Question 1

The following selected account balances were drawn from the 2012 balance sheet and income statement of Fultz Company:  Based on the above information,what is the balance of Common Stock for Fultz Company?
A) $750
B) $1,550
C) $1,050
D) $2,050

Accepted Answer

The balance of Common Stock can be found in the Stockholders' Equity section of the balance sheet. The only option that includes a Common Stock balance in this section is C) $1,050.

Question 2

On May 1,2012,Perez Company paid $12,000 rent for a one year lease on equipment it uses in its operations.The adjusting entry at the end of the year
A) decreases assets and stockholders' equity.
B) decreases assets and liabilities.
C) increases an expense and decreases a liability.
D) is not required.

Accepted Answer

The adjusting entry decreases assets (prepaid rent) and stockholders' equity (retained earnings) because the rent expense is recognized, reducing net income.

Question 3

Bloomfield Company issued stock for $30,000 cash on January 20,2012.During 2012,the company recorded revenue on account of $12,000 and expenses on account of $5,500.Bloomfield received $8,200 cash from accounts receivable and paid $4,500 on the accounts payable.The company also purchased land for $5,000 cash.The beginning cash balance was zero.Based on this information,the amount of cash at the end of the year is:
A) $31,500
B) $22,974
C) $29,100
D) $28,700

Accepted Answer

D

Question 4

At the end of the accounting period,Sefcik Company made an adjusting entry for supplies consumed.Which of the following choices reflects how this event would affect the company's financial statements? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Accepted Answer

The answer of At the end of the accounting period,Sefcik...

Question 5

If a company purchases supplies on account,this transaction would cause
A) total assets to decrease.
B) liabilities to increase.
C) equity to decrease.
D) Retained Earnings to increase.

Accepted Answer

Purchasing supplies on account means the company is acquiring goods without making an immediate payment. As a result, the company's liabilities increase since it now owes money to the supplier. However, total assets, equity, and retained earnings are not impacted by this transaction.

Question 6

Sefcik Company purchased supplies on account.Which of the following choices accurately reflects how this event would affect the company's financial statements? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Accepted Answer

The answer of Sefcik Company purchased supplies on account.Which of...

Question 7

Which of the following transactions involves a deferral?
A) recording the prepayment of three months' rent
B) recording the interest earned (but not received)on a certificate of deposit
C) recording interest accrued on a note payable
D) recording salaries of employees earned but not yet paid

Accepted Answer

Recording the prepayment of three months' rent involves a deferral because the payment is made in advance and the expense is not yet incurred. The rent will be expensed over the three-month period. The other options involve accruals, recording interest earned but not received, recording interest accrued on a note payable, and recording salaries earned but not yet paid.

Question 8

Which of the following does not involve a deferral?
A) receipt of advance fees from clients
B) recording salaries of employees earned but not yet paid
C) payment of six months' rent
D) purchase of supplies on account

Accepted Answer

The answer of Which of the following does not involve...

Question 9

Jaycox Company received $1,000 cash from the issue of stock on January 1,2012.During 2012 the Jaycox Company earned $3,500 of revenue on account.The company collected $2,400 cash from accounts receivable and paid $3,000 cash for operating expenses.Based on this information alone:
A) total assets increased by $1,500.
B) total assets decreased by $3,500.
C) total assets increased by $2,400.
D) total assets did not change.

Accepted Answer

The initial cash from stock issuance increases assets by $1,000. Revenue earned on account increases accounts receivable by $3,500. Collecting $2,400 reduces accounts receivable but increases cash, so no net change. Paying $3,000 in expenses decreases cash. Net change in assets: $1,000 (stock) + $3,500 (revenue) - $3,000 (expenses) = $1,500 increase.

Question 10

Recording accrued salary expense at the end of an accounting period causes an increase in Salaries Expense and
A) an increase in a liability.
B) a decrease in an asset.
C) an increase in an equity account.
D) none of these.

Accepted Answer

Accrued salary expense represents salaries owed to employees but not yet paid. Recording this expense at the end of an accounting period increases the Salaries Expense account, which is an income statement account. It also increases a liability account, typically called Accrued Salaries Payable, since the company now owes money to its employees for work performed but not yet paid for. Therefore, choice A is the correct answer. There is no decrease in an asset or increase in an equity account when recording accrued salary expense.

Question 11

Osborn Company provided services to a customer on account.Which of the following represents the effect of this transaction on the financial statements? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Accepted Answer

The answer of Osborn Company provided services to a customer...

Question 12

ABC Company experienced an accounting event that affected its financial statements as indicated below:  Which of the following accounting events could have caused these effects on ABC's financial statements?
A) earned revenue on account
B) purchased equipment on account
C) provided services to customers for cash
D) recognized accrued salaries owed to employees

Accepted Answer

The answer of ABC Company experienced an accounting event that...

Question 13

Nikonowicz Enterprises experienced the following events during 2012,its first year in operation: The business acquired $10,000 cash by issuing common stock to investors.
The business purchased land for $6,000 cash.
Services were provided to customers for $8,000 cash.
Services were provided to customers for $3,000 on account.
Operating expenses of $5,000 were incurred and paid in cash.
Operating expenses of $2,000 were incurred on account.
A dividend of $1,000 was paid to the owners of Nikonowicz Enterprises.
Based on this information,the amount of retained earnings as of December 31,2012,was
A) $1,000.
B) $3,000.
C) $5,000.
D) $11,000.

