Question 1

A company has recorded $25,000 in debits to a particular account, and has also recorded $14,000 of credits to that account. The account balance is&#10;A) $11,000 debit&#10;B) $14,000 credit&#10;C) $25,000 debit&#10;D) $39,000 debit

Accepted Answer

The account balance is calculated by subtracting the total credits from the total debits. In this case, $25,000 - $14,000 = $11,000, which means the account has a balance of $11,000 in debits. Choice A) is the only option that reflects this answer.

Question 2

On November 1, 2017, the Baumol Real Estate Corp. received $4,000 from a tenant, representing rent for November and December 2017, as well as January and February of 2018, and recorded the transaction with a journal entry to cash and to unearned revenue. Assuming there were no other journals made, Baumol should record which of the following on December 31, 2017?

A) Debit unearned revenue, and credit rent revenue, for $4,000.
B) Debit unearned revenue, and credit rent revenue, for $2,000
C) Debit unearned revenue, and credit cash, for $2,000
D) Debit revenue, and credit unearned revenue, for $4,000
E) Half the rent received has been earned

B

Accepted Answer

When Baumol received the $4,000, they recorded it as unearned revenue because it had not been earned yet. As time passes and the rent becomes earned, the unearned revenue account will decrease and the rent revenue account will increase. 
Since the journal entry recorded on November 1 covered rent for November and December 2017, as well as January and February of 2018, Baumol has earned only half of the rent by December 31, 2017 (i.e. for November and December 2017). Therefore, they should record a debit to unearned revenue and a credit to rent revenue for only $2,000 ($1,000 for each of the two months earned). Choice B is the best answer.

Question 3

During December, an accountant does $700 of bookkeeping work for the Castorini Plumbing Corp., but does not bill the company until January. Which of the following is the appropriate journal entry that should be made in the December 31 balance sheet? (Assume the company prepares its balance sheet in February.)

A) No entry, since no bill was received in December
B) A credit to cash, and a debit to accounting expense, of $700
C) A credit to accrued expenses payable, and a debit to accounting expense, of $700
D) A credit to accounting expense, and a debit to cash, of $700
E) No cash moved. Accrual accounting requires the expense be recognized

C

Accepted Answer

The appropriate journal entry is to credit accrued expenses payable and debit accounting expense for $700. This is because the accountant performed the work in December but did not bill until January, so the expense should still be recognized in December as an accrued expense. Option A is incorrect because even though no bill was received in December, the work was performed and the expense should still be recognized. Option B is incorrect because there is no cash movement involved in this transaction. Option D is incorrect because it implies that the company paid for the accounting work in December, which is not the case. Option E is partially correct in that accrual accounting requires the expense be recognized, but it does not specify the accounts that need to be credited and debited.

Question 4

In a typical accounting cycle, which of the following events occurs first?&#10;A) Preparing financial statements&#10;B) Preparing an adjusted trial balance&#10;C) Posting information from journals to the ledger&#10;D) Preparing closing entries

Accepted Answer

Posting information from journals to the ledger is typically the first step in the accounting cycle, as it involves transferring the financial transactions recorded in the journal to the appropriate accounts in the ledger. This step provides a preliminary view of the company's financial standings before adjustments are made in later steps such as preparing an adjusted trial balance and closing entries. Finally, after all transactions are recorded and necessary adjustments made, financial statements are prepared.

Question 5

In a typical accounting cycle, which of the following events occurs last?&#10;A) Preparing adjustments&#10;B) Preparing an adjusted trial balance&#10;C) Posting information from journals to the ledger&#10;D) Preparing closing entries

Accepted Answer

Preparing closing entries occurs after all other steps in the accounting cycle, including preparing adjustments, posting information from journals to the ledger, and preparing an adjusted trial balance.

Question 6

Which of the following bookkeeping errors will not cause a trial balance to be out of balance?&#10;A) Posting only the debit side of a journal entry to the general ledger, and forgetting to post the credit side&#10;B) Adding the items in the cash account in the ledger improperly, while adding all other accounts properly&#10;C) Posting a journal entry &#34;backwards&#34; by posting the debt entries as credits, and the credit entries as debits&#10;D) Making a copying error while posting the debit side of a journal entry, and posting the credit side correctly&#10;E) While the ledger will have wrong balances in certain accounts, the total debits will equal total credits

Accepted Answer

Posting a journal entry "backwards" by reversing the debits and credits does not affect the balance of the trial balance because the total debits still equal the total credits, just in different accounts.

Question 7

Which of the following bookkeeping errors will cause the total debits and total credits to be out of balance in the general ledger?&#10;A) Posting the debit side of a journal entry as $1,900 and the credit side as $9,100&#10;B) Posting the debit side of the entry to the supplies account instead of to the supplies expense account&#10;C) Accidentally posting an entry twice&#10;D) Posting a journal entry &#34;backwards&#34; by posting the debt entries as credits, and the credit entries as debits

Accepted Answer

The answer of Which of the following bookkeeping errors will...

