Financial Accouting Midterm Practice Part 2

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Financial Accounting Quizzes & Trivia

Financial Accouting Midterm Practice Part 2Questons 1-36 from Quiz 3


Questions and Answers
  • 1. 
    Which of the following best represents the expanded accounting equation?
    • A. 

      Assets = Liabilities + Common Stock - Revenues - Expenses + Dividends

    • B. 

      Assets - Liabilities - Common Stock = Revenues - Expenses - Dividends

    • C. 

      Assets - Liabilities = Revenues - Exports - Dividends

    • D. 

      Assets - Liabilities = Revenues - Expenses + Dividends

  • 2. 
    A trial balance will not balance if
    • A. 

      A $500 payment on accounts payable is debited to Accounts Payable for $50 and credited to Cash for $50

    • B. 

      A $350 payment of rent is debited to Rent Expense for $350 and credited to Cash for $35

    • C. 

      A transaction is not posted at all

    • D. 

      A journal entry is posted twice

  • 3. 
    Recognizing expense results in a(n)
    • A. 

      Decrease to the expense account

    • B. 

      Increase to the expense account

    • C. 

      Increase in retained earnings

    • D. 

      Decrease to the revenue account

  • 4. 
    The current ratio and the quick ratio are both relative measures of a compnay's liquidity. They differ in how they are computed because
    • A. 

      The current ratio is considered to be a more conservative measure of a company's liquidity

    • B. 

      The quick ratio is considered to be a more conservative measure of a company's liquidity

    • C. 

      The current ratio is considered to be a more accurate measure of a company's liquidity

    • D. 

      The quick ratio also measures profitability

  • 5. 
    In a T-account, the left side is called the
    • A. 

      Increase side

    • B. 

      Decrease side

    • C. 

      Credit side

    • D. 

      Debit side

  • 6. 
    All of the following are components of a journal entry except
    • A. 

      Trial balance

    • B. 

      Explanation

    • C. 

      Debit entry

    • D. 

      Credit entry

  • 7. 
    The Dividends account is increased with a debit because dividends
    • A. 

      Are declared an asset

    • B. 

      Reduce liabilities

    • C. 

      Result in a decrease in equity, so debiting Dividends would have the effect of decreasing Owner's Equity

    • D. 

      Are an expense

  • 8. 
    A company purchases a piece of equipment for $8,000 in exchange for $4,000 cash and a $4,000 note payable. Which of the following journal entries represents the appropriate method for recording this transaction?
    • A. 

      Cash $4,000 Note Payable $4,000 Equipment $8,000

    • B. 

      Equipment $8,000 Cash $4,000 Accounts Payable $4,000

    • C. 

      Equipment $8,000 Cash $4,000 Note Payable $4,000

    • D. 

      Equipment $8,000 Cash $8,000

  • 9. 
    In recording accounting transactions, evidence that a transaction has taken place is obtained from
    • A. 

      The Internal Revenue Service

    • B. 

      The Securities and Exchange Commission

    • C. 

      Source documents

    • D. 

      The Board of Directors

  • 10. 
    Which of the following accounts is an asset?
    • A. 

      Supplies

    • B. 

      Dividends

    • C. 

      Accounts Payable

    • D. 

      Service Revenue

  • 11. 
    The usual sequence in the steps in the accounting cycle is
    • A. 

      Posting - journalize - analyze - trial balance

    • B. 

      Journalize - analyze - posting - closing

    • C. 

      Journalize - posting - analyze - closing

    • D. 

      Analyze - journalize - posting - trial balance

  • 12. 
    When a company prepares its trial balance, which sequence of accounts below represents the proper order in which the accounts should be listed?
    • A. 

      Assets Expenses Liabilities Revenues Equity Dividends

    • B. 

      Assets Liabilities Equity Dividends Revenues Expenses

    • C. 

      Assets Dividends Equity Expenses Liabilities Revenues

    • D. 

      Assets Revenues Equity Liabilities Expenses Dividends

  • 13. 
    The trial balance does all of the following except
    • A. 

      Help identify which accounts need to be closed

    • B. 

      Verify that accounts with debit balances equal accounts with credit balances

    • C. 

      Verify all of the accounts that will be used in the financial statements

    • D. 

