Deck 3: Processing Data Through the Accounting System

Question 1

The process of transferring data from the general journal to the general ledger is called:

A)Journalizing
B)Ledgerizing
C)Posting
D)Balancing

Answer 1

C

Question 2

Which of the following is a listing of all the account balances at a specific point in time?

A)The balance sheet.
B)The chart of accounts.
C)The general ledger.
D)The trial balance.

Answer 2

D

Question 3

Which of the following is the first step in the accounting cycle?

A)Recognize that a transaction has occurred
B)Prepare a source document
C)Prepare a chart of accounts
D)Journalize a transaction

Answer 3

C

Question 4

Which of the following accounts normally has a debit balance?

A)Accounts payable
B)Retained earnings
C)Land
D)Sales revenue

Question 5

Which of the following accounts would have a balance that carries over from one period to the next?

A)Revenue
B)Insurance expense.
C)Prepaid insurance.
D)Dividends declared.

Question 6

The chart of accounts is:__________________

A)static
B)dynamic
C)not generally useful
D)contains only permanent accounts

Question 7

Which of the following accounts normally has a debit balance?

A)Accumulated amortization
B)Prepaid insurance
C)Accounts payable
D)Common shares

Question 8

Which of the following relationships best expresses the double-entry nature of an accounting system?

A)assets = liabilities
B)assets = debits
C)liabilities = credits
D)debits = credits

Question 9

Which of the following would normally be recorded with an adjusting entry?

A)Sales on account.
B)Payment for supplies bought on account.
C)Wage expense
D)Amortization expense.

Question 10

Which of the following sequences concerning the accounting cycle is correct?

A)Journalize, post, adjusting entries, financial statements
B)Transaction analysis, trial balance, post, adjusted trial balance
C)Post, adjusting entries, closing entries, financial statements
D)Adjusting entries, closing entries, adjusted trial balance, financial statements

Question 11

Which of the following accounts normally has a credit balance?

A)Accumulated amortization
B)Accounts receivable
C)Dividends declared
D)Rent expense

Question 12

Which of the following accounting records is in chronological order?

A)The chart of accounts.
B)The general journal.
C)The general ledger.
D)The income statement.

Question 13

Which of the following statements is true?

A)The normal balance is always on the side of the T account that is increasing.
B)The normal balance is always on the side of the T account that is decreasing.
C)The normal balance is always on the debit side of the T account.
D)The normal balance is always on the credit side of the T account.

Question 14

Which of the following statements regarding the retained earnings account is NOT true?

A)It normally has a credit balance.
B)Its balance is increased by revenues.
C)Its balance is decreased by expenses.
D)Its balance is increased by the declaration of dividends.

Question 15

Which of the following types of accounts appear on the balance sheet and income statement respectively?

Question 16

The process of identifying and recording transactions is called:

A)transaction analysis
B)posting
C)recognizing
D)journalizing

Question 17

Which of the following types of entries is used to reset the temporary accounts to zero and update the balance in the retained earnings?

A)Journal entries
B)Adjusting entries
C)Closing entries
D)Balancing entries

Question 18

A deficit occurs when:

A)Assets exceed liabilities.
B)Expenses exceed revenues for the year.
C)Dividends exceed income for the year.
D)Cumulative expenses and dividends have exceeded income.

Question 19

The right side of a T account is also known as the:

A)debit side.
B)credit side.
C)asset side.
D)liability side.

Question 20

Which of the following accounts normally has a credit balance?

A)Cash
B)Dividends declared
C)Insurance expense
D)Retained earnings

Question 21

Which of the following transactions would involve a debit to an asset account?

A)Recording amortization expense on capital assets.
B)Payment of an accounts payable
C)Payment of a dividend
D)Collection of an accounts receivable

Question 22

Which of the following would cause the trial balance to be out of balance?

A)An entry recorded with only debits
B)An unrecorded entry
C)An entry recorded twice
D)An entry recorded to the wrong accounts

Question 23

When an inventory item that cost $75 is sold on account for $100, which of the following would be included in the journal entry recording the cost of goods sold?

A)Dr.Cash $100
B)Cr.Cost of goods sold $75
C)Cr.Accounts Receivable $100
D)Cr.Inventory $75

Question 24

Which of the following is not part of the accounting cycle?

A)Posting
B)Financial statement analysis
C)Adjusted trial balance
D)Transaction analysis

Question 25

Which of the following would be the closing entry for dividends declared?

