ACC 303 Week 4 Quiz 3

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ACC 303 Week 4 Quiz 3

ACC 303 Week 4 Quiz 3

All Questions Included.

 

TRUE/FALSE

 

      1.      A ledger is where the company initially records transactions and selected other events.

 

2.      Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed.

 

3.      Real (permanent) accounts are revenue, expense, and dividend accounts and are periodically closed.

 

4.      An example of an internal event would be a flood that destroyed a portion of a company’s inventory.

 

5.      All liability and stockholders’ equity accounts are increased on the credit side and decreased on the debit side.

 

6.      In general, debits refer to increases in account balances, and credits refer to decreases.

 

7.      The first step in the accounting cycle is the journalizing of transactions and selected other events.

 

8.      One purpose of a trial balance is to prove that debits and credits of an equal amount are in the general ledger.

 

9.      A general journal chronologically lists transactions and other events, expressed in terms of debits and credits to accounts.

 

10.      If a company fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit and credit balance accounts.

 

11.      Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period.

 

12.      An adjustment for wages expense, earned but unpaid at year end, is an example of an accrued expense.

 

13.      The book value of any depreciable asset is the difference between its cost and its salvage value.

 

14.      The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

 

15.      The post-closing trial balance consists of asset, liability, owners’ equity, revenue and expense accounts.

 

16.      All revenues, expenses, and the dividends account are closed through the Income Summary account.

 

17.      It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

 

*18.      The accrual basis recognizes revenue when earned and expenses in the period when cash is paid.

 

*19.      Reversing entries are made at the end of the accounting cycle to correct errors in the original recording of transactions.

 

*20.      An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

 

 

MULTIPLE CHOICE—Conceptual

 

21.     Factors that shape an accounting information system include the

a.   nature of the business.

b.   size of the firm.

c.   volume of data to be handled.

d.   all of these.

 

22.     Maintaining a set of accounting records is

a.   optional.

b.   required by the Internal Revenue Service.

c.   required by the Foreign Corrupt Practices Act.

d.   required by the Internal Revenue Service and the Foreign Corrupt Practices Act.

 

23.     Debit always means

a.   right side of an account.

b.   increase.

c.   decrease.

d.   none of these.

 

24.     An accounting record into which the essential facts and figures in connection with all transactions are initially recorded is called the

a.   ledger.

b.   account.

c.   trial balance.

d.   none of these.

 

25.     A trial balance

a.   proves that debits and credits are equal in the ledger.

b.   supplies a listing of open accounts and their balances that are used in preparing financial statements.

c.   is normally prepared three times in the accounting cycle.

d.   all of these.

 

26.     Which of the following is a real (permanent) account?

a.   Goodwill

b.   Sales

c.   Accounts Receivable

d.   Both Goodwill and Accounts Receivable

 

27.     Which of the following is a nominal (temporary) account?

a.   Unearned Revenue

b.   Salary Expense

c.   Inventory

d.   Retained Earnings

 

28.     Nominal accounts are also called

a.   temporary accounts.

b.   permanent accounts.

c.   real accounts.

d.   none of these.

 

29.     The double-entry accounting system means

a.   Each transaction is recorded with two journal entries.

b.   Each item is recorded in a journal entry, then in a general ledger account.

c.   The dual effect of each transaction is recorded with a debit and a credit.

d.   More than one of the above.

 

30.     When a corporation pays a note payable and interest,

a.   the account notes payable will be increased.

b.   the account interest expense will be decreased.

c.   they will debit notes payable and interest expense.

d.   they will debit cash.

 

31.     Stockholders’ equity is not affected by all

a.   cash receipts.

b.   dividends.

c.   revenues.

d.   expenses.

 

32.     The debit and credit analysis of a transaction normally takes place

a.   before an entry is recorded in a journal.

b.   when the entry is posted to the ledger.

c.   when the trial balance is prepared.

d.   at some other point in the accounting cycle.

 

 

33.     The accounting equation must remain in balance

a.   throughout each step in the accounting cycle.

b.   only when journal entries are recorded.

c.   only at the time the trial balance is prepared.

d.   only when formal financial statements are prepared.

 

34.     The difference between the accounting process and the accounting cycle is

a.   the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.

b.   the accounting cycle represents the steps taken to accomplish the accounting process.

c.   the accounting process represents the steps taken to accomplish the accounting cycle.

d.   merely semantic, because both concepts refer to the same thing.

 

35.     An optional step in the accounting cycle is the preparation of

a.   adjusting entries.

b.   closing entries.

c.   a statement of cash flows.

d.   a post-closing trial balance.

 

36.     Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

a.   The event or item can be measured objectively in financial terms.

b.   The event or item is relevant and reliable.

c.   The event or item is an element.

d.   All of these must be met.

 

37.     Which of the following is a recordable event or item?

a.   Changes in managerial policy

b.   The value of human resources

c.   Changes in personnel

d.   None of these

 

38.     Which of the following is not an internal event?

a.   Depreciation

b.   Using raw materials in the production process

c.   Dividend declaration and subsequent payment

d.   All of these are internal transactions.

 

39.     External events do not include

a.   interaction between an entity and its environment.

b.   a change in the price of a good or service that an entity buys or sells, a flood or earthquake.

c.   improvement in technology by a competitor.

d.   using buildings and machinery in operations.

