. date,amount(debit or credit),journal pagenumber
c. alrouut (debitor credit),accountnumber
d. date,amount(debitor credit)accountnumber
28. The postreferencecolumnsare usedto tracetransactions
from thejournalto the accounts.What will be
postedon the postreference
columnof (a) the.iournaland
(b) on the account?
a. (a) the arror,rnt
of the debit or credit(b) tlre.loLrrrral
pagenurnber
b. (a) thejournal pagenumber(b) the dateof the transaction
c. (a) thejournal pagenumber,(b) tlie accountnumber
d. (a) the accountnumber,(b) thejournal pagenumber
29. Whichof the followingerrors,eachconsidered
individually,wouldcausethe trial balancetotalsto be
unequal?
a. a transactionwas not posted
b. a paynlentof$67 for insurance
was postedas a debitof$42 to PrepaidInsurance
anda
creditof $42 to Cash
c . a p a y m e n t o$f l , 3 l l t o a c r e d i t o r w a s p o s t e d a s a d e b i t$o3f, l l l t o A c c o u n t s P a y a b l e
anda debitof $31I to AccountsReceivable
d. cashreceivedfrom customerson accountwas postedas a debit of $680 to Cashand a
creditof $680 to AccountsPayable
30. All of the following statements
regardinga horizontalarralysisare true except:
a. A lrorizorrtalanalysisis usedto comparearriterr itr a currentstatementwith the same
item in prior statements.
b. A horizontalarralysiscan be performedon a balancesheetand incomestatement,
but not
on a statementof cashflows.
c. If FeesEarnedin 2009 is $150,000and FeesEarnedin 2010 is $187,500,
a horizontal
arralysis
will indicatea25o/oincrease
period.
overthis
d. Whentwo statementare comparedin horizontalanalysis,the earlierstatementis usedas
the basefor computingthe amountand the percentof change.
3 l. The revenuerecognitionconcept
a. is in not in conflict with the cashmethodof accor.rnting
b. deternrines
whetrrevetrueis creditedto a revenueaccoLlut
c. statesthat revenlreis not recordeduntil the caslris received
d. controlsall revenuereportingfor the cashbasisofaccounting
Name:
ID: A
32. Deferredexpenseshave
a. not yet beenrecordedas expensesor paid
b. beenrecordedas expensesand paid
c. beenincurredand paid
d. not yet beenrecordedas expenses
33. Deferredreveulleis revenuethat is
a. earnedand the cashhas beenreceived
b. earnedbut the cashhasnot beenreceived
c. not earnedand the cashhasnot beenreceived
d. not earnedbut the cashhas beenreceived
34. Adjusting entriesaffect at leastone
a. incomestatementaccountand one balancesheetaccount
b. revenueand the drawingaccount
c. assetand one owner'sequityaccount
d. revenLle
and oue capitalaccount
35. Whichof the followingis an exampleof accruedrevenue?
a. Swirnmingpool cleaningthat hasbeenfor threemonthsin advance.
b. Swimmingpool cleaningthat lrasbeenprovidedbut hasnot beenbilled or paid.
c. An agreementhas been signedfor swimming pool cleaningfor the next three months.
d. Swimmingpool cleaningthat hasbeenprovidedand paid on the sameday.
36. Which accountwould normally4! requirean adjustingentry?
a. WagesExpense
b. AccouutsReceivable
c. AccumulatedDepreciation
d. Smitli,Capital
37. The balancein the office suppliesaccountorrJune I was $6,300,suppliespurchasedduringJunewere
$3,100,and the supplieson handat June30 were $2,500. The amountto be usedfor the appropriate
adjustingentry is
a. $3,700
b . $I 1 , 9 0 0
c. $5.700
d. $6,900
38. Ifthere is a balancein the unearnedsubscriptions
accountafter adjustingentriesare made,it represents
a(n)
a. deferral
b. accrual
c, drawing
d. revenue
39. Unearnedrent, representingrent for the next six months'occupancy,would be reportedon the landlord's
balancesheetas a(n)
a. asset
b. liability
c. capitalaccount
d. revenlle
Name:
ID: A
40. What is the purposeof the adjustedtrial balance?
a. to verify that all of tlie adjustingentrieshavebeenposted
b. to verify tlratthe net income<loss>is correctlyreported
c. to verify that no adjustingjournal entry hasbeenornitted.
d. to verify thanhe debitsand creditsbalance
41. Round-tripping
is when
a. a sellingcol'ltpanysellsto a customercompanywith hLrgediscounts.
b. a sellingcompanypretendsto sell to a fictitiouscompanywith the intentof inflating
revenues
c. a sellingcompanylendsmoneyto a customercompanyto increaseassets.
d. a sellingcompanylendsmoneyto a customercompanyto be usedto purchasegoods
from the sellingcompany.