Accepted Answer

Retained earnings are calculated as total revenues minus total expenses and dividends. Revenues are $11,000 ($8,000 cash + $3,000 on account), expenses are $7,000 ($5,000 cash + $2,000 on account), and dividends are $1,000. Thus, retained earnings = $11,000 - $7,000 - $1,000 = $3,000.

Question 14

Stahl Company paid $7,800 on May 1,2012 for insurance coverage for a one year period beginning that date.The adjusting entry required to recognize insurance expense on December 31,2012 would have what effect on the financial statements? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Accepted Answer

The answer of Stahl Company paid $7,800 on May 1,2012...

Question 15

The Redding Company recorded salaries earned by employees but not yet paid.Which of the following represents the effect of this transaction on the financial statements? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Accepted Answer

The answer of The Redding Company recorded salaries earned by...

Question 16

The adjustment to record the completion of services for which clients had paid in advance would involve which of the following?
A) a decrease in assets and an increase in equity
B) a decrease in liabilities and an increase in equity
C) an increase in assets and a decrease in liabilities
D) an increase in liabilities and a decrease in equity

Accepted Answer

The completion of services for which clients had paid in advance is a revenue recognition principle. It means that the company has now earned the revenue and needs to adjust their accounts. This adjustment involves decreasing the liability (prepayments) and increasing the equity (revenue). Therefore, the correct option is B) a decrease in liabilities and an increase in equity.

Question 17

Which of the following transactions does not involve an accrual?
A) recording revenue that has been earned but not yet received
B) recording interest expense incurred but not yet paid
C) recording salary expense incurred but not yet paid
D) recording the pre-payment of two year's worth of insurance

Accepted Answer

The pre-payment of two years' worth of insurance is a deferral transaction, not an accrual transaction. Accruals involve recognizing and recording expenses or revenues that have been incurred but not yet paid or received, respectively. Pre-payments are transactions where an expense (or revenue) is paid (or received) in advance and then recorded as an asset (or liability) until it is recognized as an expense (or revenue) in the future.

Question 18

Which of the following events involves an accrual?
A) a cash payment received from a customer before services are provided
B) supplies purchased with cash but not yet used
C) interest earned but not received
D) A and C

Accepted Answer

Accrual refers to revenue or expenses that have been earned or incurred, respectively, but not yet received or paid. Interest earned but not received is an example of an accrual. Option A is a prepayment, and option B is a type of asset known as prepaid expenses.

Question 19

The term "realization" refers to which of the following?
A) the closing of an account
B) the collection of cash from sale of goods or services
C) the earning of revenue
D) the correction of an error

Accepted Answer

Realization refers to the collection of cash from the sale of goods or services. This means that the revenue has been earned and now the company is actually receiving the money for it. The other options do not accurately fit the definition of realization.

Question 20

The entry to recognize salary expense incurred but not yet paid involves which of the following?
A) an increase in liabilities
B) an increase in assets
C) a decrease in assets
D) an increase in equity

Accepted Answer

Recognition of salary expense incurred but not yet paid results in an increase in the liability of the company as it owes money to its employees for their services. This liability is recognized as salaries payable (short-term liability) and will be settled in the future.

Quiz 2: Understanding the Accounting Cycle

The following selected account balances were drawn from the 2012 balance sheet and income statement of Fultz Company: Based on the above information,what is the balance of Common Stock for Fultz Company?

On May 1,2012,Perez Company paid $12,000 rent for a one year lease on equipment it uses in its operations.The adjusting entry at the end of the year

At the end of the accounting period,Sefcik Company made an adjusting entry for supplies consumed.Which of the following choices reflects how this event would affect the company's financial statements?

If a company purchases supplies on account,this transaction would cause

Sefcik Company purchased supplies on account.Which of the following choices accurately reflects how this event would affect the company's financial statements?

Which of the following transactions involves a deferral?

Which of the following does not involve a deferral?

Jaycox Company received $1,000 cash from the issue of stock on January 1,2012.During 2012 the Jaycox Company earned $3,500 of revenue on account.The company collected $2,400 cash from accounts receivable and paid $3,000 cash for operating expenses.Based on this information alone:

Recording accrued salary expense at the end of an accounting period causes an increase in Salaries Expense and

Osborn Company provided services to a customer on account.Which of the following represents the effect of this transaction on the financial statements?

ABC Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on ABC's financial statements?

Stahl Company paid $7,800 on May 1,2012 for insurance coverage for a one year period beginning that date.The adjusting entry required to recognize insurance expense on December 31,2012 would have what effect on the financial statements?

The Redding Company recorded salaries earned by employees but not yet paid.Which of the following represents the effect of this transaction on the financial statements?

The adjustment to record the completion of services for which clients had paid in advance would involve which of the following?

Which of the following transactions does not involve an accrual?

Which of the following events involves an accrual?

The term "realization" refers to which of the following?

The entry to recognize salary expense incurred but not yet paid involves which of the following?