ACCOUNTING (ACCT) EXAM 1 MULTIPLE

QUESTIONS WITH VERIFIED ANSWERS.

In an annual report, where would a financial statement reader find out what revenue
policy a company is following?

a. Balance sheet
b. Auditor's report
c. Notes to the financial statements
d. Management discussion and analysis section Correct Answer -c. Notes to the
financial statements

Which of the following is an investing activity?

a. Buying inventory
b. Issuing common stock
c. Buying machinery
d. Borrowing from a bank Correct Answer -c. Buying machinery

Breanna Company received $1,200 in payments during the month of July from clients
for services completed and billed in June. What is the entry to record the July
transactions?

a. Dr. Cash $1,200, Cr. Unearned Revenue $1,200

b. Dr. Unearned Revenue $1,200, Cr. Revenue $1,200
c. Dr. Cash $1,200, Cr. Accounts Receivable $1,200
d. Dr. Cash $1,200, Cr. Revenue $1,200 Correct Answer -c. Dr. Cash $1,200, Cr.
Accounts Receivable $1,200

The balance in the office supplies account on October 1 was $9,375. Office supplies on
hand on October 31st were $7,125. The adjusting entry needed at the end of the month
is:

a. Dr. Supplies Expense $2,250, Cr. Cash $2,250

b. Dr. Supplies Expense $9,375, Cr. Supplies Payable $9,375
c. Dr. Supplies Expense $2,250, Cr. Supplies $2,250
d. Dr. Supplies $7,125, Cr. Cash $7,125 Correct Answer -c. Dr. Supplies Expense
$2,250, Cr. Supplies $2,250

Wilbur Co. incurred repairs expense on account. What is the impact on the accounting
equation?

a. Assets increase and decrease so there is no impact to the accounting equation

b. Assets increase, Expenses increase, SE increases
c. Expenses Increase, Liabilities increase, SE decreases
d. Expenses Increase, Liabilities increase, SE increases Correct Answer -c. Expenses
Increase, Liabilities increase, SE decreases

A corporation purchases one year of insurance in advance using cash. This will cause
the following changes to the accounting equation...

a. An increase in total assets, no change in total liabilities and an increase in equity.

b. A decrease in total assets, no change in total liabilities and a decrease in equity.
c. No change in total assets, no change in total liabilities and no change in equity.
d. An increase in total assets, an increase in total liabilities and no change in equity.
Correct Answer -c. No change in total assets, no change in total liabilities and no
change in equity.

Which of the following is NOT an advantage of structuring your business as a

corporation?

a. No Personal Liability
b. Easier to Transfer Ownership
c. Lower Taxes
d. Easier to Raise Funds Correct Answer -c. lower taxes

An adjusting journal entry requires:

a. An entry that includes both a revenue account and an expense account

b. An entry in two sets of books
c. An entry that impacts the balance sheet and the income statement
d. An entry that impacts the balance sheet only Correct Answer -c. An entry that
impacts the balance sheet and the income statement

If a company buys equipment on account for $1,500, they should record which of the
following journal entries?

a. debit Equipment, credit Accounts Payable

b. debit Equipment, credit Accumulated Depreciation
c. debit Equipment, credit Accounts Receivable
d. debit Equipment, credit Cash Correct Answer -a. debit Equipment, credit Accounts
Payable

B & A's landscaping business provides tree trimming services to a client on March 27th,
2020 while the client is out of town. The client came back home on March 28th and
mailed a check to B & A's business office on March 29th, 2020. B & A received the
check at the business office on April 1st, 2020. If B & A's business adherers to the
revenue recognition principle, when should B & A recognize the revenue?

a. April 1st
b. March 29th
c. March 28th
d. March 27th Correct Answer -d. March 27th
(recognize revenue when the service is performed)

Which of the following statements about the classified balance sheet is false?

a. Current liabilities should be listed in order of due date

b. There are four classifications of asset types
c. Current assets should be listed in order of liquidity
d. There are two classifications of liability types Correct Answer -a. Current liabilities
should be listed in order of due date

Johnson Company last paid its employees on September 26th. Assuming financial
statements will be prepared as of September 30th and that employees have worked
additional days since September 26th, Johnson should make which of the following
adjusting journal entries at month end?

a. Dr. Salaries Expense, Cr. Salaries Payable

b. No entry is needed until November when the employees are paid
c. Dr. Salaries Expense, Cr. Cash
d. Dr. Salaries Payable, Cr. Cash Correct Answer -a. Dr. Salaries Expense, Cr.
Salaries Payable
(bc it is a future obligation to pay them)

Which of the following statements is true?

a. Relevant accounting information must be capable of making a difference in the

decision.
b. Faithful representation is the quality of information that confirms the company signed
the financial report
c. Historical cost means using the fair value for each asset on the balance sheet.
d. The primary objective of financial reporting is to provide a method to track profits and
losses Correct Answer -a. Relevant accounting information must be capable of
making a difference in the decision.