Question 8

In the year-end closing process, which account should not be reset to zero?&#10;A) Dividends&#10;B) Sales revenues&#10;C) Land&#10;D) Supplies expense

Accepted Answer

Land is a long-term asset and its value is not affected by the year-end closing process. Therefore, it should not be reset to zero. Dividends, sales revenues, and supplies expense are all temporary accounts that should be reset to zero at the end of the accounting period.

Question 9

On December 1, 2017, Physical Bank made a loan to a customer of $2,000,0000, with an annual interest rate of 6%. The loan, and all the interest, are due on November 30, 2018. The appropriate adjusting entry the bank should make on December 31, 2017 is

A) Debit cash $10,000 and credit interest revenue $10,000
B) Debit interest revenue $10,000 and credit cash $10,000
C) Debit interest receivable $10,000 and credit interest revenue $10,000
D) Debit interest revenue $10,000 and credit interest receivable $10,000

Accepted Answer

Interest for one month (December) on a $2,000,000 loan at 6% annual interest is $10,000 ($2,000,000 * 6% / 12 months). This interest has been earned but not yet received, so the bank should recognize it as interest receivable (an asset) and as interest revenue (increasing income).

Question 10

Allay Company purchased $6,500 of merchandise inventory on account. Which of the following entries would be required to record this transaction?&#10;A) Dr. Accounts Payable 6,500 Cr. Purchases 6,500&#10;B) Dr. Inventory 6,500 Cr. Accounts Payable 6,500&#10;C) Dr. Cost of Goods Sold 6,500 Cr. Accounts Payable 6,500&#10;D) Cr. Accounts Payable 6,500 Cr. Inventory 6,500

Accepted Answer

When a company purchases merchandise inventory on account, the inventory account is increased (debited) and the accounts payable account is also increased (credited). Therefore, the correct entry would be:
Dr. Inventory 6,500 
Cr. Accounts Payable 6,500

Question 11

What business event would be represented by a journal entry that shows a debit to cash of $500 and a credit to unearned revenue of $500?&#10;A) Cash has been paid out to a company that will rent the company space in the future.&#10;B) The company has provided services to a customer, and the cash account has been increased.&#10;C) Cash has been received by the company for services that have not yet been provided.&#10;D) The company has refunded money to a customer, because the company did not provide the services it promised.

Accepted Answer

The answer of What business event would be represented by...

Question 12

A company has recorded $38,000 in debits to a particular account, and has also recorded $14,000 of credits to that account. The account balance is&#10;A) $52,000 credit&#10;B) $24,000 credit&#10;C) 24,000 debit&#10;D) $52,000 debit

Accepted Answer

The answer of A company has recorded $38,000 in debits...

Question 13

All of the following accounts increase with debits, except&#10;A) Bank loans payable&#10;B) Accounts receivable&#10;C) Interest expense&#10;D) Dividends

Accepted Answer

The answer of All of the following accounts increase with...

Question 14

All of the following accounts increase with credits, except&#10;A) Sales revenues&#10;B) Accounts payable&#10;C) Dividends&#10;D) Retained earnings

Accepted Answer

The answer of All of the following accounts increase with...

Question 15

On January 1, 2016, the Marlin Company purchased a tractor that cost $30,000, had a five-year useful life, and a $5,000 salvage value. Which of the following is the correct general journal entry to record depreciation expense for the 2016 fiscal year?

A) Dr. Depreciation Expense $6,000 Cr. Accumulated depreciation $6,000
B) Dr. Accumulated depreciation $5,000 Cr. Depreciation expense $5,000
C) Dr. Depreciation expense $5,000 Cr. Cash $5,000
D) Dr. Depreciation expense $5,000 Cr. Accumulated depreciation $5,000

Accepted Answer

The answer of On January 1, 2016, the Marlin Company...

Question 16

On November 1, 2017, Schubert Corp. paid $1,200 in advance for an insurance policy that covered the company for six months. Assuming that Schubert recorded this purchase as an asset, the adjusting entry required on December 31, 2017 would include

A) A debit to prepaid insurance for $1,200
B) A credit to prepaid insurance for $1,200
C) A credit to insurance expense for $400
D) A debit to insurance expense for $400

Accepted Answer

The answer of On November 1, 2017, Schubert Corp. paid...

Question 17

What business event is represented by a journal entry that shows a debit to supplies of $800 and a credit to accounts payable of $800?&#10;A) The company incurred supplies expense.&#10;B) The company purchased supplies with cash.&#10;C) The company used supplies.&#10;D) The company purchased supplies on account.

Accepted Answer

The answer of What business event is represented by a...

Question 18

What business event is represented by a journal entry that shows a debit to supplies of $9,000 and a credit to cash of $9,000?&#10;A) The company incurred supplies expense.&#10;B) The company purchased supplies with cash.&#10;C) The company used supplies.&#10;D) The company purchased supplies on account.

Accepted Answer

The answer of What business event is represented by a...

Question 19

What business event is represented by a journal entry that shows a debit to supplies expense of $9,000 and a credit to supplies of $9,000?&#10;A) The company incurred supplies expense.&#10;B) The company purchased supplies with cash.&#10;C) The company used supplies.&#10;D) The company purchased supplies on account.

Accepted Answer

The answer of What business event is represented by a...

Deck 13: Appendix