A)Dr.Expense summary, Cr.Dividends declared
B)Dr.Retained earnings, Cr.Dividends declared
C)Dr.Dividends declared, Cr.Expense summary
D)Dr.Dividends declared, Cr.Retained earnings

Question 26

The sale of merchandise to a customer partly for cash and partly on account would require which of the following entries?

A)Dr.Accounts receivable, Dr.Cash, Cr.Sales revenue
B)Dr.Cash, Dr.Accounts payable, Cr.Sales revenue
C)Dr.Cash, Cr.Sales revenue
D)Dr.Accounts payable, Dr.Accounts receivable, Cr.Sales revenue

Question 27

Which of the following is not an example of an adjusting entry?

A)Recording unpaid interest at year end relating to an outstanding loan balance at year end
B)Recording amortization on office equipment purchased during the year
C)Recording the gain on the sale of equipment made during the year.
D)Reducing the prepaid rent account for the portion of rent actually used.

Question 28

Which of the following would be the adjusting journal entry to expense prepaid rent for the period?

A)Dr.Prepaid rent, Cr.Rent expense
B)Dr.Rent expense, Cr.Cash
C)Dr.Prepaid rent, Cr.Cash
D)Dr.Rent expense, Cr.Prepaid rent

Question 29

Which of the following is not found on a multi-step income statement?

A)Income taxes payable
B)Gross margin
C)Extraordinary items
D)Discontinued operations

Question 30

A list of all the accounts used by the company in its accounting records is referred to as a:

A)Chart of accounts
B)Adjusted trial balance
C)General journal
D)General ledger

Question 31

Which of the following results in a debit entry to the account identified?

A)Increase in shareholders' equity
B)Recording interest revenue
C)Payment on accounts receivable
D)Decrease in shareholders' equity

Question 32

Which of the following statements about accumulated amortization is NOT true?

A)It is calculated in accordance with the matching principle.
B)It records the portion or how much of the asset has been used up.
C)It is reflected on the balance sheet.
D)It helps determine how much an asset can be sold for.

Question 33

Which of the following would be the adjusting entry to record accrued interest at the end of an accounting period?

A)Dr.Interest expense, Cr.Cash
B)Dr.Interest expense, Cr.Interest payable
C)Dr.Interest payable, Cr.Interest income
D)Dr.Interest payable, Cr.Cash

Question 34

When the board of directors declares and pays a $500 dividend, which of the following would be included in the resulting journal entry?

A)Dr.Retained earnings, Cr.Cash
B)Dr.Cash, Cr.Retained Earnings
C)Dr.Retained Earnings, Cr.Dividends declared
D)Dr.Cash, Cr.Dividends payable

Question 35

An example of a contra asset account is:

A)Accumulated amortization
B)Amortization expense
C)Discount on Bonds Payable
D)Prepaid expenses

Question 36

The purchase of land for a combination of cash and a 15-year note would require which of the following entries?

A)Dr.Land, Dr.Cash, Cr.Long-term note payable
B)Dr.Land, Cr.Cash, Cr.Long-term note payable
C)Dr.Cash, Cr.Long-term note payable, Cr.Land
D)Dr.Land, Dr.Long-term note payable, Cr.Cash

Question 37

Which of the following would be the adjusting journal entry to recognize earned but unpaid wages for the period?

A)Dr.Wages Expense, Cr.Cash
B)Dr.Wages Payable, Cr.Cash
C)Dr.Wages Payable, Cr.Wages Expense
D)Dr.Wages Expense, Cr.Wages Payable

Question 38

Income statements prepared using which basis provide the most information about future cash flows?

A)Actual basis
B)Cash basis
C)Historical basis
D)Accrual basis

Question 39

Which of the following statements about the trail balance is NOT true?

A)Debit balances must equal credit balances.
B)It includes only assets, liability and equity accounts.
C)It is useful for detecting errors.
D)It is an important step in the accounting cycle.

Question 40

The purchase of land for a combination of cash and issuance of shares would require which of the following entries?

A)Dr.Land, Cr.Common shares, Cr.Cash
B)Dr.Cash, Dr.Common shares, Cr.Land
C)Dr.Land, Cr.Cash, Dr.Common Shares
D)Dr.Cash, Cr.Land, Cr.Common shares

Question 41

If a company sold a capital asset in the normal course of its operations, where would the gain be reported on a multi-step income statement?