      Ensure there are no errors in the accounting records

  • 14. 
    If a journal entry has been posted, the accounting equation is out of balance, then one might conclude that
    • A. 

      The transaction was a bad business decision for the company

    • B. 

      The company owes a tax liability

    • C. 

      The transaction was posted to the wrong accounts

    • D. 

      The income statement will show a net loss

  • 15. 
    ___________ refers to the process of transferring amounts from the journal entries to general ledger accounts.
    • A. 

      Balancing

    • B. 

      Journalizing

    • C. 

      Analyzing

    • D. 

      Posting

  • 16. 
    Recognizing an expense results in a(n)
    • A. 

      Decrease to the expense account

    • B. 

      Increase to the expense account

    • C. 

      Increase in retained earnings

    • D. 

      Decrease to the revenue account

  • 17. 
    If a company manager wants to determine the amount that the company owes to suppliers, to which account would the manager look to determine the amounts owed?
    • A. 

      Accounts Payable

    • B. 

      Unearned Revenue

    • C. 

      Supplies Expense

    • D. 

      Accounts Receivable

  • 18. 
    The normal balance of an asset account is
    • A. 

      A credit balance

    • B. 

      Always the same as the normal balance of the equity accounts

    • C. 

      A debit balance

    • D. 

      Dependent upon the financial condition of the entity

  • 19. 
    Which of the following entries shows revenues earned and billed but not yet collected?
    • A. 

      Accounts Receivable XXX Revenue XXX

    • B. 

      Revenue XXX Accounts Receivable XXX

    • C. 

      Accounts Receivable XXX Cash XXX

    • D. 

      Cash XXX Accounts Receivable XXX

  • 20. 
    One way to compute the quick ratio is
    • A. 

      (Current Assets - Inventory) / Current Liabilities

    • B. 

      Net Income / Net Sales

    • C. 

      Current Inventory / Current Liabilities

    • D. 

      Current Assets / Current Liabilities

  • 21. 
    If Jennings Corporation has Net Sales of $15,750, Interest income of $675, Research and Development Expenses of $4,125, Selling Expenses of $3,246, Interest Expense of $438, and Office Expenses of $975, what is Jennings Corporation's Operating Income (Loss)?
    • A. 

      $7,641

    • B. 

      $10,651

    • C. 

      $7,404

    • D. 

      $6,291

  • 22. 
    The record of a single transaction that is entered into a company's journal is known as
    • A. 

      Credit

    • B. 

      T-account posting

    • C. 

      Debit

    • D. 

      Journal entry

  • 23. 
    If liabilities are paid in cash, then
    • A. 

      Assets will increase

    • B. 

      Liabilities will increase

    • C. 

      Owner's equity will decrease

    • D. 

      Assets will decrease

  • 24. 
    The quick ratio measures the company's
    • A. 

      Short-term profits

    • B. 

      Ability to cover its long-term obligations

    • C. 

      Ability to meet its short-term debts with its most liquid assets

    • D. 

      Ability to meet all of its short-term obligations

  • 25. 
    Which of the following entries represents payment for wages?
    • A. 

      Cash XXX Salaries Expense XXX

    • B. 

      Accounts Payable XXX Cash XXX

    • C. 

      Wages Expense XXX Cash XXX

    • D. 

      Cash XXX Salaries Payable XXX

  • 26. 
    Owner's Equity is increased by
    • A. 

      Expenses

    • B. 

      Liabilities

    • C. 

      Dividends

    • D. 

      Revenues

  • 27. 
    Which of the following accounts would not be increased by debiting the account?
    • A. 

      Revenues

    • B. 

      Assets

    • C. 

      Expenses

    • D. 

      Dividends

  • 28. 
    In accounting, when a compnay makes a purchase "on account," it is the equivalent of
    • A. 

      Purchasing with a sales tax exemption

    • B. 

      Purchasing in bulk

    • C. 

      Purchasing with a discount

    • D. 

      Purchasing on credit

  • 29. 
    How is working capital computed?
    • A. 

      Assets - Liabilities

    • B. 

      Current Assets + Current Liabilities

    • C. 

      Current Assets - Current Liabilities

    • D. 

