Question 1

Deferred expenses (prepaid expenses)  are initially recorded as assets, but over time are expected to become

Accepted Answer

A)   liabilities.
B)   other assets.
C)   revenues.
D)   expenses.E) None of the above
F) All of the above

Question 2

A company makes a deferral adjustment that reduces a liability. This must mean:

Accepted Answer

A)   an asset account is decreasing by the same amount.
B)   an expense account is increasing by the same amount.
C)   a revenue account is increasing by the same amount.
D)   a different liability account is decreasing by the same amount.E) A) and D)
F) A) and C)

Question 3

Which of the following is done last at the end of the year?

Accepted Answer

A)   Prepare adjusting journal entries.
B)   Prepare an adjusted trial balance.
C)   Prepare closing journal entries.
D)   Prepare a post-closing trial balance.E) A) and D)
F) A) and C)

Question 4

One major difference between deferral and accrual adjustments is:

Accepted Answer

A)   accrual adjustments are influenced by estimates of future events and deferral adjustments are not.
B)   deferral adjustments are made before taxes and accrual adjustments are made after taxes.
C)   deferral adjustments are made monthly and accrual adjustments are made annually.
D)   accounts affected by an accrual adjustment always go in the same direction (i.e., both accounts are increased or both accounts are decreased)  and accounts affected by a deferral adjustment always go in opposite directions.E) A) and B)
F) A) and D)

Question 5

What is the total of the credit column of the adjusted trial balance?

Accepted Answer

A)   $24,700
B)   $37050
C)   $74,900
D)   $37,450E) B) and C)
F) C) and D) D

Question 6

You mistakenly include a contra account of $20,000 in the same column of your trial balance as the account it offsets. All other things equal, your debit and credit column totals will differ by $40,000.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding financial statements and the trial balance is correct?

Accepted Answer

A)   Financial statements are prepared only after the trial balance has shown that debits equal credits.
B)   A post-closing trial balance should be prepared before temporary accounts are closed.
C)   An adjusted trial balance reflects the amount of retained earnings to be shown on the Balance Sheet.
D)   A post-closing trial balance lists all the accounts that are shown on the Income Statement.E) A) and B)
F) A) and D)

Question 8

If Salaries payable were recorded on December 31, and these salaries were paid on the following January 5, the entry on January 5 would be:

Accepted Answer

A)   Debit to Salaries Expense and Credit to Cash.
B)   Debit to Salaries payable and Credit to Cash.
C)   Debit to Cash and Credit to Salaries Payable.
D)   Debit to Cash and Credit to Salaries Expense.E) B) and D)
F) B) and C)

Question 9

Which of the following statements is true?

Accepted Answer

A)   Expenses are listed before revenues on the income statement.
B)   Operating income is listed before net income on the income statement.
C)   The income statement is prepared after the balance sheet.
D)   Dividends declared are listed on the income statementE) All of the above
F) None of the above

Question 10

On the balance sheet, accumulated depreciation is:

Accepted Answer

A)   added to property and equipment.
B)   subtracted from property and equipment.
C)   added to total liabilities.
D)   subtracted from total liabilities.E) B) and C)
F) A) and B)

Question 11

Which of the following is the usual last step in the accounting process?

Accepted Answer

A)   Preparing the adjusted trial balance.
B)   Preparing the financial statements.
C)   Preparing a post-closing trial balance.
D)   Preparing an unadjusted trial balance.E) A) and D)
F) All of the above

Question 12

A company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required?

Accepted Answer

A)   An accrual adjustment.
B)   A comparative adjustment.
C)   A deferral adjustment.
D)   A matching adjustment.E) None of the above
F) A) and C)

Question 13

A post-closing trial balance should include only permanent accounts.

Accepted Answer

A) True 
 B)False

Question 14

At the end of the month, the adjusting journal entry to record the use of supplies would include:

Accepted Answer

A)   A debit to supplies and a credit to expenses.
B)   A credit to supplies and a debit to expenses.
C)   A debit to supplies and a credit to revenue.
D)   A credit to supplies and a debit to cash.E) A) and B)
F) A) and C) B

Question 15

Your business declared a $200 dividend on August 31, payable in September. On August 31, which of the following journal entries would be made?

