1.

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should
always be the same.

2. The time period assumption 1s often referred to as the matching principle.

3. The book value of a depreciable asset is always equal to its market value because depreciation
is a valuation technique.

4. Unearned revenue is a prepayment that requires an adjusting entry when services are
performed.

5. Ifa worksheet is used, financial statements can be prepared before adjusting entries are
journalized.

6. Closing revenue and expense accounts to the Income Summary account is an optional
bookkeeping procedure.

7. Closing entries are journalized after adjusting entries have been journalized.

8. In a corporation, Retained Earnings 1s a part of owners” equity.

9. Cash and supplies are both classified as current assets.

10. Closing entries are unnecessary if the business plans to continue operating in the future and
issue financial statements each year.

ll. The cash basis of accounting is not in accordance with generally accepted accounting
principles.

12. The normal balance of all accounts 1s a debit.

13. The time period assumption states that the economic life of a business entity can be divided
into artificial time periods.

14. If a revenue account is credited, the revenue account is increased.

15. Private accountants are accountants who are not employees of business enterprises.

16. The basic accounting equation is in balance when the creditor and ownership claims against
the business equal the assets.

17. Both correcting entries and adjusting entries always affect at least one balance sheet account
and one income statement account.

18. Current assets are listed in the order of liquidity.

19. The adjustments on a worksheet can be posted directly to the accounts in the ledger from the
worksheet.

20. The balance of the depreciation expense account will appear in the income statement
debit column of a worksheet.

21. Accountants refer to an economic event as a

a. purchase.
b. change in ownership.
c. sale.
d. transaction.

22. Adjusting entries are required

a. when expenses are recorded in the period in which they are incurred.
b. because some costs expire with the passage of time and have not yet been journalized.
c. when the company’s profits are below the budget.
d. when revenues are recorded in the period in which services are performed.

23. Closing entries are journalized and posted

a. at the end of each interim accounting period.
b. at management's discretion.
c. after the financial statements are prepared.
d. before the financial statements are prepared.

24. Closing entries are made

a. so that financial statements can be prepared.
b. so that all assets, liabilities, and owner's capital accounts will have zero balances when the
next accounting period starts.
c. in order to transfer net income (or loss) and owner's drawings to the owner's capital account.
d. in order to terminate the business as an operating entity.

25. Accumulated Depreciation is

a. an expense account.
b. a liability account.
c. acontra asset account.
d. an owner's equity account.

26. Which of the following ts incorrect regarding a trial balance?

a. A trial balance uncovers errors in journalizing and posting.
b. It proves that the company has recorded all transactions.
c. A trial balance is useful in the preparation of financial statements.
d. It proves that the debits equal the credits after posting.

27. On January 31, 2016, the balance in Bigelow Inc.'s supplies account was $780. During
February, Bigelow purchased supplies of $900 and used supplies of $1,150. At the end of
February, the balance in the supplies account should be
a. $1,030 debit.
b. $530 credit.
c. $830 debit.
d. $530 debit.

28. The standard form of a journal entry has the

a. debit account entered first at the extreme left margin.
b. debit account entered first and indented.
c. credit account entered first at the extreme left margin.
d. credit account entered first and indented.

29. Net income results when

a. Assets > Liabilities.
b. Revenues < Expenses.
c. Revenues = Expenses.
d. Revenues > Expenses.

30. Management could determine the amounts due from customers by examining which ledger
account?
a. Supplies
b. Accounts Payable
c. Accounts Receivable
d. Service Revenue

31. The income statement for the year 2016 of Bugati Co. contains the following information:

Revenues $73,000
Expenses:
Salaries and Wages Expense $43,000
Rent Expense 12,000
Advertising Expense 11,000
Supplies Expense 6,000
Utilities Expense 3,500
Insurance Expense 4.000
Total expenses _79.500
Net income (loss)
wn”
i“
wv
s
After all closing entries have been posted, the revenue account will have a balance of
a. $0.
b. $73,000 debit.
c. $73,000 credit.
d. $6,500 credit.