      Current Assets - Liabilities

  • 30. 
    If the total of the debt column equals the total of the credit column in the trial balance, it indicates that
    • A. 

      All accounts reflect correct balances

    • B. 

      No errors can be found

    • C. 

      No errors have been made

    • D. 

      The accounting equation has remained in balance

  • 31. 
    An accountant has recorded a journal entry in which she has debited a liability account for $750 and credited an asset account for $750. What type of transaction do you think this is?
    • A. 

      Receipt of revenue

    • B. 

      Payment of an account payable

    • C. 

      Payment of an expense

    • D. 

      Receipt of an account receivable

  • 32. 
    Which of the following accounts would not be increased by crediting the account?
    • A. 

      Assets

    • B. 

      Revenues

    • C. 

      Liabilities

    • D. 

      Owner's Equity

  • 33. 
    If Hayes Company has working capital of $75,000 and current liabilities of $35,000, what are its current assets?
    • A. 

      $120,000

    • B. 

      $45,000

    • C. 

      $110,000

    • D. 

      $50,000

  • 34. 
    What do the accounting terms "debit" and "credit" mean?
    • A. 

      "Debit means decrease, and "credit" means increase.

    • B. 

      "Debit" adjusts assets, and "credit" adjusts liabilities and equity.

    • C. 

      "Debit" means increase, and "credit" means decrease.

    • D. 

      "Debit" means left, and "credit" means right.

  • 35. 
    If a not receivable with a principal amount of $400,000 has an interest rate of 8%, what is the amount of interest that will accrue over nine months?
    • A. 

      $2,700

    • B. 

      $32,000

    • C. 

      $16,000

    • D. 

      $24,000

  • 36. 
    Journal entries that transfer the balances in the revenue, expense and dividends accounts to retained earnings at the end of the accounting period are
    • A. 

      Closing entries

    • B. 

      Transfer entries

    • C. 

      Adjusting entries

    • D. 

      Posting entries

  • 37. 
    Net income is
    • A. 

      Retained earnings less dividends paid

    • B. 

      The difference between assets and liabilities

    • C. 

      The difference between sales and cost of goods sold

    • D. 

      The difference between all of the revenues earned and all of the expenses incurred during an accounting period

  • 38. 
    Which of the following journal entries shows sales revenue being closed into the Retained Earnings account?
    • A. 

      Retained Earnings XXX Sales Revenue XXX

    • B. 

      Sales Revenue XXX Retained Earnings XXX

    • C. 

      Owner's Equity XXX Sales Revenue XXX

    • D. 

      Sales Revenue XXX Owner's Equity XXX

  • 39. 
    The McBain Company performs services for the Buchanan Company. Once McBain finishes its work, McBain sends Buchanan a bill and records revenue on its books, despite having received no cash from Buchanan. For the McBain Company, this is an example of
    • A. 

      Revenue earned on account

    • B. 

      Unearned revenue

    • C. 

      A cash sale

    • D. 

      A cash expenditure

  • 40. 
    Kurth Corporation prepaid rent for one year in the amount of $24,000 on August 31 of Year 1, for the period beginning September 1. When the company prepared its financial statements on December 31, what adjusting entry would Kurth need to reflect the expired rent?
    • A. 

      Rent Expense 24,000 Cash 23,000

    • B. 

      Rent Revenue 24,000 Rent Expense 24,000

    • C. 

      Prepaid Rent 8,000 Rent Expense 8,000

    • D. 

      Rent Expense 8,000 Prepaid rent 8,000

  • 41. 
    All of the following are permanent accounts except
    • A. 

      Prepaid expenses

    • B. 

      Interest income

    • C. 

      Unearned revenue

    • D. 

      Retained earnings

  • 42. 
    If Portico Company determines that it has accrued interest on a note receivable in the amount of $825, what journal entry will it need to make to record this accrual?
    • A. 

      Interest Receivable 825 Interest Revenue 825

    • B. 

      Interest Revenue 825 Interest Receivable 825

    • C. 

      Interest Income 825 Interest Revenue 825

    • D. 

      Note Receivable 825 Interest Revenue 825

  • 43. 
    The Accumulated Depreciation account is a(n)
    • A. 

      Asset account

    • B. 

      Expense account

    • C. 

