Question 1

A trial balance prepared after the closing entries have been posted would show a zero balance in which one of the following accounts?

Accepted Answer

A)   Supplies.
B)   Accounts receivable.
C)  Accumulated depreciation.
D)  Income tax expense.E) A) and B)
F) A) and C)

Question 2

On December 31, 2014, Krug Company reported pretax income of $120,000 prior to the following adjusting entries: Depreciation expense: $31,000.
Accrued service revenues: $29,000.
Accrued expenses: $12,000.
Used insurance: $9,000; the insurance was initially recorded as prepaid.
Rent revenue earned: $7,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue.
How much is Krug's pretax income after adjusting entries?

Accepted Answer

A)   $113,000.
B)   $104,000.
C)  $106,000.
D)  $128,000.E) B) and D)
F) None of the above

Question 3

Accrued revenues are revenues that have been earned, but the customer has not yet paid for the goods or services.

Accepted Answer

A) True 
 B)False

Question 4

Modern Mother Magazine (MMM) has received cash subscriptions on April 1, 2014 in the amount of $3,600,000 for the next three years. The year-end for MMM is December 31, 2014. Magazine delivery occurs monthly and started on April 1, 2014. These were the only subscription sales for the year.
Required:
Answer the following questions for the year ended December 31, 2014.
A. What amount of cash should be reported for the year on the statement of cash flows?
B. What amount of subscriptions revenue should be reported on the income statement?
C. What amount would be reported as unearned subscriptions revenue on the balance sheet as of December 31, 2014?

Accepted Answer

A. $3,600,000. B. $9...

Question 5

Which of the following correctly describes the following adjusting journal entry? Depreciation expense
 \quad Accumulated depreciation

Accepted Answer

A)   Total assets decrease.
B)   Liabilities will increase.
C)  Stockholders' equity is not affected.
D)  Net income increases. E) A) and B)
F) B) and C)

Question 6

Top Company's 2014 sales revenue was $200,000 and 2013 sales revenue was $180,000. Top's total assets as of December 31, 2014 were $150,000 and total assets as of January 1, 2014 were $130,000. What is Top's total asset turnover ratio?

Accepted Answer

A)   1.48
B)   1.33
C)  1.36
D)  1.43E) A) and B)
F) None of the above

Question 7

Which of the following is a false statement about the unadjusted trial balance?

Accepted Answer

A)   It is not a financial statement for external reporting purposes.
B)   It provides data in a convenient form for preparing the adjusting entries and financial statements.
C)  It provides a check of the equality of the debits and credits of the ledger accounts after transactions have been journalized and posted.
D)  It provides a listing of balance sheet accounts only.E) B) and C)
F) All of the above

Question 8

Accounts that start a new accounting period with zero balances are referred to as temporary accounts and include both balance sheet and income statement accounts.

Accepted Answer

A) True 
 B)False

Question 9

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Accepted Answer

A) True 
 B)False

Question 10

What does the total asset turnover ratio measure and how is it calculated? Give two examples of transactions that decrease the ratio.

Accepted Answer

The total asset turnover ratio measures ...

Question 11

Which of the following does not correctly describe the following adjusting journal entry? Salaries expense
 \quad Salaries payable

Accepted Answer

A)   Total assets do not change.
B)   The transaction is an example of an accrual.
C)  Stockholders' equity decreases.
D)  Net income is not affecteD.This journal entry increases expenses and liabilities; the increase in expenses decreases net income, retained earnings, and thus stockholders' equity. E) B) and C)
F) All of the above

Question 12

Morgan Company used supplies in the amount of $2,000. Due to an error in posting to the general ledger, the supplies account was credited for only $200 while supplies expense was debited for $2,000. During which phase of the accounting cycle would this error be first discovered?

Accepted Answer

A)   Analysis of the supplies purchase transaction.
B)   Closing the books.
C)  Preparation of the adjusted trial balance.
D)  Preparation of the income statement.E) A) and D)
F) B) and C)

Question 13

Which of the following correctly describes the accounts reported on the post-closing trial balance?

Accepted Answer

A)   They include permanent and temporary accounts with non-zero balances.
B)   The ending retained earnings balance includes the current period net income.
C)  They include only temporary account balances.
D)  They do not include stockholders' equity account balances.E) All of the above
F) A) and B)

Question 14

The journal entry to adjust the unearned revenue account when revenues are earned results in an increase in assets and a decrease in liabilities.

