2.
Internal users of accounting information include a company's investors (or
stockholders).
A. True
B. False
4.
The balance sheet reports assets and claims to those assets at a specific point in
time.
A. True
B. False
5.
The notes to the financial statements are not required.
A. True
B. False
8.
Easy transfer of ownership is a characteristic of which form of business
organization?
A. Sole proprietorship
B. Partnership
C. Corporation
D. All of the above
9.
In which forms of business organization are the owners personally liable for all
the debts of the business?
A. Sole proprietorship and corporation
B. Sole proprietorship and partnerships
C. Partnership and corporation
D. All of them
10.
Internal users want answers to which of the following questions?
A. What price for our product will maximize the company's net income?
B. Which product line is most profitable?
C. Is cash sufficient to pay dividends to stockholders?
D. All of the above.
14.
Cost of goods sold is classified as what type account?
A. Asset
B. Expense
C. Liability
D. Revenue
15.
Which of the following would not appear on the income statement?
A. Service revenue
B. Interest expense
C. Net income
D. Dividends paid
9.
Which of the following is not classified as a current asset?
A. Prepaid expenses.
B. Accounts receivable.
C. Patents.
D. Inventory.
10.
Which of the following is the correct order for listing current assets on the balance
sheet?
A. Cash, accounts receivable, prepaid expenses, inventories, short-term investments
B. Cash, short-term investments, inventories, prepaid expenses, accounts receivable
C. Cash, accounts receivable, inventories, short-term investments, prepaid expenses
D. Cash, short-term investments, accounts receivable, inventories, prepaid expenses
11.
Which of the following is an example of an intangible asset?
A. Accounts receivable.
B. Trademarks.
C. Prepaid expenses.
D. Property, plant, and equipment.
3.
Every transaction affects at least two accounts.
A. True
B. False
4.
Assets are increased with credits.
A. True
B. False
5.
Transactions are recorded in chronological order in the general journal.
A. True
B. False
7.
Issuance of Stock is an investing activity.
A. True
B. False
9.
If an expense is paid with cash:
A. assets will decrease.
B. retained earnings will increase.
C. liabilities will increase.
D. expenses will decrease.
10.
If cash is received in advance from a customer:
A. assets will decrease.
B. retained earnings will increase.
C. liabilities will increase.
D. stockholders' equity will decrease.
11.
Receipt of an unearned revenue:
A. increases an asset; increases a liability.
B. increases an asset; increases a revenue.
C. decreases a liability; increases stockholders' equity.
D. decreases a revenue; increase stockholders' equity.
13.
Accounts with normal debit balances include:
A. assets and liabilities.
B. liabilities and expenses.
C. stockholders' equity and revenues.
D. expenses and assets.
14.
Accounts with normal credit balances include:
A. assets and liabilities.
B. revenues and expenses.
C. liabilities and stockholders' equity.
D. revenues and assets.
16.
The first place every transaction is recorded is the:
A. ledger.
B. account.
C. basic accounting equation.
D. journal.
17.
Issuing stock to investors for cash would result in:
A. a debit to Common Stock and a credit to Cash.
B. a debit to Cash and a credit to Common Stock.
C. a debit to Cash and a credit to Retained Earnings.
D. a credit to Cash and a debit to Retained Earnings.
20.
The process of transferring entries from the journal to the ledger is called:
A. journalizing.
B. transferring.
C. posting.
D. balancing.
21.
When a trial balance balances, it is an indication that:
A. all journal entries have been posted.
B. the account balances are correct.
C. debits equal credits.
D. all transactions have been journalized.
23.
On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000
cash. This is an example of a (an) ______.
A. operating activity
B. financing activity
C. investing activity
D. accural activity
4.
Book value is equal to cost minus accumulated depreciation.
A. True
B. False
5.
Accrued expenses are expenses that have already been paid.
A. True
B. False
6.
Closing entries produce a zero balance in each temporary account.
A. True
B. False
11.
Which of the following is not a typical example of a prepaid expense?
A. Supplies
B. Insurance
C. Rent
D. Wages
16.
Medina Company purchased office supplies costing $5,000 and debited Office
Supplies for the full amount. Supplies on hand at the end of the accounting period were
$1,300. The appropriate adjusting journal entry to be made would be:
A. debit Office Supplies $3,700; credit Office Supplies Expense $3,700.
B. debit Office Supplies Expense $1,300; credit Office Supplies $1,300.
C. debit Office Supplies Expense $3,700; credit Office Supplies $3,700.
D. debit Office Supplies $1,300; credit Office Supplies Expense $4,000.
18.
On August 1 the Hwang Co. purchased a photocopy machine for $8,000. The
estimated annual depreciation on the machine is $1,680. If the company prepares annual
financial statements on December 31, the appropriate adjusting journal entry to make on
December 31 would be:
A. debit Depreciation Expense $140; credit Accumulated Depreciation $140.
B. debit Depreciation Expense $1,680; credit Accumulated Depreciation $1,680.
C. debit Depreciation Expense $700; credit Accumulated Depreciation $700.
D. debit Depreciation Expense $700; credit Office Equipment $700.
20.
On July 1, East Lake, Inc. purchased a 3-year insurance policy for $12,600.
Prepaid Insurance was debited for the entire amount. On December 31, when the annual
financial statements are prepared, the appropriate adjusting journal entry would be:
A. debit Prepaid Insurance $2,100; credit Insurance Expense $2,100.
B. debit Insurance Expense $10,500; credit Prepaid Insurance $10,500.
C. debit Prepaid Insurance $10,500; credit Insurance Expense $10,500.
D. debit Insurance Expense $2,100; credit Prepaid Insurance $2,100.
3.
Which of the following events is not recorded in the accounting records?
A. Equipment is purchased on account.
B. An employee is terminated.
C. A cash investment is made into the business.
D. The owner withdraws cash for personal use.
7.
A revenue account:
A. is increased by debits.
B. is decreased by credits.
C. has a normal balance of a debit.
D. is increased by credits.
8.
Which accounts normally have debit balances?
A. Assets, expenses, and revenues.
B. Assets, expenses, and retained earnings.
C. Assets, liabilities, and dividends.
D. Assets, dividends, and expenses.
6.
The trial balance shows Supplies $1,350 and Supplies Expense $0. If $600 of
supplies are on hand at the end of the period, the adjusting entry is:
A. Supplies
600
Supplies Expense
B. Supplies
750
Supplies Expense
7.
C. Supplies Expense
Supplies
750
750
D. Supplies Expense
Supplies
600
600
600
750
Adjustments for unearned revenues:
A. decrease liabilities and increase revenues.
B. increase liabilities and increase revenues.
C. increase assets and increase revenues.
D. decrease revenues and decrease assets.
8.
Adjustments for prepaid expenses:
A. decrease assets and increase revenues.
B. decrease expenses and increase assets.
C. decrease assets and increase expenses.
D. decrease revenues and increase assets.