Deck 3: The Financial Reporting Process

Question 1

2)The matching principle is the principle that states:

A)All costs that are used to generate revenue are recorded in the period the revenue is recognized.
B)All transactions are recorded at the exchange price.
C)The business is separate from its owners.
D)The business will continue to operate indefinitely unless there is evidence to the contrary.

Answer 1

A

Question 2

Consider the following events for Betterment Incorporated:
January 1 $\quad$ Betterment purchases gasoline for $\$ 200$ on account.
January 7 $\quad$ Betterment advertises lawn mowing services for $\$ 100$ per lawn.
January 9 $\quad$ Betterment signs January 8 $\quad$ customers who pay a total of $\$ 800$ cash.
January 12 $\quad$ Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used.
January 13 $\quad$ Betterment pays for the gasoline purchased on January 1 .
Under accrual-basis accounting,what is the appropriate day to record the revenues related to lawn services?

A)January 1.
B)January 7.
C)January 9.
D)January 12.

Answer 2

January 12.

Question 3

4)Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?

A)January.
B)February.
C)April.
D)Evenly in each of the three months.

Answer 3

C

Question 4

8)When the amount of interest receivable decreases during an accounting period:

A)Accrual-basis revenues exceed cash collections from borrowers.
B)Accrual-basis net income exceeds cash-basis net income.
C)Accrual-basis revenues are less than cash collections from borrowers.
D)Accrual-basis expenses are less than cash payments to borrowers.

Question 5

The following information pertains to Sooner Company:
May 1 $\quad$ Customer ordered an installation service to be done by Sooner Company on May 15.
May 2 $\quad$ Customer paid cash for the installation job to be done on May 15.
May 8 $\quad$ The Sooner Company purchased installation supplies on account for the job.
May 15 $\quad$ The installation job was started and completed.
May 20 $\quad$ Amount owed for supplies purchased on May 8 is paid.
Assuming that Sooner Company uses accrual-basis accounting,when would the company record the expense related to the supplies?

A)May 2.
B)May 8.
C)May 15.
D)May 20.

Question 6

Consider the following events for Sophia Incorporated:
April 5 $\quad$ Sophia purchases volleyballs for $\$ 200$ on account.
April 6 $\quad$ Sophia advertises a sand volleyball camp for $\$ 20$ a person.
April 12 $\quad$ Thirty people sign up for the camp paying a total of $\$ 600$ .
April 21 $\quad$ Sophia hosts the sand volleyball camp.
April 23 $\quad$ Sophia pays for the volleyballs purchased on April 5.
Under accrual-basis accounting,what is the appropriate day to record the revenues from the sand volleyball camp?

A)April 5.
B)April 6.
C)April 12.
D)April 21.

Question 7

9)When the balance of the Unearned Revenue account decreases during an accounting period:

A)Accrual-basis revenues exceed cash collections from customers.
B)Accrual-basis expenses exceed cash collections from customers.
C)Accrual-basis revenues are less than cash collections from customers.
D)Accrual-basis net income is less than cash-basis net income.

Question 8

Consider the following events for Sophia Incorporated:
April 5 $\quad$ Sophia purchases volleyballs for $\$ 200$ on account.
April 6 $\quad$ Sophia advertises a sand volleyball camp for $\$ 20$ a person.
April 12 $\quad$ Thirty people sign up for the camp paying a total of $\$ 600$ .
April 21 $\quad$ Sophia hosts the sand volleyball camp.
April 23 $\quad$ Sophia pays for the volleyballs purchased on April 5.
Under cash-basis accounting,what is the appropriate day to record the expenses related to the sand volleyball camp?

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 9

10)Which transaction would not be recorded under cash-basis accounting?

A)Providing services to customers for cash.
B)Purchasing one year of rent in advance.
C)Paying salaries to employees.
D)Purchasing supplies on account.

Question 10

12)On July 1,2012,Rents-A-Lot Inc.paid $72,000 for 36 months of advance rent on its warehouse.What would be the amount of rent expense in the 2013 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

A)Cash-basis = $24,000; Accrual-basis = $24,000.
B)Cash-basis = $72,000; Accrual-basis = $12,000.
C)Cash-basis = $0; Accrual-basis = $24,000.
D)Cash-basis = $0; Accrual-basis = $12,000.

