Module 4 Quiz

Multiple Choice

1. Which of the following is an example of an implicit transaction?

a. Payment of one year’s rent in advance

b. Payment of dividends to stockholders
c. Recording monthly depreciation on equipment
d. Expiration of prepaid rent.
e. Both a and c
f. Both c and d

2. Which of the following is not an application of an accrual accounting?

a. Adjusting the accounts at the end of a period

b. Recognizing revenues when earned
c. Recognizing expenses when incurred
d. Recording expenses when paid

3. A company recorded cash purchases of supplies as a debit to what account?

Dr. Office Supplies Inventory

Cr. Cash

a. Assets
b. Cash
c. Office Supplies Inventory
d. Office Supplies Expense

4. In November, cash was received in advance of rendering a service. The explicit transaction was
correctly recorded in November. If the service was not performed by December 31, the adjusting entry
would be

In November

DR. Cash

Cr. Unearned Revenue

Dr. Ueanred Revenue

Cr. Revenues

a. a debit to Unearned Revenue and a credit to Cash.

b. a debit to Unearned Revenue and a credit to Revenue.
c. a debit to Revenue and a credit to Prepaid Services.
d. a debit to Prepaid Services and a credit to Revenue. e. both b and d f. none of the above

5. The Wages Payable account is an example of

a. an expense.
b. an asset.
c. a liability.
d. an owners’ equity item.

6. ABC Engineering completed a survey for York, Corp., on July 30 and billed the company on August 1.
For ABC, this is an example of

Dr. Accounts Recivable

Cr. Revenues

a. an accrued expense.
b. an accrued revenue.
c. a deferred expense.
d. a deferred revenue.

7. The journal entry to record the receipt of revenue received in advance requires a

Dr. Cash

Cr. Unearned Revenue

Dr. Unearned Revenue

Cr. Revnue

a. debit to Unearned Revenue.

b. credit to Revenue.
c. credit to Cash.
d. debit to Cash.
e. debit to Revenue.

8. The journal entry to record the accrual of interest expense on a one-year note requires a credit to

Dr. InTerest Expesne

Cr. Interest Payable

Dr. Interest Payable

Cr. Cash

a. Cash.
b. Interest Expense.
c. Interest Payable.
d. Prepaid Interest.
9. Which of the following accounts is a current asset?

a. Accounts Receivable
b. Equipment
c. Goodwill
d. Accounts Payable

10. Which of the following accounts is a current liability?

a. Wages Payable
b. Bonds Payable due in 2019
c. Prepaid Rent
d. Sales Taxes Payable
e. both a and d

11. Which of the following is used in liquidity determination?

a. Return on sales ratio

b. Profit margin
c. Current ratio
d. None of the above.

12. Donald, Corp.’s balance sheet as of Dec. 31, 20X2 includes the following: Current assets $ 60,000
Current liabilities $ 15,000 Total assets $ 90,000 Total liabilities $ 45,000 What is Donald’s current ratio?
a. 2.0
b. 4.0
c. 3.0
d. 6.0

13. Morton, Corp., has the following income statement items for the year 20X2: Sales $ 100,000 Gross
profit $ 72,000 Operating expenses $ 47,000 Net income $ 25,000 What is Morton’s return on sales?

a. 5%
b. 10%
c. 25%
d. 40%