TEST I: MULTIPLE CHOICE

1. The work sheet is a:

a. formal statement issued to creditors
b. working paper often used by accountants to summarize adjusting entries
c. replacement for the ledger
d. replacement for a set of financial statements

2. The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on a
work sheet:
a. is the amount of net income or loss
b. indicates there is an error on the work sheet
c. is not unusual for preparing the work sheet
d. is the net difference between revenue, expenses, and drawing

3. Net income appears on the work sheet in the:

a. debit column of the Balance Sheet columns
b. debit column of the Adjustments columns
c. debit column of the Income Statement columns
d. credit column of the Income Statement columns

4. A net loss appears on the work sheet in the:

a. debit column of the Balance Sheet columns
b. debit column of the Trial Balance columns
c. debit column of the Income Statement columns
d. credit column of the Adjustments columns

5. A net loss appears on the work sheet:

a. when revenue exceeds expenses
b. when expenses exceed revenues
c. every time the Adjusted Trial Balance columns do not balance on the initial totaling
d. every time the Income Statement columns do not balance on the initial totaling

6. After net income is entered on the work sheet, the Balance Sheet debit and credit columns must:
a. be the same amount as the total amount of the Income Statement debit and credit columns
b. equal each other
c. be the same amount as the total amount in the Adjusted Trial Balance debit and credit columns
d. not be equal to each other and need not be the same total amounts as any other pair of columns on the
work sheet

7. If the work sheet does not contain a pair of columns for the Retained Earnings Statement, the capital stock and
dividends amounts are:
a. omitted
b. extended to the Balance Sheet columns
c. extended to the Income Statement columns
d. extended to the Adjustments columns

8. Which of the following appears in the Balance Sheet columns of the work sheet?
a. Equipment
b. Fees Earned
 c. Depreciation Expense
d. Supplies Expense

9. Which of the following appears in the Balance Sheet columns of the work sheet?
a. Unearned Fees
b. Rent Expense
c. Salaries Expense
d. Service Revenue

10. Which of the following appears in the Balance Sheet columns of the work sheet?
a. Accounts Receivable
b. Rent expense
c. Supplies Expense
d. Service Revenue

11. Which of the following appears in the Balance Sheet columns of the work sheet?
a. Prepaid Insurance
b. Wages Expenses
c. Rent Revenue
d. Service Revenue  

12. An indication that the work sheet columns are in balance and the work sheet is completed is:
a. the word "Total" is written at the bottom of each pair of columns  
b. each pair of columns is double underlined
c. each pair of columns has the totals circled
d. the final figures are written in ink  

13. After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals
of the Debit and Credit columns are P39,750 and P21,750, respectively. What is the amount of net income or net loss for the
period?
a. P18,000 net income
b. P18,000 net loss
c. P39,750 net income
d. P21,750 net income

14. After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals
of the Debit and Credit columns are P30,750 and P69,750, respectively. What is the amount of net income or net loss for the
period?
a. P39,000 net income
b. P39,000 net loss
c. P30,750 net income
d. P69,750 net income  

15. After all of the account balances have been extended to the Income Statement columns of the work sheet, the
totals of the debit and credit columns are P89,900 and P67,600, respectively. What is the amount of the net income or net loss for
the period?
a. P22,300 net income
b. P22,300 net loss
c. P89,900 net income
 d. P67,600 net loss  

16. After all of the account balances have been extended to the Income Statement columns of the work sheet, the
totals of the debit and credit columns are P92,300 and P67,600, respectively. What is the amount of the net income or net loss for
the period?
a. P24,700 net income  
b. P24,700 net loss
c. P92,300 net income
d. P92,300 net loss  

17. When preparing the Retained Earnings Statement, the beginning capital balance can always be found:
a. in the Income Statement columns of the work sheet  
b. in the statement of cash flows
c. in the general ledger
d. in the general journal
 
18. Unearned Fees appears on the:
a. balance sheet  
b. Retained Earnings Statement
c. income statement
d. statement of cash flows  