Question 11

5)A customer purchased a drill press on November 14 on account from Sears.The drill press was delivered two weeks later.The customer paid for the drill press on December 5.When should Sears record the revenue for this transaction according to the revenue recognition principle?

A)November.
B)December.
C)Evenly in each of the two months.
D)One-third in November and two-thirds in December.

Question 12

Which of the following statements are correct?
For accrual-basis accounting:
(1) record revenues when earned
(2) record expenses when cash is paid For cash-basis accounting:
(3) record revenue when cash is received
(4) record expenses when benefit is received

A)(1)and (4)
B)(2)and (3)
C)(1)and (3)
D)(2)and (4)

Question 13

1)The revenue recognition principle states that:

A)Revenue should be recognized in the period the cash is received.
B)Revenue should be recognized in the period earned.
C)Revenue should be recognized in the balance sheet.
D)Revenue is a component of common stock.

Question 14

Consider the following events for Betterment Incorporated:
January 1 $\quad$ Betterment purchases gasoline for $\$ 200$ on account.
January 7 $\quad$ Betterment advertises lawn mowing services for $\$ 100$ per lawn.
January 9 $\quad$ Betterment signs up 8 customers who pay a total of $\$ 800$ cash.
January 12 $\quad$ Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used.
January 13 $\quad$ Betterment pays for the gasoline purchased on January 1.
Under accrual-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

A)January 1.
B)January 7.
C)January 12.
D)January 13.

Question 15

Consider the following events for Sophia Incorporated:
April 5 $\quad$ Sophia purchases volleyballs for $\$ 200$ on account.
April 6 $\quad$ Sophia advertises a sand volleyball camp for $\$ 20$ a person.
April 12 $\quad$ Thirty people sign up for the camp paying a total of $\$ 600$ .
April 21 $\quad$ Sophia hosts the sand volleyball camp.
April 23 $\quad$ Sophia pays for the volleyballs purchased on April 5.
Under accrual-basis accounting,what is the appropriate day to record the expenses related to the sand volleyball camp?

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 16

The following information pertains to Sooner Company:
May 1 $\quad$ Customer ordered an installation service to be done by Sooner Company on May 15.
May 2 $\quad$ Customer paid cash for the installation job to be done on May 15.
May 8 $\quad$ The Sooner Company purchased installation supplies on account for the job.
May 15 $\quad$ The installation job was started and completed.
May 20 $\quad$ Amount owed for supplies purchased on May 8 is paid.
Assuming that Sooner Company uses cash-basis accounting,when would the company record the expense related to the supplies?

A)May 2.
B)May 8.
C)May 15.
D)May 20.

Question 17

7)The primary difference between accrual-basis and cash-basis accounting is:

A)The timing of when revenues and expenses are recorded.
B)Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting.
C)Accrual-basis accounting violates both the revenue recognition and matching principles.
D)Adjusting entries are only a necessary part of cash-basis accounting.

Question 18

6)Which accounting principle states that a company should "record revenues when they are earned"?

A)Matching
B)Revenue recognition
C)Conservatism
D)Materiality

Question 19

Consider the following events for Betterment Incorporated:
January 1 $\quad$ Betterment purchases gasoline for $\$ 200$ on account.
January 7 $\quad$ Betterment advertises lawn mowing services for $\$ 100$ per lawn.
January 9 $\quad$ Betterment signs up 8 customers who pay a total of $\$ 800$ cash.
January 12 $\quad$ Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used.
January 13 $\quad$ Betterment pays for the gasoline purchased on January 1.
Under cash-basis accounting,what is the appropriate day to record the expenses related to the gasoline?

A)January 1.
B)January 9.
C)January 12.
D)January 13.

Question 20

3)Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?

A)Accounting equation.
B)Revenue recognition.
C)Matching principle.
D)Conservatism.