32. Bob Bundy, an employee of Jumbo Corp., will not receive her paycheck until April 2. Based
on services performed from March 15 to March 31, his salary was $1,500. The adjusting entry
for Jumbo Corp. on March 31 is
a. No entry is required.
b. Salaries and Wages Expense 1.500
Salaries and Wages Payable 1,500
c. Salaries and Wages Expense 1,500
Cash 1,500
d. Salaries and Wages Payable 1,500
Cash 1,500

33. The historical cost of an asset and its fair value are
a. the same on the date of acquisition.
b. never the same.
c. irrelevant when the asset is used by the business in its operations.
d. the same when the asset is sold.

34. As of June 30, 2016, Little Giantz Company has assets of $100,000 and owner's equity of
$60,000. What are the liabilities for Little Giantz Company as of June 30, 2016?
a. $60,000
b. $100,000
c. $40,000
d. $160,000
35. The following information is for Qwik Auto Supplies:
Qwik Auto Supplies
Balance Sheet
December 31. 2016

Cash $ 45,000 Accounts Payable $ 140,000

Prepaid Insurance 80,000 Salaries and Wages Payable 60,000
Accounts Receivable 110,000 Mortgage Payable _150,000
Inventory 140,000 Total Liabilities 350,000
Land Held for Investment 185,000
Land 250.000
Building $200,000
Less Accumulated Owner's Capital _750,000
Depreciation $0,000) 150,000
Trademark 140.000 Total Liabilities and
Total Assets $1,100,000 Owner's Equity $1,100,000

The total dollar amount of assets to be classified as investments is

a. $0.
b. $185,000.
c. $725,000.
d. $585,000.

36. The final step in the accounting cycle is to prepare

a.closing entries.
b-financial statements.
c.a post-closing trial balance.
d.adjusting entries.
37. The best interpretation of the word credit is the
a. offset side of an account.
b. right side of an account.
c. decrease side of an account.
d. increase side of an account.

38. An accountant has debited an asset account for $1.400 and credited a liability account for
$500. What can be done to complete the recording of the transaction?
a. Credit a different asset account for $900.
b. Debit an owner's equity account for $900.
c. Debit another asset account for $900.
d. Nothing further must be done.

39. During 2016, its first year of operations, Aida’s Bakery had revenues of $65,000 and
expenses of $35,000. The business had owner's drawings of $22.000. What is the amount of
owner's equity at December 31, 2016?
a. $0
b. $22,000 debit
c. $8,000 credit
d. $30,000 credit

40. On January 1, 2016, Utah Utility Company reported owner's equity of $705,000. During the
year, the owner withdrew cash of $30,000. At December 31, 2016, the balance in owner's equity
was $795.000. What amount of net income or net loss would the company report for 2016?
a. Net income of $120,000
b. Net income of $150,000
c. Net income of $90,000
d. Net loss of $60,000
41. A trial balance will not balance if
a. incorrect account titles are used in journalizing.
b. a journal entry is only partially posted.
c. ajournal entry is posted twice.
d. a wrong amount is used in journalizing.

42. In order to close the owner's drawings account, the

a. owner's capital account should be credited.
b. owner's capital account should be debited.
c. income summary account should be debited.
d. income summary account should be credited.

43. Depreciation expense for a period 1s the

a. book value of the asset + useful life.
b. portion of an asset's cost that expired during the period.
c. market value of the asset = useful life.
d. original cost of an asset - accumulated depreciation.

44. A net loss will result during a time period when

a. assets exceed liabilities.
b. assets exceed owner's equity.
c. revenues exceed expenses.
d. expenses exceed revenues.

45. Boise Co. pays its employees twice a month, on the 7th and the 21st. On June 21, Boise Co.
paid employee salaries of $6,000. This transaction would
a. increase owner's equity by $6,000.
b. be recorded by a $6,000 debit to Salaries and Wages Payable and a $6.000 credit to Salaries
and Wages Expense.
c. decrease the balance in Salaries and Wages Expense by $6,000.
d. decrease net income for the month by $6,000.
46. In a service-type business, revenue is considered recognized
a. at the end of the year.
b. when cash is received.
c. when the service is performed.
d. at the end of the month.

47. If total liabilities decreased by $30,000 and owner's equity decreased by $15,000 during a
period of time, then total assets must change by what amount and direction during that same
period?
Select one:
a. $45,000 increase
b. $15,000 decrease
c. $45,000 decrease
d. $15,000 increase

48. A company spends $20 million dollars for an office building. Over what period should the
cost be written off?
a. Over the useful life of the building.
b. When the $20 million is expended in cash.
c. After $20 million in revenue is recognized.
d. All in the first year.