19. Accumulated Depreciation appears on the:

a. balance sheet
b. Retained Earnings Statement
c. income statement
d. statement of cash flows  

20. Salaries Payable appears on the:

a. balance sheet  
b. Retained Earnings Statement
c. income statement
d. statement of cash flows  

21. Depreciation Expense appears on the:

a. balance sheet  
b. Retained Earnings Statement
c. income statement
d. statement of cash flows

22. Long-term Liabilities appears on the:

a. balance sheet  
b. Retained Earnings Statement
c. income statement
d. statement of cash flows  

23. Accounts Receivable appears on the:

a. Balance sheet
b. Retained Earnings Statement
 c. Income Statement
d. Statement of Cash Flows
24. Accumulated Depreciation appears on the:
a. balance sheet in the current assets section  
b. balance sheet in the fixed assets section
c. balance sheet in the long-term liabilities section
d. income statement as an operating expense  

25. Notes Receivable due in 350 days appears on the:

a. balance sheet in the current assets section  
b. balance sheet in the fixed assets section
c. balance sheet in the current liabilities section
d. income statement as an expense  

26. Unearned Fees appears on the:

a. balance sheet in the current assets section  
b. balance sheet as a current liability
c. balance sheet in the Stockholders' equity section
d. income statement as revenue  

27. Which one of the fixed asset accounts listed below will not have a related contra asset account?
a. Office Equipment  
b. Land
c. Delivery Equipment
d. Building  

28. The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a:
a. fixed asset  
b. current asset
c. contra asset
d. current liability  

29. Prepaid insurance is reported on the balance sheet as a:

a. current asset  
b. fixed asset
c. current liability
d. long-term liability  

30. At the end of an accounting year, in what statement would a balance in the prepaid insurance account appear?
a. balance sheet  
b. income statement
c. statement of cash flows
d. Retained Earnings Statement  

31. Which of the following is reported on the Retained Earnings Statement for the current year?
a. Accumulated depreciation  
b. Stockholders' additional investment made during the current period
c. Rent expense
d. Wages payable  
32. Adjusting entries are dated in the journal as of:
a. the date they are actually journalized.
b. the last day of the accounting period.
c. the first day of the accounting period
d. the middle of the accounting period.  

33. Adjusting entries:

a. need not be journalized since they appear on the work sheet and the ledger accounts need not be adjusted.  
b. need not be posted if the financial statements are prepared from the work sheet
c. are not needed if reversing entries are prepared
d. must be journalized and posted

34. Closing entries:

a. need not be journalized if reversing entries are prepared
b. need not be posted if the financial statements are prepared from the work sheet
c. are not needed if adjusting entries are prepared
d. must be journalized and posted

35. Closing entries are dated in the journal as of:

a. the date they are actually journalized, although they are generally prepared after the end of the accounting
period
b. the last day of the accounting period, although they are actually journalized after the end of the accounting
period
c. the first day of the accounting period, although they are actually journalized after the end of the accounting
period
d. the first day of the subsequent accounting period

36. Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
a. Supplies Expense
b. Accumulated Depreciation
c. Prepaid Expenses
d. Unearned revenues

37. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?
a. Salaries Expense
b. Fees Earned
c. Unearned Rent
d. Depreciation Expense

38. Which of the following accounts will be closed to Retained Earnings at the end of the fiscal year?
a. Rent Expense
b. Fees Earned
c. Income Summary
d. Depreciation Expense

39. Which of the following accounts ordinarily appears in the post-closing trial balance?
a. Dividends
 b. Supplies Expense
c. Fees Earned
d. Unearned Rent

40. The entry to close the appropriate insurance account at the end of the accounting period is debit:
a. Income Summary; credit Prepaid Insurance
b. Prepaid Insurance; credit Income Summary
c. Insurance Expense; credit Income Summary
d. Income Summary; credit Insurance Expense