Usetlte following informationin tlie adjustedtrial balancefor StocktonCompanyto answerthe following
questious.
StocktonComoanv
AdiustedTrial Balance
For the Year endedDecember3 2 0 1 0
Cash
AccountsReceivable
PrepaidExpenses
Equipment
AccumulatedDepreciation
AccountsPayable
NotesPayable
Bob Steely,Capital
Bob Steelv.Withdrawals
FeesEarned
WagesExperrse
RentExoense
UtilitiesExperrse
r3.700
$ r.r00
r.900
4,200
12,940
790
8,750
2.500
1.960
775
250
Depreciatiou
Expense
M iscellaneousExperrse
Totals
A'
$ 6.030
2,100
700
Determine
thetotalliabilitiesfor theperiod.
a . $1 , 9 0 0
b. $6,100
c. $4,200
d . $1 9 , 0 4 0
85
$28,890
$28,890
Name:
ID: A
43. Balancesheetaccounts
a. representarnountsaccumulatedduringa specificperiodof tirne
b. are calledreal accour.rts
c. havezero balancesafter tlreclosingentrieshavebeenposted
d. areequalto assetsand liabilities
44. Whichof the followingaccountgroLrps
areall considered
nominalaccounts?
a. Cash.FeesEarned.UnearnedRevenues
b. PrepaidExpenses,UnearnedRevenues,
FeesEarned
c. CapitalAccount,DrawingAccount,IncomeSumntary
d. DrawingAccount,FeesEarned,Rent Expense
4 5 . C l o s i n ge n t r i e s
a. neednot be-ioLrrnalized
if adjustingentriesareprepared
b. neednot be postedif the financialstaternents
are preparedfrom the work slieet
c. are not neededifadjLrstingentriesare prepared
d. mustbejournalizedand posted
46. Which of the accountsbelow would be closedby postinga debitto the account?
a. UnearnedRevenue
b. FeesEarned
c. JoslrMorton, Drawing
d. RentE,xpense
47. The entryto closethe appropriateinsuranceaccoLult
at the end of the accountingperiodis
a. debitInconreSummary;creditPrepaidInsurance
b. debitPrepaidInsurance;
creditIncorneSumrnary
c. debit InsuranceExpense;credit lncomeSumrnary
d. debitIncomeSumrnary;credit InsuranceExpense
48. The following are stepsto the accountingcycle. Of the following, which stepshouldbe donefirst?
a. Closingentriesarejournalizedand postedto the ledger.
b. Transactions
are postedto the ledger,
c. Ad.justing
entriesarejor,rrrralized
and postedto the ledger.
d, Financialstatements
are prepared.
49. The naturalbusiness
year
year
a. is a fiscal
that endswhen businessactivitiesare at its lowestpoint.
b. is a calendaryearthat endswhen businessactivitiesare at its lowestpoint.
c. is a fiscalyeartliat endswherrbusinessactivitiesare at its highestpoint.