__________ are a set of rules and practices, having substantial authoritative support,
that the accounting profession recognizes as a general guide for financial reporting
purposes.

a. Financial Accounting Standards Board (FASB)

b. Public Company Accounting Oversight Board (PCAOB)
c. Generally Accepted Accounting Principles (GAAP)
d. International Accounting Standards Board (IASB) Correct Answer -c. Generally
Accepted Accounting Principles (GAAP)
On 2/1/21, Rocky Attorney At Law received $4,000 upfront from his client before
performing any legal services. At 2/28/21 Rocky recognized that he had performed
$1,250 of legal services during the month. What adjusting entry is necessary?

a. debit Service Revenue 1,250, credit Unearned Revenue 1,250

b. debit Unearned Revenue 1,250, credit Service Revenue 1,250
c. debit Service Revenue 2,750, credit Unearned Revenue 2,750
d. debit Unearned Revenue 2,750, credit Service Revenue 2,750 Correct Answer -b.
debit Unearned Revenue 1,250, credit Service Revenue 1,250

The Portland Ponies sell season tickets for their home basketball games before the
season starts. Joe Smith, a season ticket holder, paid $5,750 for his season tickets. The
entire amount of $5,750 was credited to Unearned Service Revenue. If the Portland
Ponies do not make an adjusting journal entry after each game is played, this would
cause:

a. Liabilities to be understated
b. Net Income to be understated
c. Revenues to be overstated
d. Assets to be understated Correct Answer -b. Net Income to be understated

Jones Corporation has ending retained earnings of $1,495, common stock of $4,560,
dividends of $1,000, revenues of $2,500, and assets of $13,500. What are total
liabilities?

a. $7,940
b. $7,055
c. $6,445
d. $7,445 Correct Answer -d. $7,445

At the end of an accounting period, companies transfer the temporary account balances
to the permanent stockholder's equity account: retained earnings. Which of the following
accounts is not a temporary account?

a. Salaries Expense
b. Service Revenue
c. Dividends
d. Accounts Receivable Correct Answer -d. Accounts Receivable

Anita Corp. failed to adjust their books for their accrued interest expense incurred but
not yet paid at the end of the accounting period. As a result, there is an understatement
of which account(s)?

a. Only Expenses
b. Expenses and Assets
c. Expenses and Liabilities
d. Stockholder's Equity and Assets Correct Answer -c. Expenses and Liabilities

Which of the following account types is not included in Property, Plant, & Equipment
(PP&E)?

a. Accumulated Depreciation
b. Furniture
c. Inventory
d. Vehicles Correct Answer -c. Inventory

When Common Stock is first issued, a company should record the following transaction:

a. debit Cash, credit Retained Earnings

b. debit Common Stock, credit Cash
c. debit Cash, credit Common Stock
d. debit Common Stock, credit Accounts Receivable Correct Answer -c. debit Cash,
credit Common Stock

If total liabilities decreased by $75,500 and total stockholder's equity increased by

$125,500 then the amount and change (increase/ decrease) in total assets is:

a. $50,000 decrease
b. $50,000 increase
c. $201,000 decrease
d. $201,000 increase Correct Answer -b. $50,000 increase

Which of the following statements about a Trial Balance is correct?

a. All answer choices are correct.

b. It proves the equality of total debits and credits.
c. It is a list of all company account balances.
d. It can help in preparing financial statements. Correct Answer -a. All answer choices
are correct.

The Cash account started the month with a debit balance of $1,150. During the month,
the Cash account was debited for $300 and credited for $400. What is the ending
balance of Cash?

a. $100 credit balance

b. $1,450 debit balance
c. $1,850 debit balance
d. $1,050 debit balance Correct Answer -d. $1,050 debit balance