Accounting 201
SI Practice Exam Ch. 1-4
1. 201 Company pays its employees every Friday (not including Friday’s labor)
for work rendered that week. The payroll is typically $7,000 per week (we are
open 7 days/week). What journal entry would be recorded on Wednesday if the
end of the accounting period is on a Wednesday?
A. Salary Expense
6,000
Salary Payable
6,000
B. Salary Expense
6,000
Cash
6,000  would be for Friday (if $7,000)
C. Salary Payable
6,000
Cash
6,000
D. Salary Payable
6,000
Salary Expense
6,000
2. The appropriate journal entry to record depreciation expense would include a
debit to depreciation expense and a credit to which account?
A. Buildings
B. Retained Earnings
C. Accumulated Depreciation
D. Loss in Market Value
3. At the beginning of the month, a customer paid us $5,000 for services not yet
rendered. At the end of the month, we have performed $2,000 of the services as
expected. What journal entry will be made at the end of the month?
A. Cash
2,000
Unearned Revenue
2,000
B. Unearned Revenue
3,000
Revenue
3,000
C. Unearned Revenue
2,000
Revenue
2,000
D. No entry is needed
Decrease unearned by 2,000
4. Which of the following would result in an increase in Retained Earnings?
A. Issuing dividends
B. Net income
C. Net loss
D. Investments by owners
5. Which of the following transactions would not have any effect on stockholders’
equity?
A. Investments of cash by stockholders
B. Net loss
C. Dividends to stockholders
D. Purchase of land using the proceeds of a bank loan
6. Gerald had beginning total stockholders' equity of $160,000. During the year,
total assets increased by $240,000 and total liabilities increased by $120,000.
Gerald's net income was $180,000. No additional investments were made;
however, dividends did occur during the year. How much were the dividends?
A. 20,000
B. 60,000
C. 140,000
D. 220,000
7. Which of the following are increased by a debit?
A. Liabilities and expenses
B. Assets and expenses
C. Stockholders’ Equity and assets
D. Liabilities and Dividends
8. The trial balance:
A. Provides a listing of each account in active use
B. Provides a listing of every account in the chart of accounts
C. Proves that there are no errors in the journal or ledger
D. Is a formal financial statement
9. Which of the following accounts are not closed at the end of the period?
A. Wages Expense
B. Retained Earnings
C. Revenue
D. Depreciation Expense
10. The matching principle is best demonstrated by:
A. The use of debits and credits
B. The accounting equation, A = L + SE
C. Allocating the cost of an asset to expense over the periods during which
benefits are derived from the ownership of the asset
D. Offsetting the cash outflows of the period with the cash receipts of the period
11. Accumulated depreciation:
A. Appears on the balance sheet in the stockholders’ equity section
B. Appears on the income statement
C. Appears on the balance sheet as a contra-current-asset account
D. Appears on the balance sheet as a contra-Property, Plant, and Equipment
account
12. The Staley Corp. sold $1,000 of gift certificates in March, 2xx8. In June, 2xx8,
the gift certificates were redeemed. As a result, Staley:
A. Has an increase in revenue in March
B. Has an increase in unearned revenue in March
C. Has an increase in unearned revenue in June
D. Has an increase in stockholders’ equity in March
13. Which of the following statements regarding adjusting entries are true?
A. An accrual adjustment that increases an asset will include an increase in an
expense
B. A deferral adjustment that decreases an asset will include an increase in an
expense
C. Neither of the above are true
D. Both of the above are true
14. The following comments each relate to the recording of journal entries. Which
statement is true?
a. For any given journal entry, debits must exceed credits.
b. It is customary to record credits on the left and debits on the right.
c. The chart of accounts reveals the amount to debit and credit to the affected
accounts.
d. Journalizing is the process of converting transactions and events into
debit/credit format.
15. Failure to record the receipt of a utility bill for services already received will
result in:
a. An overstatement of assets.
b. An overstatement of liabilities.
c. An overstatement of equity. (expense decreases stockholders’ equity)
d. An understatement of assets.
16. The proper journal entry to record a company’s billing of clients for $500 of
services rendered is:
a. Cash
500
Accounts Receivable
500
b. Accounts Receivable
500
Capital Stock
500
c. Accounts Receivable
500
Service Revenue
500
d. Cash
500
Service Revenue
500
17. The proper journal entry to record $1,000 of Dividends paid by a company is:
a. Dividends
1,000
Cash
1,000
Dividends are not expenses
b. Accounts Payable
1,000
Cash
1,000
c. Dividends Expense
1,000
Cash
d. Dividends Expense
Service Revenue
1,000
1,000
1,000
18. Which of the following errors will be disclosed in the preparation of a trial
balance?
a. Recording transactions in the wrong account.
b. Duplication of a transaction in the accounting records.
c. Posting only the debit portion of a particular journal entry.
d. Recording the wrong amount for a transaction to both the account debited and
the account credited.
