Question 1

A $200 credit to Interest Payable was instead recorded in error as a $200 credit to Cash in an adjusting entry,which has been posted to the ledger accounts.Which of the following is the result of this error?

Accepted Answer

A)  The trial balance is out of balance by $200.
B)  Total assets are understated by $200.
C)  Net income is overstated by $200.
D)  Total liabilities are overstated by $200.E) B) and D)
F) B) and C)

Question 2

A transaction has been recorded in the T-accounts of Gibbs Company as follows:

Which of the following could be an explanation for this transaction?

Accepted Answer

A)  Cash has been paid out to a company that will provide future services to Gibbs Company.
B)  Gibbs has completed services for which they had earlier received cash in advance.
C)  Gibbs has provided services to a customer on account.
D)  Gibbs has received cash for service to be provided in the future.E) None of the above
F) C) and D)

Question 3

At the end of its fiscal year,a company must adjust its accounting records for unrecorded accruals and deferrals before it can prepare financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements about debits is false?

Accepted Answer

A)  Debits Increase Assets.
B)  Debits Increase Expenses.
C)  Debits Decrease Liabilities.
D)  Debits Increase Liabilities.E) None of the above
F) A) and B)

Question 5

A transaction has been recorded in the general journal of Van Buren Company as follows:

Which of the following describes how this entry affects the company's financial statements when it is posted to the ledger accounts?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) A) and C)
F) A) and D)

Question 6

Which of the following statement is true regarding the trial balance?

Accepted Answer

A)  Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance.
B)  The income statement is prepared using the post-closing trial balance.
C)  A balance of debits and credits ensures that all transactions have been recorded correctly.
D)  Trial balances are only prepared at the end of an accounting period.E) A) and B)
F) All of the above

Question 7

A trial balance can only be prepared at the end of the fiscal year,as part of the adjusting and closing processes.

Accepted Answer

A) True 
 B)False

Question 8

The Lazarus Company recorded the following adjustment in general journal format:

Which of the following choices accurately reflects how this event would affect the company's financial statements?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) B) and D)
F) All of the above

Question 9

What effect will the following closing entry have on the retained earnings account?

Accepted Answer

A)  Retained earnings will remain unchanged.
B)  Retained earnings will decrease by $2,550.
C)  Retained earnings will increase by $2,550.
D)  Retained earnings will be transferred to the income statement.E) None of the above
F) B) and D)

Question 10

A trial balance can be in balance,even if there are errors in the accounting system.

Accepted Answer

A) True 
 B)False

Question 11

Bijan Corporation earned $4,000 of revenue that had been deferred.How would the related adjusting entry be recorded in the company's T-accounts?

Accepted Answer

A)   
B)   
C)   
D)   E) A) and B)
F) C) and D)

Question 12

What is the term used to describe the right side of a T-account?

Accepted Answer

A)  Credit Side
B)  Claims Side
C)  Debit Side
D)  Equity SideE) A) and B)
F) None of the above

Question 13

-Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that appear on that particular financial statement. )

Accepted Answer

A)  Account numbers 2,4,and 5 will appear on the income statement.
B)  Account numbers 1,3,and 8 will appear on the balance sheet.
C)  Account numbers 2,5,and 8 will appear on the statement of cash flows.
D)  Account numbers 4,5,and 6 will appear on the statement of changes in stockholders' equity.E) All of the above
F) C) and D)

Question 14

To record the purchase of supplies on account,an accountant would credit Supplies.

Accepted Answer

A) True 
 B)False

Question 15

The following transaction has been recorded in the general journal:

How will this transaction affect the company's financial statements after it is posted to the ledger accounts?

Accepted Answer

A)  Decreases Total Liabilities
B)  Increases Retained Earnings
C)  Decreases Total Assets
D)  Decreases Stockholders' EquityE) A) and B)
F) A) and D)

Question 16

Explain how the following general journal entry affects the accounting equation.

Accepted Answer

A)  Both assets and stockholders' equity increase.
B)  Both liabilities and assets increase.
C)  Assets increase and stockholders' equity decreases.
D)  Liabilities increase and stockholders' equity decreases.E) None of the above
F) B) and C)

Question 17

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.
 
-Which company has the highest return-on-assets ratio?

Accepted Answer

A)  Grumpy.
B)  Happy.
C)  Doc.
D)  They all have equal return-on-assets ratios.E) C) and D)
F) B) and C)

Question 18

How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense?

Accepted Answer

A)  The credit column of the trial balance would be $600 more than the debit column.
B)  The debit column of the trial balance would be $1,200 more than the credit column.
C)  The credit column of the trial balance would be $1,200 more than the debit column.
D)  The debit column of the trial balance would be $600 more than the credit column.E) C) and D)
F) B) and D)

Question 19

Calculating the debt-to-assets ratio measures how efficiently a company is using its assets in the normal scope of business.

Accepted Answer

A) True 
 B)False

Question 20

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.
 
-Which company has the highest level of debt risk?

Accepted Answer

A)  Grumpy
B)  Happy
C)  Doc
D)  They all have equal debt riskE) B) and C)
F) A) and C)

Exam 3: The Double-Entry Accounting System

To record the purchase of supplies on account,an accountant would credit Supplies.

Correct AnswerverifiedShow Answer

The following transaction has been recorded in the general journal: How will this transaction affect the company's financial statements after it is posted to the ledger accounts?

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What effect will the following closing entry have on the retained earnings account?

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Calculating the debt-to-assets ratio measures how efficiently a company is using its assets in the normal scope of business.

Correct AnswerverifiedShow Answer

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies. -Which company has the highest level of debt risk?

Correct AnswerverifiedShow Answer

Explain how the following general journal entry affects the accounting equation.

Correct AnswerverifiedShow Answer

Which of the following statements about debits is false?

Correct AnswerverifiedShow Answer

Bijan Corporation earned $4,000 of revenue that had been deferred.How would the related adjusting entry be recorded in the company's T-accounts?

Correct AnswerverifiedShow Answer

The Lazarus Company recorded the following adjustment in general journal format: Which of the following choices accurately reflects how this event would affect the company's financial statements?

Correct AnswerverifiedShow Answer

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies. -Which company has the highest return-on-assets ratio?

Correct AnswerverifiedShow Answer

Which of the following statement is true regarding the trial balance?

Correct AnswerverifiedShow Answer

How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense?

Correct AnswerverifiedShow Answer

A trial balance can be in balance,even if there are errors in the accounting system.

Correct AnswerverifiedShow Answer

What is the term used to describe the right side of a T-account?

Correct AnswerverifiedShow Answer

At the end of its fiscal year,a company must adjust its accounting records for unrecorded accruals and deferrals before it can prepare financial statements.

Correct AnswerverifiedShow Answer

A transaction has been recorded in the general journal of Van Buren Company as follows: Which of the following describes how this entry affects the company's financial statements when it is posted to the ledger accounts?

Correct AnswerverifiedShow Answer

A transaction has been recorded in the T-accounts of Gibbs Company as follows: Which of the following could be an explanation for this transaction?

Correct AnswerverifiedShow Answer

A trial balance can only be prepared at the end of the fiscal year,as part of the adjusting and closing processes.

Correct AnswerverifiedShow Answer

A $200 credit to Interest Payable was instead recorded in error as a $200 credit to Cash in an adjusting entry,which has been posted to the ledger accounts.Which of the following is the result of this error?

Correct AnswerverifiedShow Answer

-Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that appear on that particular financial statement. )

Correct AnswerverifiedShow Answer

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