Question 21

A company provided $1,500 of services to customers during the month of May.The customers paid in June.What would the impact of these transactions be during May on each of the following three items?
$\quad$ Cash $\quad$$\quad$$\quad$$\quad$ Cash-basis $\quad$ Accrual-basis
$\quad$ Balance $\quad$$\quad$$\quad$ Net Income $\quad$ Net Income
a. $\text { No effect\quad\quad No effect\quad\quad Increase }$
b. $\text { No effect\quad\quad No effect\quad\quad No Effect }$
c. $\text { Increase\quad\quad Increase\quad\quad Increase }$
d. $\text { Increase \quad \quad Increase\quad\quad No effect }$

A)Option a
B)Option b
C)Option c
D)Option d

Question 22

35)When a magazine sells subscriptions to customers,it is an example of:

A)An accrued expense.
B)An accrued revenue.
C)A prepaid expense.
D)An unearned revenue.

Question 23

29)The following events pertain to Bills Company: Using accrual-basis accounting,on which date should Bills Company record revenue for the accounting and tax services?

A)December 30,2012.
B)December 31,2012.
C)January 4,2013.
D)January 11,2013.

Question 24

23)A company purchased $400 of office supplies on account during May.All the supplies were used in May,and the account was paid during June.What would the impact of these transactions be during May on each of the following three items?

A)Option a
B)Option b
C)Option c
D)Option d

Question 25

27)The following events pertain to Jasper Corporation: Using cash-basis accounting,on which date should Jasper record supplies expense?

A)May 1.
B)May 5.
C)May 8.
D)May 9.

Question 26

25)Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

A)Received $600 from customers for services to be provided in May.
B)Paid $1,800 for a six-month insurance policy covering the period July 1-December 31.
C)Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun newspaper.
D)Received $300 from customers for services performed in March.

Question 27

38)Prepayments occur when:

A)Cash payment (or an obligation to pay cash)occurs before the expense recognition.
B)Sales are delayed pending credit approval.
C)Customers are unable to pay the full amount due when goods are delivered.
D)Cash payment occurs after the expense is incurred and liability is recorded.

Question 28

28)The following events pertain to Bills Company: Using cash-basis accounting,on which date should Bills Company record revenue for the accounting and tax services?

A)December 30,2012.
B)December 31,2012.
C)January 4,2013.
D)January 11,2013.

Question 29

32)Adjusting entries are primarily needed for:

A)Cash-basis accounting.
B)Accrual-basis accounting.
C)Current value accounting.
D)Manual accounting systems.

Question 30

36)When a company makes an end-of-period adjusting entry which includes a credit to Prepaid Rent,the debit is usually made to:

A)Cash.
B)Rent Expense.
C)Rent Payable.
D)Rent Receivable.

Question 31

30)When a company provides services on account,which of the following would be recorded using cash-basis accounting?

A)Debit to Cash.
B)Debit to Service Revenue.
C)Credit to Unearned Revenue.
D)No entry would be recorded.

Question 32

Consider the following events for Sophia Incorporated:
April 5 $\quad$ Sophia purchases volleyballs for $\$ 200$ on account.
April 6 $\quad$ Sophia advertises a sand volleyball camp for $\$ 20$ a person.
April 12 $\quad$ Thirty people sign up for the camp paying a total of $\$ 600$ .
April 21 $\quad$ Sophia hosts the sand volleyball camp.
April 23 $\quad$ Sophia pays for the volleyballs purchased on April 5.
Under cash-basis accounting,what is the appropriate day to record the revenues related to the sand volleyball camp?

A)April 5.
B)April 12.
C)April 21.
D)April 23.

Question 33

31)Which of the following is a possible adjusting journal entry?

A)Debit Cash,credit Accounts Payable.
B)Debit Service Revenue,credit Cash.
C)Debit Salaries Expense,credit Salaries Payable.
D)Debit Utilities Expense,credit Retained Earnings.

Question 34

34)Making insurance payments in advance is an example of:

A)An accrued revenue.
B)An accrued expense.
C)An unearned revenue.
D)A prepaid expense.

Question 35

33)Which of the following is true about adjusting entries?

A)Entries are necessary due to the conservatism principle.
B)Entries can be done at the beginning or end of the accounting period.
C)They zero the balance of all income statement accounts.
D)They are a necessary part of accrual-basis accounting.

Question 36

26)Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

A)Purchased $500 of office supplies on account (supplies were used in May and paid for in May).
B)Paid $1,800 for a six-month insurance policy covering the period July 1-December 31.
C)Paid $700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun newspaper.
D)Received $300 from customers for services performed in March.

Question 37

41)The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:

A)A debit to a liability.
B)A debit to an asset.
C)A credit to a liability.
D)A credit to an asset.