Accepted Answer

A) True 
 B)False

Question 15

At December 31, 2014, the following adjusting entries were recorded in the accounts of ABD Company:
There were no other accrued receivables or payables on ABD's books in 2014.
Required:
Calculate the balances in the following accounts immediately after the closing entries were posted.

Accepted Answer

The answer of At December 31, 2014, the following adjusting...

Question 16

Which of the following does not correctly describe the following adjusting journal entry? Interest receivable
 \quad Investment income

Accepted Answer

A)   Total assets increase.
B)   The transaction is an example of an accrual.
C)  Stockholders' equity decreases.
D)  Net income increases. E) B) and C)
F) A) and C)

Question 17

What is the effect on the financial statements when a company fails to adjust the prepaid insurance expense account at year-end for insurance coverage that has been used?

Accepted Answer

A)   Net income is overstated and stockholders' equity is understated.
B)   Expenses are understated and stockholders' equity is understated.
C)  Expenses are understated and net income is understated.
D)  Net income is overstated and assets are overstateD.Failure to reduce prepaid insurance expense to reflect insurance coverage that has been used results in the prepaid asset account being overstated and the insurance expense account being understated. The result is that net income and assets are overstated.E) B) and D)
F) B) and C)

Question 18

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

Accepted Answer

A)   Total assets do not change.
B)   Net income decreases.
C)  Liabilities are decreased.
D)  Stockholders' equity increases.E) C) and D)
F) B) and C)

Question 19

Which of the following journal entries is used to record a deferral? A. Interest expense
 \quad Interest payable
B. Accounts receivable
 \quad Service revenues
 \quad C. Salaries expense
Salaries payable
D. Cash
 \quad Unearned revenue

Accepted Answer

A)   Option A
B)   Option B
C)  Option C
D)  Option D E) A) and B)
F) B) and C)

Question 20

Which of the following correctly describes the closing entry process?

Accepted Answer

A)   The closing process reduces the balances in the permanent accounts to zero at the end of each period.
B)   The closing entries are usually prepared prior to the adjusted trial balance.
C)  The closing process creates a zero balance in all temporary accounts at the end of each period.
D)  The closing process creates a zero balance at the end of each period for all accounts on the year-end trial balance.E) C) and D)
F) All of the above

Exam 4: Adjustments, Financial Statements, and the Quality of Earnings

Morgan Company used supplies in the amount of $2,000. Due to an error in posting to the general ledger, the supplies account was credited for only $200 while supplies expense was debited for $2,000. During which phase of the accounting cycle would this error be first discovered?

Correct Answer
verified

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Correct Answer
verified

Accrued revenues are revenues that have been earned, but the customer has not yet paid for the goods or services.

Correct Answer
verified

What is the effect on the financial statements when a company fails to adjust the prepaid insurance expense account at year-end for insurance coverage that has been used?

Correct Answer
verified

At December 31, 2014, the following adjusting entries were recorded in the accounts of ABD Company: There were no other accrued receivables or payables on ABD's books in 2014. Required: Calculate the balances in the following accounts immediately after the closing entries were posted.

Correct Answer
verified

Which of the following is a false statement about the unadjusted trial balance?

Correct Answer
verified

Correct Answer
verified
A. $3,600,000. B. $9...
View Answer

Which of the following correctly describes the following adjusting journal entry? Depreciation expense $\quad$ Accumulated depreciation

Correct Answer
verified

Which of the following correctly describes the accounts reported on the post-closing trial balance?

Correct Answer
verified

Which of the following does not correctly describe the following adjusting journal entry? Interest receivable $\quad$ Investment income

Correct Answer
verified

Which of the following journal entries is used to record a deferral? A. Interest expense $\quad$ Interest payable B. Accounts receivable $\quad$ Service revenues $\quad$ C. Salaries expense Salaries payable D. Cash $\quad$ Unearned revenue

Correct Answer
verified

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

Correct Answer
verified

Correct Answer
verified

A trial balance prepared after the closing entries have been posted would show a zero balance in which one of the following accounts?

Correct Answer
verified

Which of the following correctly describes the closing entry process?

Correct Answer
verified

Accounts that start a new accounting period with zero balances are referred to as temporary accounts and include both balance sheet and income statement accounts.