Accepted Answer

A)   Debit Dividends Receivable for $200; credit Dividends Declared for $200.
B)   Debit Dividends Declared for $200; credit Dividends Payable for $200.
C)   Debit Dividends Payable for $200; credit Dividends Declared for $200.
D)   Debit Dividends Declared for $200; credit Dividends Receivable for $200.E) All of the above
F) C) and D)

Question 16

What is the amount to be reported on the balance sheet as Prepaid Insurance at December 31, 2011?

Accepted Answer

A)   $0
B)   $2,000
C)   $6,000
D)   $18,000E) None of the above
F) C) and D) B

Question 17

The new CEO of the company takes over on December 10, 2010. He is promised a significant bonus for every percent he can raise net income in 2011 over 2010 results. Which of the following adjustments would aid him in making 2011 results look the most impressive?

Accepted Answer

A)   Allocating more of the cost of machinery to depreciation expense in 2011 than in 2010.
B)   Prepaying 2012 expenses in 2011.
C)   Deferring 2011 expenses to 2012 and accruing revenues in 2011 that don't exist.
D)   Recording 2011 revenue as unearned revenue.E) A) and B)
F) B) and C)

Question 18

Declared dividends:

Accepted Answer

A)   are an expense of doing business.
B)   are not a legal obligation that a company must pay.
C)   are a way to distribute the company's profits to its stockholders.
D)   are not recorded as a liability because they are not an expense of doing business.E) B) and D)
F) A) and B)

Question 19

Which of the following is not a true statement?

Accepted Answer

A)   Expenses are closed with a credit.
B)   Revenues are closed with a debit.
C)   Dividends are closed with a credit.
D)   Retained earnings are closed with a debit.E) A) and B)
F) B) and D)

Question 20

Which of the following accounts does not normally have a credit balance on an adjusted trial balance?

Accepted Answer

A)   Accumulated depreciation.
B)   Dividends declared.
C)   Accounts payable.
D)   Contributed capital.E) A) and B)
F) A) and C)

Exam 4: Adjustments, Financial Statements, and Financial Results

Deferred expenses (prepaid expenses) are initially recorded as assets, but over time are expected to become

Correct AnswerverifiedShow Answer

A company makes a deferral adjustment that reduces a liability. This must mean:

Correct AnswerverifiedShow Answer

Which of the following is done last at the end of the year?

Correct AnswerverifiedShow Answer

One major difference between deferral and accrual adjustments is:

Correct AnswerverifiedShow Answer

What is the total of the credit column of the adjusted trial balance?

Correct AnswerverifiedD

You mistakenly include a contra account of $20,000 in the same column of your trial balance as the account it offsets. All other things equal, your debit and credit column totals will differ by $40,000.

Correct AnswerverifiedShow Answer

Which of the following statements regarding financial statements and the trial balance is correct?

Correct AnswerverifiedShow Answer

If Salaries payable were recorded on December 31, and these salaries were paid on the following January 5, the entry on January 5 would be:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

On the balance sheet, accumulated depreciation is:

Correct AnswerverifiedShow Answer

Which of the following is the usual last step in the accounting process?

Correct AnswerverifiedShow Answer

A company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required?

Correct AnswerverifiedShow Answer

A post-closing trial balance should include only permanent accounts.

Correct AnswerverifiedShow Answer

At the end of the month, the adjusting journal entry to record the use of supplies would include:

Correct AnswerverifiedB

Your business declared a $200 dividend on August 31, payable in September. On August 31, which of the following journal entries would be made?

Correct AnswerverifiedShow Answer

What is the amount to be reported on the balance sheet as Prepaid Insurance at December 31, 2011?

Correct AnswerverifiedB

The new CEO of the company takes over on December 10, 2010. He is promised a significant bonus for every percent he can raise net income in 2011 over 2010 results. Which of the following adjustments would aid him in making 2011 results look the most impressive?

Correct AnswerverifiedShow Answer

Declared dividends:

Correct AnswerverifiedShow Answer

Which of the following is not a true statement?

Correct AnswerverifiedShow Answer

Which of the following accounts does not normally have a credit balance on an adjusted trial balance?

Correct AnswerverifiedShow Answer

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D

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B

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B

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