Question 38

24)A company paid $900 to workers during May.Of this amount,$600 was for work performed in April,while the other $300 was for work performed during May.What would the impact of this transaction be during May on each of the following three items?

A)Option a
B)Option b
C)Option c
D)Option d

Question 39

37)When a company makes an end-of-period adjusting entry which includes a debit to Supplies Expense,the usual credit entry is made to:

A)Accounts Payable.
B)Supplies.
C)Cash.
D)Retained Earnings.

Question 40

39)An example of an adjusting entry would not include:

A)Recording the use of office supplies.
B)Recording the expiration of prepaid insurance.
C)Recording unpaid salaries.
D)Paying salaries to company employees.

Question 41

The following financial information is from Shovels Construction Company for 2012:
$$\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 15,000 \\\hline \text { Buildings } & 80,000 \\\hline \text { Cash } & 10,500 \\\hline \text { Accounts Receivable } & 9,500 \\\hline \text { Sales Tax Payable } & 4,500 \\\hline \text { Retained Earnings } & 47,500 \\\hline \text { Supplies } & 40,000 \\\hline \text { Notes Payable (due in 18 months) } & 35,000 \\\hline \text { Interest Payable } & 3,000 \\\hline \text { Common Stock } & 35,000 \\\hline\end{array}$$
What is the amount of current assets,assuming the accounts above reflect normal activity?

A)$20,000.
B)$60,000.
C)$140,000.
D)$175,000.

Question 42

43)The adjusting entry required to record accrued expenses includes:

A)A credit to Cash.
B)A debit to an asset.
C)A credit to an asset.
D)A credit to liability.

Question 43

54)A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

A)A trial balance.
B)An adjusted trial balance.
C)A post-closing trial balance.
D)An accounting trial balance.

Question 44

56)Resources owned by the company that will provide a benefit for more than one year are called:

A)Current assets.
B)Current liabilities.
C)Long-term assets.
D)Revenues.

Question 45

53)Which of the following regarding adjusting entries is correct?

A)Adjusting entries are recorded for all external transactions.
B)Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.
C)Adjusting entries are needed because we use accrual-basis accounting.
D)After adjusting entries,all temporary accounts should have a balance of zero.

Question 46

50)Eve's Apples opened for business on January 1,2012,and paid for two insurance policies effective that date.The liability policy was $36,000 for eighteen-months,and the crop damage policy was $12,000 for a two-year term.What was the balance in Eve's Prepaid Insurance account as of December 31,2012?

A)$9,000.
B)$18,000.
C)$30,000.
D)$48,000.

Question 47

The following table contains financial information for Trumpeter Inc.before closing entries:
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salary Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expenses } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$$
What is Trumpeter's net income?

A)$3,500.
B)$2,500.
C)$5,000.
D)$5,500.

Question 48

The following table contains financial information for Trumpter's Inc.before closing entries:
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salaries Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expense } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$$
What is the amount of Trumpter's total liabilities?

A)$5,000
B)$78,500
C)$68,500
D)$83,500

Question 49

51)Which of the following is(are)true regarding the characteristics of adjusting entries?

A)Adjusting entries reduce the balance of revenue,expense,and dividend accounts to zero.
B)Adjusting entries allow for the proper application of the revenue recognition principle.
C)Adjusting entries allow for the proper application of the matching principle.
D)Both b and c are true.

Question 50

The following table contains financial information for Trumpeter Inc.before closing entries:
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salaries Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expenses } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$$
What is the amount of Trumpeter's total assets?

A)$81,500
B)$82,500
C)$68,500
D)$83,500

Question 51

Consider the following items:
Land
Accounts Receivable
Notes Payable (due in three years)
Accounts Payable
Retained Earnings
Prepaid Rent
Unearned Revenue
Buildings
Notes Payable (due in six months)
Equipment
How many of the items listed above are generally long-term assets?

A)Two.
B)Three.
C)Four.
D)Five.

Question 52

63)The closing entry for expenses includes:

A)A debit to Dividends and a credit to all expense accounts.
B)A debit to Retained Earnings and a credit to all expense accounts.
C)A debit to Revenues and a credit to Retained Earnings.
D)A debit to Revenues and a credit to all expense accounts.

