Question 1

Which of the following accounts would be closed at the end of a period?

Accepted Answer

Sales accounts are closed at the end of a period to transfer their balances to the income summary account, which is then used to adjust the retained earnings in the equity section of the balance sheet. Retained earnings, unearned revenue, and prepaid expenses are balance sheet accounts that carry their balances forward into future periods.

Question 2

A database system differs from manual and computer-based transactions system in that-

Accepted Answer

Unlike manual and computer-based transaction systems, a database system does not only contain information about business events and accounting events, but it also allows for the efficient and effective processing and analysis of this data to produce meaningful reports and insights. A database system can generate a variety of reports, including financial statements, management reports, and operational reports, depending on the needs of the organization. Therefore, option A is the best choice as it accurately describes the primary difference between a database system and manual or computer-based transaction systems.

Question 3

Which of the following accounts would normally have a credit balance?

Accepted Answer

Retained Earnings would normally have a credit balance as it represents the accumulated profits of a company that have not been paid out as dividends.

Question 4

Which of the following accounts would normally have a debit balance?

Accepted Answer

Inventory is an asset account, and all asset accounts typically have a debit balance.

Question 5

Merta Inc.reported revenues of $500,000,expenses of $340,000 and operating income of $160,000.Explain the information contained in each of these figures.

Accepted Answer

The answer of Merta Inc.reported revenues of $500,000,expenses of $340,000...

Question 6

When a firm has net income,which of the following is not an appropriate closing entry?

Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts (like Retained Earnings). Option B is not appropriate because it suggests debiting Retained Earnings and crediting Income Summary, which is the reverse of the correct process. Normally, the Income Summary account is debited and Retained Earnings is credited to transfer net income to Retained Earnings.

Question 7

Valhalla Company sold goods on account to a customer for $75,000.The goods cost Valhalla $60,000.How should Valhalla report this transaction?

Accepted Answer

Revenue is recognized when goods are sold on account. The cost of goods sold is an expense that is recognized when the goods are sold.

Question 8

On which financial statement would unearned revenue be reported?

Accepted Answer

Unearned revenue is a liability as the company has received payment but has not yet fulfilled its obligation to provide goods or services. Therefore, it is reported on the balance sheet under current liabilities.

Question 9

Answer the following two questions:
What are adjusting entries and why are they necessary?
What are closing entries and why are they necessary?

Accepted Answer

The answer of Answer the following two questions:
What are adjusting...

Question 10

If a company fails to accrue the appropriate wage expense at the end of the accounting period,

Accepted Answer

Failing to accrue the appropriate wage expense means that the expense is not recorded in the period it was incurred. This results in net income being overstated because expenses are understated, and current liabilities (wages payable) are also understated because the obligation to pay wages has not been recorded.

Question 11

Some accounts are increased with debits and others with credits.Wouldn't recording transactions be easier if all accounts were increased with debits and decreased with credits?

Accepted Answer

The answer of Some accounts are increased with debits and...

Question 12

How would the balance sheet and income statement be affected if a $2,000 accrued expense was recorded as $3,000?

Accepted Answer

The answer of How would the balance sheet and income...

Question 13

Smithville Company purchased machinery four years ago for $24,000.Smithville estimates that the machinery will have a total useful life of six years.What amount will Smithville include in total assets for machinery?

Accepted Answer

The machinery was purchased for $24,000 and has a total useful life of six years. This means it depreciates $4,000 per year ($24,000 / 6 years). After four years, it would have depreciated $16,000 ($4,000 * 4 years), leaving a remaining value of $8,000 ($24,000 - $16,000). This remaining value is what will be included in total assets for machinery.

Question 14

Which of the following is not an accounting event?

Accepted Answer

A customer placing an order for goods is not an accounting event. It is a business event, but it does not involve any financial transaction that would require an entry in the accounting records. The other options involve financial transactions that would need to be recorded in the accounting system.

Question 15

Which of the following events results in a revenue event?

Accepted Answer

Revenue is recognized when goods are delivered or services are rendered, which occurs when a customer purchases merchandise on open account.

Question 16

Palisades Corporation purchased equipment by signing a long-term note payable.What was the effect of this transaction?

Accepted Answer

When Palisades Corporation purchased equipment by signing a long-term note payable, it increased the assets (equipment) and increased the liabilities (note payable). This is because the corporation now owes money for the equipment it acquired through the note payable.

Question 17

In a computer-based transaction system which of the following serves as the journal?

Accepted Answer

The answer of In a computer-based transaction system which of...

Question 18

Which of the following is not an advantage of the computer-based transaction system?

Accepted Answer

The answer of Which of the following is not an...

Question 19

The master file in a computer-based transaction system serves as which of the following?

Accepted Answer

The answer of The master file in a computer-based transaction...

Question 20

Which financial statement would report a firm's total profits accumulated to date minus distributions to owners?

Accepted Answer

The answer of Which financial statement would report a firm's...

Quiz 7: Accounting Information Systems