Chapter 4
1. The closing process is necessary in order to:
A. calculate net income or net loss for an accounting period.
temporary
B. ensure that all permanent accounts are closed to zero at the end of each accounting period.
C. ensure that the company complies with state laws.
D. ensure that net income or net loss and owner withdrawals for the period are closed into the
owner's capital account.
E. ensure that management is aware of how well the company is operating.
2. The Unadjusted Trial Balance columns of a company's work sheet show the balance in the
Office Supplies account as $750. The Adjustments columns show that $425 of these supplies
were used during the period. The amount shown as Office Supplies in the Balance Sheet
columns of the work sheet is:
Supplies
A. $325 debit.
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B. $325 credit.
C. $425 debit.
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D. $750 debit.
E. $750 credit.
3. If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the
wrong work sheet column. The Balance Sheet columns will balance on completing the work
sheet but with the wrong net income, if the amount sorted in error is:
A. An expense amount placed in the Balance Sheet Credit column.
B. A revenue amount placed in the Balance Sheet Debit column.
C. A liability amount placed in the Income Statement Credit column. Is
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D. An asset amount placed in the Balance Sheet Credit column.
E. A liability amount placed in the Balance Sheet Debit column.
4. The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments
columns contain entries for the following: 1. Office supplies used during the period, $1,200. 2.
Expiration of prepaid rent, $700. 3. Accrued salaries expense, $500. 4. Depreciation expense,
$800. 5. Accrued service fees receivable, $400. The Adjusted Trial Balance columns total is:
A. $80,400.
Office Supphes
B. $84,000.
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C. $85,700.
Accrued sales
D. $85,900.
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E. $87,600.
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5. The following information is available for the Travis Travel Agency. After these closing entries
what will be the balance in the Jay Travis, Capital account? (1) Total revenues $125,000; (2)
Total Expenses $60,000; (3) Jay Travis, Capital $80,000; (4) Jay Travis, Withdrawals $15,000
A. $ 65,000.
B. $ 80,000.
C. $130,000.
D. $145,000.
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6. After preparing and posting the closing entries to close revenues (and gains) and expenses
(and losses) into the income summary, the income summary account has a debit balance of
$33,000. The entry to close the income summary account will include:
A. a debit of $33,000 to owner withdrawals.
B. a credit of $33,000 to owner withdrawals.
C. a debit of $33,000 to income summary.
D. a debit of $33,000 to owner capital.
E. a credit of $33,000 to owner capital.
7. An error is indicated if the following account has a balance appearing on the post-closing trial
balance:
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D. Ted Nash, Capital.
E. Salaries Payable
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8. A company's ledger accounts and their end-of-period balances before closing entries are
posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process
of closing theIncome Summary account? (Assume all accounts have normal balances.)
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A. $16,780 debit.
B. $ 7,180 credit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit.
9. A post-closing trial balance reports:
A. All ledger accounts with balances, none of which can be temporary accounts.
B. All ledger accounts with balances, none of which can be permanent accounts.
C. All ledger accounts with balances, which include some temporary and some permanent
accounts.
D. Only revenue and expense accounts.
E. Only asset accounts.
Chapter 3
1. Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three, or six-month periods.
B. That are prepared before any adjustments have been recorded.
C. That show the assets above the liabilities and the liabilities above the equity.
D. Where revenues are reported on the income statement when cash is received and expenses
are reported when cash is paid.
E. Where the adjustment process is used to assign revenues to the periods in which they are
earned and to match expenses with revenues.
2. If a company mistakenly forgot to record depreciation on office equipment at the end of an
accounting period, the financial statements prepared at that time would show:
A. Assets overstated and equity understated.
B. Assets and equity both understated.
C. Assets overstated, net income understated, and equity overstated.
D. Assets, net income, and equity understated.
E. Assets, net income, and equity overstated.
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3. If a company failed to make the end-of-period adjustment to remove from the Unearned
Management Fees account the amount of management fees that were earned, this omission
would cause:
A. An overstatement of net income.
B. An overstatement of assets.
C. An overstatement of liabilities.
D. An overstatement of equity.
E. An understatement of liabilities.
4. A company earned $2,000 in net income for October. Its net sales for October were $10,000.
Its profit margin is:
,
A. 2%.
100%
B. 20%.
C. 200%.
D. 500%.
E. $8,000.
5. Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A
physical count of the supplies showed $105 of unused supplies available. The required
adjusting entry is:
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A. Debit Office Supplies $105 and credit Office Supplies Expense $105.
B. Debit Office Supplies Expense $105 and credit Office Supplies $105.
C. Debit Office Supplies Expense $254 and credit Office Supplies $254.
D. Debit Office Supplies $254 and credit Office Supplies Expense $254.
E. Debit Office Supplies $105 and credit Supplies Expense $254.
6. 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:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
E. Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.
7. PPW Co. leased a portion of its store to another company for eight months beginning on
October 1, 2009, at a monthly rate of $800. This other company paid the entire $6,400 cash on
October 1, which PPW Co. recorded as unearned revenue. The journal entry made by PPW Co.
at year- end on December 31, 2009 would include:
A. A debit to Rent
Earned for $2,400.
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B. A credit to Unearned Rent for $2,400.
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C. A debit to Cash for $6,400.
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D. A credit to Rent Earned for $2,400.
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E. A debit to Unearned Rent for $4,000.
8. An adjusting entry was made on December 31, 2009 to accrue salary expense of $1,200.
Which of the following entries would be prepared to record the next⑳
payment of salaries, on
January, 2010 in the amount of $3,000?
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A. Debit Salaries Expense $3,000 and credit Cash $3,000.
B. Debit Salaries Payable $3,000 and credit Cash $3,000.
C. Debit Salaries Payable $1,200 and credit Cash $1,200.
D. Debit Salaries Expense $1,200 and credit Salaries Payable $1,200.
E. Debit Salaries Payable $1,200; Debit Salaries Expense $1,800 and credit Cash $3,000.
9. On May 1, 2009, Carter Advertising Company received $3,600 from Kaitlyn Breanna for
advertising services to be completed April 30, 2010. The Cash receipt was recorded as
unearned fees. The adjusting entry on December 31, 2010 should include:
A. a debit to Earned Fees for $3,600.
B. a debit to Unearned Fees for $1,200.
C. a credit to Unearned Fees for $1,200.
D. a debit to Earned Fees for $2,400.
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E. a credit Earned Fees for $2,400.
10. A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on
December 31. Which of the following statements is true?
A. It will have no effect on income.
B. It will overstate assets and liabilities by $9,000
C. It will understate net income by $9,000.
D. It will understate assets by $9,000.
E. It will understate expenses and overstate net income by $9,000.