Question 53

46)On April 1,a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance.At the end of the year,the financial statements would report:

A)Insurance Expense,$4,800; Prepaid Insurance $0.
B)Insurance Expense,$3,600; Prepaid Insurance $1,200.
C)Insurance Expense,$3,650; Prepaid Insurance $4,800.
D)Insurance Expense,$1,200; Prepaid Insurance $3,600.

Question 54

55)An adjusted trial balance:

A)Is a list of all accounts and their balances after adjusting entries.
B)Is a list of all accounts and their balances before adjusting entries.
C)Is a list of all accounts and their balances after closing entries.
D)Is a trial balance adjusted for cash-basis accounting.

Question 55

48)During the year,Cheng Company paid salaries of $24,000.In addition,$8,000 in salaries has accrued by the end of the year but has not been paid.The year-end adjusting entry would include which one of the following?

A)Debit to Salaries Expense for $32,000.
B)Credit to Salaries Expense of $8,000.
C)Debit to Salaries Payable for $24,000.
D)Credit to Salaries Payable for $8,000.

Question 56

64)The primary purpose of closing entries is to:

A)Prove the equality of the debit and credit entries in the general journal.
B)Ensure that all assets and liabilities are recognized in the appropriate period.
C)Update the balance of Retained Earnings and prepare revenue,expense,and dividend accounts for next period's transactions.
D)Assure that adjusting entries balance.

Question 57

49)At the beginning of December,Global Corporation had $2,000 in supplies on hand.During the month,supplies purchased amounted to $3,000,but by the end of the month the supplies balance was only $800.What is the appropriate month-end adjusting entry?

A)Debit Cash $4,200,credit Supplies $4,200.
B)Debit Supplies $4,200,credit Supplies Expense $4,200.
C)Debit Supplies Expense $4,200,credit Supplies $4,200.
D)Debit Cash $800,credit Supplies $800.

Question 58

42)Adjusting entries:

A)Often include the Cash account.
B)Usually are recorded at the beginning of the accounting period.
C)Always involve at least one income statement account and one balance sheet account.
D)Adjust the balance of revenue and expense accounts to zero.

Question 59

The following table contains financial information for Fisher Inc.for 2012 before closing entries:
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 23,000 \\\hline \text { Common Stock } & 34,000 \\\hline \text { Supplies } & 4,000 \\\hline \text { Advertising Expense } & 2,000 \\\hline \text { Accounts Payable } & 20,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Salaries Expense } & 3,000 \\\hline \text { Prepaid Rent } & 4,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Equipment } & 45,000 \\\hline\end{array}$$
How many of the above accounts are permanent?

A)Three.
B)Four.
C)Five.
D)Six.

Question 60

The following financial information is from Bronco Company.All debt is due within one year unless stated otherwise.
$$\begin{array} { | l | r | } \hline \text { Retained Earnings } & \$ 52,000 \\\hline \text { Supplies } & 37,000 \\\hline \text { Equipment } & 72,000 \\\hline \text { Accounts Receivable } & 8,600 \\\hline \text { Unearned Revenue } & 6,000 \\\hline \text { Accounts Payable } & 15,000 \\\hline \text { Common Stock } & 25,000 \\\hline \text { Notes Payable (due in 18 months) } & 35,000 \\\hline \text { Interest Payable } & 7,000 \\\hline \text { Cash } & 22,400 \\\hline\end{array}$$
What is the amount of current liabilities?

A)$63,000.
B)$28,000.
C)$45,600.
D)$22,000.

Question 61

70)Temporary accounts would not include:

A)Salaries Payable.
B)Advertising Expense.
C)Supplies Expense.
D)Dividends.

Question 62

Frosty Inc.has the following balances on December 31 prior to closing entries:
$$\begin{array} { | l | r | } \hline \text { Revenues } & \$ 35,000 \\\hline \text { Retained Earnings, Jan. 1 } & 10,000 \\\hline \text { Cash } & 7,000 \\\hline \text { Expenses } & 23,000 \\\hline \text { Accounts Payable } & 4,000 \\\hline \text { Dividends } & 1,000 \\\hline \text { Supplies } & 18,000 \\\hline\end{array}$$
Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries?

