Deck 3: The Financial Reporting Process

Question 1

The following information pertains to Sooner Company: 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.

Answer 1

D
Explanation: Cash-basis expenses are recorded at the time cash is pai

Question 2

Consider the following events for Sophia Incorporated: 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.

Answer 2

C
Explanation: Accrual-basis expenses are recorded at the time they help to produce revenue.

Question 3

Consider the following events for Betterment Incorporated: 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.

Answer 3

D
Explanation: Cash-basis expenses are recorded at the time cash is pai

Question 4

Consider the following events for Sophia Incorporated: 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 5

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 6

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 7

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

Which of the following statements are correct?

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

Question 9

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.

Question 10

Consider the following events for Sophia Incorporated: 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 11

The following information pertains to Sooner Company: 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 12

Consider the following events for Betterment Incorporated: 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 13

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 14

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 15

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 16

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 17

Consider the following events for Betterment Incorporated: 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.

Question 18

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.

Question 19

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

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

Question 20

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 21

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 22

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 23

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 24

Which of the following would not typically be used as an adjusting entry?

A)
B)
C)
D) Unearned Revenue
Service Revenue

Question 25

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 26

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 27

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 28

Consider the following events for Sophia Incorporated: 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 29

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 30

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 31

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 32

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 33

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 34

Adjusting entries are primarily needed for:

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

Question 35

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 36

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 37

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?

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

Question 38

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 39

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 40

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 41

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 42

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 43

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 44

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 45

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 46

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 47

Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries?

A) Insurance Expense $\quad 1,750$
Prepaid Insurance $\quad$ 1,750
B) Prepaid Insurance $\quad 1,750$
Insurance Expense $\quad$ 1,750
C) $$\begin{array} { l l r } \text { Insurance Expense } & 1,750 & \\\text { Prepaid Insurance } & 2,450 & \\\quad \text { Accounts Payable } & & 4,200\end{array}$$
D) Insurance Expense $\quad 2,450$
Prepaid Insurance $\quad$ 2,450

Question 48

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 49

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 50

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended December 31. What is the adjusting entry to record accrued salaries at the end of the year?

A) Salaries Payable $\quad 22,400$
Salaries Expense $\quad$ 22,400
B) Salaries Expense 6,400
Salaries Payable $\quad$ 6,400
C) Salaries Expense $\quad$ 9,600
Salaries Payable $\quad$ 9,600
D) Salaries Expense $\quad 22,400$
Salaries Payable $\quad$ 22,400

Question 51

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 52

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 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 54

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 55

On July 1, 2012, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2012 through December 2013. What adjusting entry should Charlie Co. record on December 31, 2012?

A) $\begin{array}{cc}\text { Rent Expense } & 18,000 \\\text { Cash } & 18,000\end{array}$
B) $$\begin{array}{l}\begin{array} { l l } \text { Rent Expense } & 18,000\end{array}\\\begin{array} { l l } \text { Prepaid Rent } & 18,000\end{array}\end{array}$$
C) $$\begin{array} { c c } \text { Prepaid Rent } & { 6,000 } \\\text { Rent Expense } & 6,000\end{array}$$
D) Rent Expense $\quad$ 6,000
Prepaid Rent $\quad$ 6,000

Question 56

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 57

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 58

On September 1, 2012, Gold Magazine sold 400 one-year subscriptions for $90 each. The total amount received was credited to Unearned Revenue. What would be the required adjusting entry at December 31, 2012?

A) Unearned Revenue $\quad 36,000$
Service Revenue $\quad$ 36,000
B) Service Revenue $\quad 24,000$
Unearned Revenue $\quad$$\quad$ 24,000
C) Unearned Revenue $\quad 24,000$
Service Revenue $\quad$$\quad$ 24,000
D) $$\begin{array}{l}\text { Unearned Revenue } \quad 12,000\\\text { Service Revenue } \quad 12,000\end{array}$$

Question 59

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 60

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 61

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 62

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 63

Permanent accounts would not include:

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

Question 64

Temporary accounts would not include:

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

Question 65

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 66

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 67

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 68

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 69

Permanent accounts would not include:

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

Question 70

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 71

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 72

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 73

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 74

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 75

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

Which of the following is a permanent account?

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

Question 77

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 78

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 79

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 80

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.