A)In income from operations
B)In income from non-operating sources
C)In Income from discontinued operations
D)In income from asset dispositions

Question 42

Which income statement format is the most useful for predicting future results and evaluating and analyzing past performance?

A)Classified income statement
B)Single step income statement
C)Unclassified income statement
D)Multi-step income statement

Question 43

Which of the following is not true about earnings per share?

A)Companies with discontinued items must only report EPS on income before such items.
B)Must be reported on the income statement or in the notes accompanying the financial statements.
C)Are calculated using a weighted average of the outstanding shares.
D)In complex situations, financial statements might include up to six EPS calculations.

Question 44

Melrose Corporation's books revealed the following data for the current year:
Net income $50,000
Retained earnings $750,000
Common shares, January 1 25,000 shares
Common shares, December 31 30,000 shares
The earnings per share is:

A)$30.00
B)$2.00
C)$1.82
D)$1.67

Question 45

Which of the following is NOT true about unusual or infrequent events?

A)They may be segmented from other results on the income statement.
B)They are treated the same way as extraordinary items on the income statement
C)These items are often reported with other non-operating items.
D)They include events like labour disputes and organizational restructuring.

Question 46

Which of the following is the proper order of presentation in the current asset section on the balance sheet?

A)Cash, receivables, inventory, temporary investments, prepaid expenses
B)Cash, temporary investments, receivables, inventory, prepaid expenses
C)Cash, inventory, receivables, temporary investments, prepaid expenses
D)Cash, prepaid expenses, inventory, receivables, temporary investments

Question 47

In a classified balance sheet the following is NOT true:

A)The long term assets and liabilities are presented before the short term assets and liabilities.
B)The asset and liability sections are divided into short-term and long-term sections.
C)Shareholders' equity is made up of retained earnings and share capital.
D)The current assets are listed in order of liquidity.

Question 48

Which of the following items would qualify as an extraordinary item?

A)Loss due to earthquake damage to a warehouse in San Francisco, California
B)Loss due to hurricane damage to a building in Toronto, Ontario
C)Loss due to hurricane damage to a hotel in Miami, Florida
D)Loss due to flood damage to a store in New Orleans, Louisiana

Question 49

Which of the following is not a purpose of an income statement?

A)To determine how much money the company owes its suppliers.
B)To aid in the projection of future results.
C)To aid in the assessment of a company's performance over a period of time.
D)To aid in the calculation of earnings per share for the period.

Question 50

Which of the following is the basic formula for earnings per share?

A)Net income ÷ Average number of shares of common shares outstanding
B)Net income ÷ Ending number of shares of common shares outstanding
C)Net income ÷ Beginning number of shares of common shares outstanding
D)Net income ÷ Total number of shares of common shares outstanding

Question 51

Which of the following accounts could be included in both the "income from operations" and the "income from non-operating sources" sections of the income statement?

A)Interest expense
B)Amortization expense
C)Bad debt expense
D)Insurance expense

Question 52

GAAP requires two items be shown on the income statement after income tax expense.The correct order of presentation is:

A)Extraordinary items and discontinued operations
B)Discontinued operations and unusual items
C)Discontinued operations and extraordinary items
D)Extraordinary items and infrequent items

Question 53

Which of the following is not a characteristic of an extraordinary item?

A)Unusual
B)Infrequent
C)Due to an error
D)Not the result of a management decision

Question 54

Which of the following is shown net of its income tax effects?

A)Income from unusual or infrequent events
B)Income from discontinued operations
C)Income from non-operating sources
D)Income from continuing operations

Question 55

Which of the following amounts would be shown net of tax in the income statement?

A)The gain on the sale of a fixed asset.
B)The gain from the expropriation of land.
C)The loss from writing down obsolete inventory.
D)The loss incurred during a labour strike.

Question 56

Which of the following accounts is a balance sheet account?

A)Other comprehensive income.
B)Accumulated other comprehensive income
C)Unrealized gains from investing activities
D)Loss from continuing operations.

Question 57

Items in this category may be reported either by themselves or with other non-operating items.

A)Income from discontinued operations
B)Income from extraordinary items
C)Income from unusual or infrequent events
D)Corporate income taxes

Question 58

Which of the following items is shown after the computation of income tax expense?

A)Unusual or infrequent events
B)Non operating revenues
C)Gain of loss on disposal of capital assets
D)Gain or loss on disposal of discontinued operations