A)Increase of $11,000.
B)Increase of $13,000.
C)Increase of $12,000.
D)Increase of $14,000.

Question 63

68)Which of the following is a possible closing entry?

A)Debit Cash,credit Service Revenue.
B)Debit Cash,credit Retained Earnings.
C)Debit Service Revenue,credit Retained Earnings.
D)Debit Dividends,credit Retained Earnings.

Question 64

Of the following six accounts,which ones have temporary balances?
(1)Service Revenue
(2)Dividends
(3)Salaries Expense
(4)Common Stock
(5)Retained Earnings
(6)Cash

A)(1),(2),and (3)
B)(4),(5),and (6)
C)(2),(4),and (5)
D)(1),(3),and (5)

Question 65

79)For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

A)$2,000.
B)$2,500.
C)$3,500.
D)$6,000.

Question 66

66)Permanent accounts would not include:

A)Interest Expense.
B)Salaries Payable.
C)Prepaid Rent.
D)Unearned Revenues.

Question 67

85)Which of the following accounts is(are)listed in a post-closing trial balance?

A)Prepaid Rent.
B)Accounts Payable.
C)Salaries Expense.
D)Two of these three accounts would be included in a post-closing trial balance.

Question 68

83)A list of all accounts and their balances after posting closing entries is referred to as:

A)A trial balance.
B)An adjusted trial balance.
C)A post-closing trial balance.
D)An accounting trial balance.

Question 69

84)A post-closing trial balance:

A)Is a list of all accounts and their balances after adjusting entries.
B)Is a list of all accounts and their balances before adjusting entries.
C)Is a list of all accounts and their balances after closing entries.
D)Is a trial balance adjusted for cash-basis accounting.

Question 70

77)When a company prepares closing entries,which one of the following is NOT a correct closing entry?

A)Debit Retained Earnings; credit Salaries Expense.
B)Debit Dividends; credit Retained Earnings.
C)Debit Service Revenue; credit Retained earnings.
D)All of the above are correct.

Question 71

81)The closing process includes which of the following?

A)Closing the balance of the retained earnings account to zero.
B)Closing the balance of only the dividends account to zero.
C)Closing the balances of only revenue and expense accounts to zero.
D)Closing the balances of revenue,expense and dividend accounts to zero.

Question 72

78)In the first three years of operations,Lindsey Corporation earned net income/loss of -$150,000,$100,000,and $250,000.At the end of the third year,Lindsey Corporation has a balance of $120,000 for its Retained Earnings account.What is the total amount of dividends Lindsey Corporation paid over the three years?

A)$130,000.
B)$120,000.
C)$80,000.
D)$380,000.

Question 73

67)The purpose of closing entries is to transfer:

A)Accounts Receivable to Retained Earnings when an account is fully paid.
B)Balances in temporary accounts to a permanent account.
C)Inventory to Cost of Goods Sold when merchandise is sold.
D)Assets and liabilities when operations are discontinued.

Question 74

72)The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

A)$1.9 million
B)$3.2 million
C)$4.5 million
D)$1.3 million

Question 75

76)Which of the following accounts will NOT be involved in closing entries?

A)Prepaid Insurance.
B)Service Revenue.
C)Utilities Expense.
D)Retained Earnings.

Question 76

80)Which of the following is true concerning temporary and permanent accounts?

A)Cash is a temporary account.
B)Permanent accounts represent activity over the entire life of the company.
C)Permanent accounts must be closed at the end of every reporting period.
D)Temporary accounts represent activity over the previous three years.

Question 77

74)Which of the following describes the purpose(s)of closing entries?

A)Adjust the balances of asset and liability accounts for unrecorded activity during the period.
B)Transfer the balances of temporary accounts to common stock.
C)Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.
D)Both b and c.

Question 78

73)The Retained Earnings account had a beginning credit balance of $26,000.During the period,the business had a net loss $12,000,and the company paid dividends of $8,000.The ending balance in the Retained Earnings account is:

A)$6,000
B)$30,000
C)$22,000
D)$14,000

Question 79

69)Permanent accounts would not include:

A)Accounts Payable.
B)Office Supplies.
C)Utilities Expense.
D)Common Stock.

Question 80

75)Which of the following is a permanent account?

A)Dividends
B)Service Revenue
C)Advertising Expense
D)Retained Earnings