49. The income statement for the year 2016 of Bugati Co. contains the following information:

Revenues $73,000
Expenses:
Salaries and Wages Expense $43.000
Rent Expense 12.000
Advertising Expense 11.000
Supplies Expense 6.000
Utilities Expense 3,500
Insurance Expense 4.000
Total expenses 79,500
Net income (loss) $ (6,500)
The entry to close the revenue account includes a
Select one:
a. credit to Revenues for $73.000.
b. debit to Revenues for $73,000.
c. debit to Income Summary for $6,500.
d. credit to Income Summary for $6,500.

50.The relationship between current assets and current liabilities is important in evaluating a
company's
a. liquidity.
b. market value.
c. profitability.
d. accounting cycle.

51. Baden Realty Company received a check for $18.000 on July 1 which represents a 6 month
advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full
$18.000. Financial statements will be prepared on July 31. Baden Realty should make the
following adjusting entry on July 31:
a. Debit Unearned Rent, $3,000; Credit Rental Revenue, $3,000.
b. Debit Rental Revenue, $3,000: Credit Unearned Rent, $3,000.
c. Debit Unearned Rent, $18.000: Credit Rental Revenue, $18.000.
d. Debit Cash, $18,000: Credit Rental Revenue, $18,000.

52. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a
a. debit to an asset account and a credit to an expense account.
b. debit to an expense account and a credit to an asset account.
c. debit to an asset account and a credit to an asset account.
d. debit to an expense account and a credit to an expense account.
53. The following items are taken from the financial statements of the Freight Service for the
year ending December 31, 2016:

Accounts payable $ 19,000

Accounts receivable 13,000
Accumulated depreciation — equipment 26.000
Advertising expense 21,200
Cash 15,000
Owner's capital (1/1/16) 104.000
Owner's drawings 11,000

Depreciation expense 12,000

Equipment 210,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000

Service revenue 135,000

Supplies 5,000
Supplies expense 6.000

What is the book value of the equipment at December 31, 2016?

a. $210.000
b. $184,000
c. $172,000
d. $236,000

54. The Income Summary account is an important account that is used

a. during interim periods.
b.in preparing adjusting entries.
c.annually in preparing closing entries.
d.annually in preparing and correcting entries.
55. The two optional steps in the accounting cycle are preparing
a. a post-closing trial balance and reversing entries.
b.a worksheet and post-closing trial balances.
c.feversing entries and a worksheet.
d.an adjusted trial balance and a post-closing trial balance.

56. Eastwood Post Pavillion received a $650 check from a customer for the balance due. The
transaction was erroneously recorded as a debit to Cash $560 and a credit to Service Revenue
$560. The correcting entry is
a.debit Cash, $650: credit Accounts Receivable, $650.
b.debit Cash, $90 and Accounts Receivable. $560: credit Service Revenue, $650.
c.debit Cash, $90 and Service Revenue, $560: credit Accounts Receivable, $650.
d.debit Accounts Receivable, $650: credit Cash, $90 and Service Revenue, $560.

57. On May 25, Mt. Hood Company received a $370 check from Douglas Fir for services to be
performed in the future. The bookkeeper for Mt. Wood Company incorrectly debited Cash
for $370 and credited Accounts Receivable for $370. The amounts have been posted to the
ledger. To correct this entry, the bookkeeper should:
a.debit Cash $370 and credit Unearned Service Revenue $370.
b.debit Accounts Receivable $370 and credit Service Revenue $370.
c.debit Accounts Receivable $370 and credit Cash $370.
d.debit Accounts Receivable $370 and credit Unearned Service Revenue $370.

58. Equipment is classified in the balance sheet as

a.a current asset.
b.property, plant, and equipment.
c.an intangible asset.
d.a long-term investment.
59. All of the following are property, plant. and equipment except
a. supplies.
b. machinery.
c. land.
d. buildings.

60. An intangible asset

a.does not have physical substance, yet often is very valuable.
b.is worthless because it has no physical substance.
c.is converted into a tangible asset during the operating cycle.
d.cannot be classified on the balance sheet because it lacks physical substance.