19. The word “debit” is best described to mean:
A. An increase in an account
B. A decrease in an account
C. Left
D. Right
20. Adjustments are needed:
A. To correct errors made during the journalizing process
B. To ensure that assets, liabilities, and equity accounts, as well as revenues and
expenses, are stated at their proper amounts
C. To adjust the accounts to a balance that makes the A = L + SE equation equal
D. To close accounts at the end of the period
21. When would a company require an accrual adjusting entry?
A. When a company owes its employees their wages, but will not pay them until
after the end of the period
B. When a company sells a gift certificate to a customer, but the customer does
not immediately use the gift certificate
C. When a company pays for three months of rent in advance
D. None of the above require an accrual adjusting entry
22. What type of adjusting journal entry is the recording of depreciation?
A. Accrual
B. Deferral
C. Closing
D. None of the above
23. How many of the following statements are true?
• Adjusting journal entries rarely, but sometimes, involve cash
• Adjusting journal entries must involve at least two balance sheet accounts
• Contra-accounts are not listed on the balance sheet
A. None
B. One
C. Two
D. Three
24. Which of the following is considered a “temporary” account?
A. Dividends Payable
B. Rental Expense
C. Retained Earnings
D. Accounts Receivable
25. Which of the following statements best describes the revenue principle?
A. Expenses must be matched to the revenues that they helped generate
B. Revenues must be recorded only when cash is received
C. Revenue must be recorded only when earned, regardless of the timing of cash
receipts
D. Revenue results from any receipt of cash from any source
26. Our building depreciates at a rate of $10,000 per year. The entry to record
depreciation at year end would result in:
A. A credit to depreciation expense
B. A credit to the Building account
C. No effect on total assets
D. A credit to accumulated depreciation
27. Which of the following is not considered a current asset?
A. Cash
B. Inventory
C. Equipment
D. Accounts Receivable
28. If a company forgot to record an adjusting entry for depreciation, which of the
following would be true?
A. Assets would be understated
B. Liabilities would be overstated
C. Net Income would be understated
D. Expenses would be understated
29. If a company began operations in 2012, assets increased by $35,000,
liabilities increased by $17,000, and the owners of the company invested $5,000
in the company during the year. Revenues were $50,000 and expenses were
$30,000. How much were dividends during the year?
A. $7,000
B. $5,000
C. $13,000
D. $20,000
30. Which of the following is not included as a rule or principle under GAAP?
A. Accrual-basis accounting
B. Cash-basis accounting
C. Matching principle
D. Revenue principle
31. Which of the following is the correct entry to record an adjustment of the
Prepaid Rent account at the end of the month?
A. Cash
500
Rent Expense
500
B. Rent Expense
500
Cash
500
C. Prepaid Rent
500
Rent Expense
500
D. Rent Expense
500
Prepaid Rent
500
32. How many of the following statements are true?
• For a given journal entry, debits must always equal credits.
• A journal entry must involve only 2 accounts.
• The principle of conservatism says that companies should use the least
optimistic measures when uncertainty exists about the value of an asset or
liability
A. One
B. Two
C. Three
D. None
33. Which of the following statements about the statement of cash flows is true?
A. The statement of cash flows shows only the cash flows from the period from
operating activities.
B. Cash paid for dividends is reported as an operating activity on the statement
of cash flows
C. Cash collected from customers is reported as an operating activity on the
statement of cash flows
D. The statement of cash flows is reported as of a point in time
34. During the off-season, the Atlanta Braves pre-sold 500 tickets for their first
game of the season at $20 per ticket. Which of the following would occur?
A. Cash would increase
B. Revenues would increase (revenue different than unearned rev)
C. A and B
D. Neither A nor B
If they asked about the game itself you would record revenue and unearned
revenue
35. Which of the following accounts have a normal credit balance?
A. Accounts Payable
B. Insurance Expense
C. Accounts Receivable
D. Equipment
36. Which of the following would result in a deferral (you’re paid before) adjusting
entry?
A. Earning income during a period but not paying associated income taxes until
the fiscal year end several months later (accrual)
B. Not paying employees their wages for hours worked in February until March
15 (accrual)
C. Using up supplies purchased for cash in the beginning of the month (paid
before)
D. Performing services for a client who will not pay us until after the period has
ended
37. Company A purchased $240,000 in supplies this year. The supplies account
increased by $20,000 during the year to an ending balance of $56,000. What was the
supplies expense for Company A during the Year?
A. $260,000
B. $276,000
C. $164,000
D. $220,000
38. Clemson Inc. borrowed $80,000 from the bank on 8/1/13 signing a 4 year, 12% note
payable. How much interest expense should GS report for 2010?
A. $3200
B. $4000
C. $2000
D. $4800
Answers to Practice Exam One
1. A
2. C
3. C
4. B
5. D
6. B
7. B
8. A
9. B
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
C
D
B
B
D
C
C
A
C
C
B
A
B
A
B
C
D
C
D
A
B
D
B
C
A
A
C
No expenses on balance sheet