41. Which of the following accounts appears on a post-closing trial balance?

a. Insurance Expense
b. Prepaid Insurance
c. Dividends
d. Fees Earned

42. Which of the following accounts appears on a post-closing trial balance?

a. Insurance Expense
b. Fees Earned
c. Dividends
d. Unearned Fees

43. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:
Accumulated Depreciation P 3,000
Fees Earned 20,000
Depreciation Expense 3,500
Insurance Expense 1,000
Prepaid Rent 4,000
Supplies 500
Net income for the period is:

a. P15,500
b. P 8,000
c. P15,000
d. P11,000

44. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:
Accumulated Depreciation P 6,000
Fees Earned 25,000
Depreciation Expense 1,500
Insurance Expense 1,000
Prepaid Insurance 4,000
Supplies 500
Supplies Expenses 4,500
Net income for the period is:

a. P18,000
b. P7,500
c. P8,000
 d. P19,000

45. A fiscal year:

a. ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
b. for a business is determined by the federal government
c. always begins on January 1 and ends on December 31 of the same year
d. should end at the height of the business's annual operating cycle

46. In the normal accounting cycle the:

a. financial statements are prepared after the adjusting entries are posted
b. financial statements are prepared before the closing entries are posted
c. adjusting and closing entries are journalized after the financial statements are prepared
d. post-closing trial balance is prepared before the closing entries are posted

47. In the accounting cycle of a manual accounting system, the last step is:
a. preparing the financial statements
b. journalizing the adjusting entries
c. posting the closing entries
d. preparing a post-closing trial balance

48. Work sheets are not usually prepared:

a. during the accounting cycle of a manual accounting system
b. during the accounting cycle of a computerized system
c. unless they must be present to the bank when applying for a loan
d. if the financial statements are going to be prepared by an experienced accountant

49. Reversing entries are:

a. used by all entities
b. simply the analysis and recording of entries in the subsequent period
c. needed to correct closing entries
d. not used by all entities

50. A reversing entry reverses a(n):

a. closing entry
b. transaction entry
c. adjusting entry
d. correcting entry

TEST II: PROBLEM

1. List the errors in the following trial balance. All accounts have normal balances.
Hondo Auto Services, Inc.
Trial Balance
For Month Ending, September 30, 20—

Cash P 19,475
Accounts Receivable ?
Supplies 1,000
Equipment 15,000
 Prepaid Insurance 500
Accounts Payable 2,500
Capital Stock 17,000
Dividends 1,000
Fees Earned 49,600
Salary Expense 14,500
Rent Expense 9,000
Utilities Expense 1,400
Supplies Expense 3,900
Miscellaneous Expense 250
55,000 81,575

(A) What would be the new balance of the trial balance after errors are corrected? Accounts receivable?

2. After all adjustments have been made, but before the accounts have been closed, the following balances were
taken from the ledger:
Accounts payable P 40,000 Insurance expense P 8,600
Accounts receivable 54,500 Prepaid insurance 5,275
Accumulated depreciation 83,325 Rent expense 21,400
Capital Stock 20,000 Retained earnings 80,950
Cash 7,150 Salary expense 66,000
Depreciation expense 23,500 Salaries payable 150
Dividends 28,000 Service revenue 151,000
Equipment 155,000 Supplies 2,500
Supplies expense 3,500

Journalize the entries to close the appropriate accounts.

3. Presented below are a number of adjusting entries:

1.) Dec 31 Printing supplies expense 20,000
Printing supplies 20,000

2.) Subscription revenues 15,000

Unearned subscription revenues 15,000

3.) Insurance expense 12,000

Prepaid insurance 12,000

4.) Interest receivable 500

Interest income 500

5.) Bad debt expense 5,000

Allowance for bad debt 5,000

6.) Salaries expense 25,000

Salaries payable 25,000

7.) Rent revenues 30,000

Unearned rent revenues 30,000
8.) Depreciation expense-Equipment 10,000
Accumulated depreciation-Equipment 10,000

9.) Interest expense 600

Interest payable 600

10.) Rent expense 20,000

Prepaid rent 20,000

Required: Prepare the reversing entries. (Indicate “no reversing entry” if not applicable.)