For each question, circle the letter of the best answer. Circle only one answer per question.

1. Which of the following forms of business organizations exists as a legal entity?

A) A sole proprietorship
B) A partnership
C) A corporation
D) A labor union
2. Which of the following is not part of the standard heading of each financial statement?
A) The company name
B) The statement title
C) The date or time period of the statement
D) The company’s industry
3. Which one of the following does not impact retained earnings directly?
A) Net income
B) Net loss
C) Dividends
D) Stock issuances
4. The Cash t-account has a beginning balance of $32,000. During the year, $244,000 was
debited and $249,000 was credited to the account. What is the ending balance of cash?
A) ($5,000)
B) $37,000
C) $27,000
D) Cannot be determined from the information given.
(This T-account is to assist you with your calculation.)
5. Which of the following is the correct order of the steps in the accounting cycle?
A) Adjust, report, analyze, record, and close
B) Record, report, analyze, adjust, and close
C) Report, analyze, close, record, and adjust
D) Analyze, record, adjust, report, and close

6. Which statement is true of the statement of stockholders’ equity?

A) It reports a company’s assets, liabilities, and equities.
B) It reports a company’s revenue and expenses for a period.
C) It is prepared using the unadjusted trial balance in order to facilitate the closing process.
D) It shows a company’s stock issuances and dividends paid to shareholders.

7. Assets are recorded in the balance sheet in order of:

A) Market Value
B) Historic Value
C) Liquidity
D) Maturity
E) None of the above

8. Which of the following is included as a component of stockholders' equity on the

balance sheet?
A) Buildings
B) Retained earnings
C) Prepaid property taxes
D) Accounts payable
E) Dividends

9. As inventory and property plant and equipment on the balance sheet are consumed, they
are reflected:
A) As a revenue on the income statement
B) As an expense on the income statement
C) As a use of cash on the statement of cash flows
D) On the balance sheet because assets are never consumed
E) Both B and C because the financial statements articulate

10. An accrual of wages expense would produce what effect on the balance sheet?
A) Increase liabilities and decrease earned capital
B) Decrease liabilities and increase earned capital
C) Increase expenses and increase liabilities
D) Decrease assets and decrease liabilities

11. Examine the financial statements effects template below. Then select the answer that best
describes the transaction.

A) Repay accounts payable of $60, net

B) Record accounts receivable of $300 and cash collected of $60
C) Purchase inventory of $300 partly on account
D) Purchase $300 of equipment on account
E) None of the above

12. Sam's Club (part of the Wal-Mart consolidated operations) collects annual nonrefundable
membership fees from customers. When should Sam's Club recognize revenue for these
membership fees?
A) Immediately when cash is received because the fees are nonrefundable
B) Evenly over the membership year
C) Evenly over the current fiscal year
D) At the end of the membership year when Sam's has discharged its obligation to the
customer
E) Pro rata over the customer's actual purchasing pattern

13. Interest expense appears in which financial statement?

A) Statement of stockholders' equity
B) Balance sheet
C) Income statement
D) Statement of cash flows
E) All of the above

Problem, Preparing Financial Statements

Use the accounts below for Testo to prepare a multi-step income statement for the year ended
December 31, 2015 and a classified balance sheet at December 31, 2015.
Sales:4775.1
Cost of good sold 149.9
Income tax expense:
3250.2