d. is a calendaryearthat endswhen businessactivitiesare at its highestpoint,
50. Which of the itemsbelow doesg.! appearon the work sheet?
a. adjustingentries
b. the unad.jr"rsted
trial balance
c. closingentries
d. the drawinsaccount
TD:A
Testl- Chapterl234
AnswerSection
MULTIPLE CHOICB
1. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPABB-lndustry
2. ANS: C
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPABB-lndustry
3. ANS: C
PTS: I
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measuremenr
4. ANS: B
PTS: 1
DIF: Difflcult
NAT: AACSBAnalyticI AICPAFN-Measurement
5. ANS: C
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurernent
6. ANS: A
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPAFN-Measurement
7. ANS: B
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticIAICPAFN-Measurement
8. ANS: A
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
9. ANS: B
PTS: I
DIF: DifficLrlt
NAT: AACSBAnalyticIAICPAFN-Measurement
10. ANS: A
PTS: I
DIF: DifficLrlt
NAT: AACSBAnalyticIAICPAFN-Measuremerrt
I l. ANS: A
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticIAICPA FN-Measurement
12. ANS: B
PTS: I
DIF: Easy
NAT: AACSBAnalyticIAICPAFN-Measurernent
13. ANS: C
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
14. ANS: D
PTS: I
DIF: Easy
NAT: AACSBAnalyticIAICPAFN-Measurenrent
15. ANS: C
PTS: I
DIF: Easy
NAT: AACSBAnalyticI AICPAFN-Measurement
16. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPA FN-Measurernent
17. ANS: D
PTS: I
DIF: Easy
NAT: AACSBAnalyticIAICPA FN-Measurement
18. ANS: C
PTS: I
DIF: E,asy
NAT: AACSBAnalyticIAICPAFN-Measurement
19. ANS: B
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
20. ANS: A
PTS: I
DIF: Moderate
NAT: AACSBAnalvticIAICPA FN-Measurement
OBJ: 01-01
OBJ: 0l-01
OBJ: 01-02
OBJ: 01-02
OBJ: 0l-02
OBJ: 01-04
OBJ: 0l-04
OBJ: 0l-04
OBJ: 0l-04
OBJ: 01-04
OBJ: 0l-04
OBJ: 0l-05
OBJ: 02-01
OBJ: 02-01
OBJ: 02-01
OBJ: 02-02
OBJ: 02-02
OBJ: 02-02
OBJ: 02-02
OBJ: 02-02
ID: A
21. ANS: D
PTS: I
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurement
22. ANS: D
PTS: I
DIF: Difflcult
NAT: AACSBAnalyticI AICPAFN-Measurement
23. ANS: A
PTS: I
DIF: Difficult
NAT: AACSBAnalyticIAICPA FN-Measuremenr
24. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPA FN-Measurement
25. ANS: C
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
26. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
27. ANS: B
PTS: 1
DIF: DifficLrlt
NAT: AACSBAnalyticIAICPAFN-Measurenrent
28. ANS: D
PTS: 1
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurement
29. ANS: C
PTS: I
DIF: Difficult
NAT: AACSBAnalyticIAICPAFN-Measurernent
30. ANS: B
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticIAICPAFN-Measurement
3I . A N S : B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
32. ANS: D
PTS: I
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurement
33. ANS: D
PTS: I
DIF: Difficult
NAT: AACSBAnalyticIAICPAFN-Measurement
34. ANS: A
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAfCPA FN-Measurement
35. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
36. ANS: D
PTS: 1
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurenrent
37. ANS: D
PTS: I
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurement
38. ANS: A
PTS: 1
DIF: Easy
NAT: AACSBAnalyticIAICPAFN-Measurement
39. ANS: B
PTS: I
DIF: Easy
NAT: AACSBAnalyticI AICPAFN-Measurement
40. ANS: D
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
41. ANS: D
PTS: I
DIF: Difficult
NAT: AACSBAnalyticI AICPAFN-Measurement
42. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
43. ANS: B
PTS: 1
DIF: Moderate
NAT: AACSBAnalvticI AICPAFN-Measurement
OBJ: 02-02
OBJ: 02-01
oBJ: 02.01
OBJ: 02-02
OBJ: 02-02
OBJ: 02-02
OBJ: 02-03
OBJ: 02-03
OBJ: 02-04
OBJ: 02-04
OBJ: 03-01
OBJ: 03-01
OBJ: 03-01
OBJ: 03-01
OBJ: 03-01
OBJ: 03-02
OBJ: 03-02
OBJ: 03-02
OBJ: 03-02
OBJ: 03-04
OBJ: 04-02
OBJ: 04-02
OBJ: 04-03
ID: A
44. ANS: D
PTS: I
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measuremenr
45. ANS: D
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticI AICPAFN-Measurement
46. ANS: B
PTS: I
DIF: Moderate
NAT: AACSB AnalyticI AICPA FN-Measurement
47. ANS: D
PTS: 1
DIF: Moderate
NAT: AACSBAnalyticIAICPA FN-Measurement
48. ANS: B
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPAFN-Measurement
49. ANS: A
PTS: I
DIF: Moderate
NAT: AACSBAnalyticIAICPABB-lndustry
50. ANS: C
PTS: I
DIF: Moderate
NAT: AACSBAnalvticIAICPAFN-Measurement
OBJ: 04-03
OBJ: 04-03
OBJ: 04-03
OBJ: 04-03
OBJ: 04-04
OBJ: 04-06
OBJ: 04-APP