Correct Answer
verified

Top Company's 2014 sales revenue was $200,000 and 2013 sales revenue was $180,000. Top's total assets as of December 31, 2014 were $150,000 and total assets as of January 1, 2014 were $130,000. What is Top's total asset turnover ratio?

Correct Answer
verified

The journal entry to adjust the unearned revenue account when revenues are earned results in an increase in assets and a decrease in liabilities.

Correct Answer
verified

What does the total asset turnover ratio measure and how is it calculated? Give two examples of transactions that decrease the ratio.

Correct Answer
verified
The total asset turnover ratio measures ...
View Answer

Which of the following does not correctly describe the following adjusting journal entry? Salaries expense $\quad$ Salaries payable

Correct Answer
verified

Exam 4: Adjustments, Financial Statements, and the Quality of Earnings

Morgan Company used supplies in the amount of $2,000. Due to an error in posting to the general ledger, the supplies account was credited for only $200 while supplies expense was debited for $2,000. During which phase of the accounting cycle would this error be first discovered?

Correct AnswerverifiedShow Answer

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Correct AnswerverifiedShow Answer

Accrued revenues are revenues that have been earned, but the customer has not yet paid for the goods or services.

Correct AnswerverifiedShow Answer

What is the effect on the financial statements when a company fails to adjust the prepaid insurance expense account at year-end for insurance coverage that has been used?

Correct AnswerverifiedShow Answer

At December 31, 2014, the following adjusting entries were recorded in the accounts of ABD Company: There were no other accrued receivables or payables on ABD's books in 2014. Required: Calculate the balances in the following accounts immediately after the closing entries were posted.

Correct AnswerverifiedShow Answer

Which of the following is a false statement about the unadjusted trial balance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. $3,600,000. B. $9...View AnswerShow Answer

Which of the following correctly describes the following adjusting journal entry? Depreciation expense \quad Accumulated depreciation

Correct AnswerverifiedShow Answer

Which of the following correctly describes the accounts reported on the post-closing trial balance?

Correct AnswerverifiedShow Answer

Which of the following does not correctly describe the following adjusting journal entry? Interest receivable \quad Investment income

Correct AnswerverifiedShow Answer

Which of the following journal entries is used to record a deferral? A. Interest expense \quad Interest payable B. Accounts receivable \quad Service revenues \quad C. Salaries expense Salaries payable D. Cash \quad Unearned revenue

Correct AnswerverifiedShow Answer

Which of the following correctly describes the effects of initially recording prepaid insurance expense when cash is paid to purchase an insurance policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A trial balance prepared after the closing entries have been posted would show a zero balance in which one of the following accounts?

Correct AnswerverifiedShow Answer

Which of the following correctly describes the closing entry process?

Correct AnswerverifiedShow Answer

Accounts that start a new accounting period with zero balances are referred to as temporary accounts and include both balance sheet and income statement accounts.

Correct AnswerverifiedShow Answer

Top Company's 2014 sales revenue was $200,000 and 2013 sales revenue was $180,000. Top's total assets as of December 31, 2014 were $150,000 and total assets as of January 1, 2014 were $130,000. What is Top's total asset turnover ratio?

Correct AnswerverifiedShow Answer

The journal entry to adjust the unearned revenue account when revenues are earned results in an increase in assets and a decrease in liabilities.

Correct AnswerverifiedShow Answer

What does the total asset turnover ratio measure and how is it calculated? Give two examples of transactions that decrease the ratio.

Correct AnswerverifiedThe total asset turnover ratio measures ...View AnswerShow Answer

Which of the following does not correctly describe the following adjusting journal entry? Salaries expense \quad Salaries payable

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A. $3,600,000. B. $9...
View Answer

Which of the following correctly describes the following adjusting journal entry? Depreciation expense $\quad$ Accumulated depreciation

Correct Answer
verified

Correct Answer
verified

Which of the following does not correctly describe the following adjusting journal entry? Interest receivable $\quad$ Investment income

Correct Answer
verified

Which of the following journal entries is used to record a deferral? A. Interest expense $\quad$ Interest payable B. Accounts receivable $\quad$ Service revenues $\quad$ C. Salaries expense Salaries payable D. Cash $\quad$ Unearned revenue

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The total asset turnover ratio measures ...
View Answer

Which of the following does not correctly describe the following adjusting journal entry? Salaries expense $\quad$ Salaries payable

Correct Answer
verified