      Liability account

    • D. 

      Contra-asset account

  • 44. 
    If the Wittker Law Firm seeks to make an adjusting entry for $8,350 of previously unearned revenue that has now been earned, what account will be credited in the adjusting entry?
    • A. 

      Unearned Revenue

    • B. 

      Service Revenue

    • C. 

      Accounts Receivable

    • D. 

      Cash

  • 45. 
    Durant Company provided services to clients during the period but did not receive payment. At the end of the period when preparing its financial statements, Durant made an adjusting entry to recognize the effect of these services performed. What will the adjusting journal entry look like?
    • A. 

      Accounts Receivable XXX Service Revenue XXX

    • B. 

      Service Revenue XXX Unearned Revenue XXX

    • C. 

      Cash XXX Accounts Receivable XXX

    • D. 

      Service Revenue XXX Accounts Receivable XXX

  • 46. 
    If Pascal Company has total revenues of $174,000, total expenses of $126,000, and dividends of $12,500, what will be the total change in retained earnings after all closing entries have been made?
    • A. 

      $60,000

    • B. 

      $48,000

    • C. 

      $35,500

    • D. 

      $312,500

  • 47. 
    A company properly recognizes a supplies expense when the supplies are
    • A. 

      Counted

    • B. 

      Purchased

    • C. 

      Recorded on the books

    • D. 

      Are consumed or used

  • 48. 
    Depreciation is the process of
    • A. 

      Allocating the cost of an asset to expense over the course of its estimated useful life

    • B. 

      Decreasing the cost of an asset during each accounting period

    • C. 

      Valuing an asset at its fair market value

    • D. 

      Accounting for the change in value of an asset due to abandonment

  • 49. 
    All of the following accounts are considered temporary except
    • A. 

      Expenses

    • B. 

      Retained earnings

    • C. 

      Dividends

    • D. 

      Revenues

  • 50. 
    A company spends $500,000 for a building. The cost of this bulding should be deducted as an expense
    • A. 

      All in the first year that the building is used

    • B. 

      When the $500,000 is paid for the building

    • C. 

      When $5000 in revenue is earned

    • D. 

      Over the expected useful life of the building

  • 51. 
    Deferred or prepaid expenses are
    • A. 

      Earned revenue

    • B. 

      Owners' equity

    • C. 

      Current liabilities

    • D. 

      Current assets

  • 52. 
    If Sullivan Enterprises seeks to make an adjusting entry to recognize depreciation on machinery in the amount of $2,650, what account will be credited?
    • A. 

      Machinery Expense

    • B. 

      Accumulated Depreciation

    • C. 

      Machinery

    • D. 

      Depreciation Expense

  • 53. 
    Solvency ratios measure the firm's ability to
    • A. 

      Pay its short-term obligations

    • B. 

      Generate profits

    • C. 

      Pay dividends

    • D. 

      Pay its debts over the long term

  • 54. 
    All of the following can be adjusting entries except
    • A. 

      Debit to Salaries Expense, credit to Salaries Payable

    • B. 

      Debit to Accounts Receivable, credit to Revenue

    • C. 

      Debit to Rent Expense, credit to Prepaid Rent

    • D. 

      Debit to Cash, credit to Unearned Revenue

  • 55. 
    The cost allocation principles of depreciation are an example of the
    • A. 

      Full disclosure principle

    • B. 

      Monetary unit principle

    • C. 

      Matching principle

    • D. 

      Revenue recognition

  • 56. 
    If the Patterson Company seeks to make an adjusting entry to record the expiration of $500 of prepaid rent, what account will be debited
    • A. 

      Accounts Payable

    • B. 

      Cash

    • C. 

      Prepaid Rent

    • D. 

      Rent Expense

  • 57. 
    The trial balance for Carillo Company indicates that they have $3,250 of supplies on hand; however, a physical count indicates that they only have $1,750 worth of supplies on hand. What adjusting journal entry must be made?
    • A. 

      Supplies Expense 1,750 Supplies 1,750

    • B. 

      Supplies Expense 1,500 Supplies 1,500

    • C. 

      Supplies 1,500 Supplies Expense 1,500

    • D. 

      Supplies 1,750 Supplies Expense 1,750