GB 518 Quiz 2 GB518 Financial Accounting Principles and Analysis 1. � Question : � Financial statements are typically prepared in the following order: � � � � � � � Balance sheet, statement of retained earnings, income statement � � � � � � � Statement of retained earnings, balance sheet, income statement � � � � � � � Income statement, balance sheet, statement of retained earnings � � � � � � Income statement, statement of retained earnings, balance sheet Question 2. � Question : � A 10-column spreadsheet used to draft a company’s unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n): � � � � � � � Adjusted trial balance � � � � � � Work sheet � � � � � � � Post-closing trial balance � � � � � � � Unadjusted trial balance � � � � � � � General ledger � � � � Question 3. � Question : � The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800 and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made? Question 4. � Question : � A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: Question 5. � Question : � A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is: � � � � � � � Debit Unpaid Salaries $600 and credit Salaries Payable $600 � � � � � � Debit Salaries Expense $400 and credit Salaries Payable $400 � � � � � � � Debit Salaries Expense $600 and credit Salaries Payable $600 � � � � � � � Debit Salaries Payable $400 and credit Salaries Expense $400 Question 6. � Question : � A company’s Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period? Question 7. � Question : � A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? � � Question 8. � Question : � An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n): Question 9. � Question : � The Income Summary account is used: � � � � � � � To adjust and update asset and liability accounts � � � � � � To close the revenue and expense accounts � � � � � � � To determine the appropriate dividend amount � � � � � � � In some situations to replace the income statement � � � � � � � To replace the retained earnings account in some businesses Question 10. Question : � The accrual basis of accounting: � � � � � � Is generally accepted for external reporting since it is more useful for most business decisions � � � � � � � Is flawed because it gives complete information about cash flows � � � � � � � Recognizes revenues when received in cash � � � � � � � Recognizes expenses when paid in cash � � � � � � � Eliminates the need for adjusting entries at the end of each period Question 11. Question : � On April 1, 2011, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2011? Question 12. Question : � The main purpose of adjusting entries is to: � � � � � � � Record external transactions and events � � � � � � Record internal transactions and events � � � � � � � Recognize assets purchased during the period � � � � � � � Recognize debts paid during the period � � � � � � � Correct errors Question 13. Question : � Unearned revenue is reported on the financial statements as: � � � � � � � A revenue on the balance sheet � � � � � � A liability on the balance sheet � � � � � � � An unearned revenue on the income statement � � � � � � � An asset on the balance sheet � � � � � � � An operating activity on the statement of cash flows Question 14. Question : � The length of time covered by a set of periodic financial statements is referred to as the: � � � � � � � Fiscal cycle � � � � � � � Natural business year � � � � � � Accounting period � � � � � � � Business cycle � � � � � � � Operating cycle Question 15. Question : � On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company’s income statement for the year ended December 31, 2011? � � � � � � � $500 � � � � � � $4,000 � � � � � � � $6,000 � � � � � � $14,000 � � � � � � � $18,000 Question 16. Question : � Based on the following information, what would be the beginning balance in the Retained Earnings Account, assuming all accounts have a normal balance? Cash $ 6,754 � � Dividends � $ 2,000 Accounts receivable $ 13,733 � Consulting fees earned � $ 13,718 Office supplies � � $ 2,625 � � Rent expense $ 3,673 Land $ 37,153 � Salaries expense � $ 6,642 Office equipment � $ 14,535 � Telephone expense $ 560 Accounts payable � $ 6,463 � � Miscellaneous expense � � $ 280 Common stock � � $ 54,490 � Retained Earnings � ? Question 17. Question : � Which of the following statements is incorrect? � � � � � � � An income statement reports revenues earned less expenses incurred � � � � � � An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments � � � � � � � Interim financial reports can be based on one-month or three-month accounting periods � � � � � � � Property, plant and equipment are referred to as plant assets Question 18. Question : � On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. What is the amount that should be recorded as depreciation on December 31? � � Question 19. Question : � A classified balance sheet: � � � � � � � Measures a company’s ability to pay its bills on time � � � � � � Organizes assets and liabilities into important subgroups � � � � � � � Presents revenues, expenses and net income � � � � � � � Reports operating, investing and financing activities � � � � � � � Reports the effect of profit and dividends on retained earnings Question 20. Question : � The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: � � � � � � Income Summary account � � � � � � Closing account � � � � � � � Balance column account � � � � � � � Contra account Question 21. Question : � The difference between the cost of an asset and the accumulated depreciation for that asset is called � � � � � � � Depreciation Expense � � � � � � � Unearned Depreciation � � � � � � � Prepaid Depreciation � � � � � � � Depreciation Value � � � � � � Book Value Question 22. Question : � Based on the following information, determine the current assets, assuming all accounts have a normal balance? Cash $ 6,754 � � Dividends � $ 2,000 Accounts receivable $ 13,733 � Consulting fees earned � $ 13,718 Office supplies � � $ 2,625 � � Rent expense $ 3,673 Land $ 37,153 � Salaries expense � $ 6,642 Office equipment � $ 14,535 � Telephone expense $ 560 Accounts payable � $ 6,463 � � Miscellaneous expense � � $ 280 Common stock � � $ 54,490 � Retained Earnings � ? Question 23. Question : � On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include: � � � � � � A debit to an expense for $1,250 � � � � � � A debit to a prepaid expense for $1,250 � � � � � � � A credit to an expense for $3,750 � � � � � � � A debit to a prepaid expense for $3,750 � � � � � � � A credit to a liability for $1,250 Question 24. Question : � On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: � � � � � � Debit Prepaid Insurance, $1,800; credit Cash, $1,800 � � � � � � Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440 � � � � � � � Debit Prepaid Insurance, $360; credit Insurance Expense, $360 � � � � � � Debit Insurance Expense, $360; credit Prepaid Insurance, $360 � � � � � � � Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440 Question 25. Question : � The adjusted trial balance contains information pertaining to: � � � � � � � Asset accounts only � � � � � � � Balance sheet accounts only � � � � � � � Income statement accounts only � � � � � � All general ledger accounts � � � � � � � Revenue accounts only
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