 

40.     A trial balance may prove that debits and credits are equal, but

a.   an amount could be entered in the wrong account.

b.   a transaction could have been entered twice.

c.   a transaction could have been omitted.

d.   all of these.

 

41.     A general journal

a.   chronologically lists transactions and other events, expressed in terms of debits and credits.

b.   contains one record for each of the asset, liability, stockholders’ equity, revenue, and expense accounts.

c.   lists all the increases and decreases in each account in one place.

d.   contains only adjusting entries.

 

42.     A journal entry to record the sale of inventory on account will include a

a.   debit to inventory.

b.   debit to accounts receivable.

c.   debit to sales.

d.   credit to cost of goods sold.

 

43.     A journal entry to record a payment on account will include a

a.   debit to accounts receivable.

b.   credit to accounts receivable.

c.   debit to accounts payable.

d.   credit to accounts payable.

 

44.     A journal entry to record a receipt of rent revenue in advance will include a

a.   debit to rent revenue.

b.   credit to rent revenue.

c.   credit to cash.

d.   credit to unearned rent.

 

45.     Which of the following errors will cause an imbalance in the trial balance?

a.   Omission of a transaction in the journal.

b.   Posting an entire journal entry twice to the ledger.

c.   Posting a credit of $720 to Accounts Payable as a credit of $720 to Accounts Receivable.

d.   Listing the balance of an account with a debit balance in the credit column of the trial balance.

 

S46.     Which of the following is not a principal purpose of an unadjusted trial balance?

a.   It proves that debits and credits of equal amounts are in the ledger.

b.   It is the basis for any adjustments to the account balances.

c.   It supplies a listing of open accounts and their balances.

d.   It proves that debits and credits were properly entered in the ledger accounts.

 

S47.     An adjusting entry should never include

a.   a debit to an expense account and a credit to a liability account.

b.   a debit to an expense account and a credit to a revenue account.

c.   a debit to a liability account and a credit to revenue account.

d.   a debit to a revenue account and a credit to a liability account.

 

48.     Which of the following is an example of an accrued expense?

a.   Office supplies purchased at the beginning of the year and debited to an expense account.

b.   Property taxes incurred during the year, to be paid in the first quarter of the subsequent year.

c.   Depreciation expense

d.   Rent earned during the period, to be received at the end of the year

P49.     Which of the following statements is associated with the accrual basis of accounting?

a.   The timing of cash receipts and disbursements is emphasized.

b.   A minimum amount of record keeping is required.

c.   This method is used less frequently by businesses than the cash method of accounting.

d.   Revenues are recognized in the period they are earned, regardless of the time period the cash is received.

 

P50.     An adjusting entry to record an accrued expense involves a debit to a(an):

a.   expense account and a credit to a prepaid account.

b.   expense account and a credit to Cash.

c.   expense account and a credit to a liability account.

d.   liability account and a credit to an expense account.

 

P51.     The failure to properly record an adjusting entry to accrue an expense will result in an:

a.   understatement of expenses and an understatement of liabilities.

b.   understatement of expenses and an overstatement of liabilities.

c.   understatement of expenses and an overstatement of assets.

d.   overstatement of expenses and an understatement of assets.

 

P52.     Which of  the following properly describes a deferral?

a.   Cash is received after revenue is earned.

b.   Cash is received before revenue is earned.

c.   Cash is paid after expense is incurred.

d.   Cash is paid in the same time period that an expense is incurred.

 

P53.     The failure to properly record an adjusting entry to accrue a revenue item will result in an:

a.   understatement of revenues and an understatement of liabilities.

b.   overstatement of revenues and an overstatement of liabilities.

c.   overstatement of revenues and an overstatement of assets.

d.   understatement of revenues and an understatement of assets.

 

P54.     The omission of the adjusting entry to record depreciation expense will result in an:

a.   overstatement of assets and an overstatement of owners’ equity.

b.   understatement of assets and an understatement of owner’s equity.

c.   overstatement of assets and an overstatement of liabilities.

d.   overstatement of liabilities and an understatement of owners’ equity.

 

55.     Adjustments are often prepared

a.   after the balance sheet date, but dated as of the balance sheet date.

b.   after the balance sheet date, and dated after the balance sheet date.

c.   before the balance sheet date, but dated as of the balance sheet date.

d.   before the balance sheet date, and dated after the balance sheet date.

 

56.     At the time a company prepays a cost

a.   it debits an asset account to show the service or benefit it will receive in the future.

b.   it debits an expense account to match the expense against revenues earned.

c.   its credits a liability account to show the obligation to pay for the service in the future.

d.   more than one of the above.

 

 

57.     How do these prepaid expenses expire?

Rent                                                    Supplies

a.   With the passage of time                          Through use and consumption

b.   With the passage of time                          With the passage of time

c.   Through use and consumption                 Through use and consumption

d.   Through use and consumption                 With the passage of time

 

58.     Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for

a.   an unearned revenue.

b.   a prepaid expense.

c.   an accrued revenue.

d.   an accrued expense.

 

59.     Unearned revenue on the books of one company is likely to be

a.   a prepaid expense on the books of the company that made the advance payment.

b.   an unearned revenue on the books of the company that made the advance payment.

c.   an accrued expense on the books of the company that made the advance payment.

d.   an accrued revenue on the books of the company that made the advance payment.

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