Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
|
|
|
1.
|
Profit is the difference between: a. | assets and liabilities | b. | assets and
equities | c. | the assets purchased with cash contributed by the owner and the
cash spent to operate the business | d. | the assets received for goods and services and the amounts used
to provide the goods and services | | |
|
|
|
2.
|
Which
of the following is not a business organization form? a. | governmental
unit | b. | proprietorship | c. | partnership | d. | corporation | | |
|
|
|
3.
|
The
initials GAAP stand for: a. | General Accounting Auditing
Procedures | b. | Generally Accepted Auditing
Principles | c. | Generally Accepted Accounting
Principles | d. | Generally Accepted Audit Practices | | |
|
|
|
4.
|
All
of the following are financial statement(s) of a proprietorship except the: a. | statement of
retained earnings | b. | statement of owner's equity | c. | income
statement | d. | statement of cash flows | | |
|
|
|
5.
|
A
debt to equity ratio of 1 indicates: a. | the business cannot pay its debts | b. | the business is
in danger of being closed | c. | the assets equal the equities | d. | the liabilities
equal the equities | | |
|
|
|
6.
|
All
other things being equal, a bank would most likely prefer to lend to a company with a debt to equity
ratio of:
|
|
|
7.
|
Which
of the following accounts is an asset account? a. | Salaries Expense | b. | Drawing | c. | Accounts Payable | d. | Cash | | |
|
|
|
8.
|
Which
of the following accounts is a liability account? a. | Notes Payable | b. | Prepaid
Insurance | c. | Capital | d. | Cash | | |
|
|
|
9.
|
Which
of the following accounts is an owner's equity account? a. | Cash | b. | Accounts Payable | c. | Prepaid
Insurance | d. | Julia Davis, Capital | | |
|
|
|
10.
|
The
gross increases in owner's equity attributable to business activities are called: a. | assets | b. | liabilities | c. | revenues | d. | net income | | |
|
|
|
11.
|
Which
of the following entries records the withdrawal of cash by Joe, owner of a proprietorship, for
personal use? a. | debit Joe,
Capital; credit Cash | b. | debit Joe, Drawing; credit Cash | c. | debit Salaries
Expense; credit Cash | d. | debit Salaries Expense; credit Salaries
Payable | | |
|
|
|
12.
|
A
debit balance in which of the following accounts would indicate a likely error? a. | Salaries
Expense | b. | Notes Payable | c. | N. McGee,
Drawing | d. | Supplies | | |
|
|
|
13.
|
Which
of the following entries records the acquisition of office supplies on account? a. | Office Supplies,
debit; Cash, credit | b. | Cash, debit; Office Supplies, credit | c. | Office Supplies,
debit; Accounts Payable, credit | d. | Accounts Receivable, debit; Office Supplies,
credit | | |
|
|
|
14.
|
Which
of the following entries records the payment of rent for the current month? a. | Cash, debit;
Rent Expense, credit | b. | Rent Expense, debit; Cash, credit | c. | Rent Expense,
debit; Accounts Receivable, credit | d. | Accounts Payable, debit; Rent Expense,
credit | | |
|
|
|
15.
|
Which
of the following entries records the billing of patients for services performed? a. | Accounts
Receivable, debit; Fees Earned, credit | b. | Accounts Payable, debit; Cash, credit | c. | Fees Earned,
debit; Accounts Receivable, credit | d. | Fees Earned, debit; Cash, credit | | |
|
|
|
16.
|
Which
of the following errors, each considered individually, would cause the trial balance totals to be
unequal? a. | a transaction
was not posted | b. | a payment of $96 for insurance was posted as a debit of $46 to
Prepaid Insurance and a credit of $46 to Cash | c. | a payment of
$311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to
Accounts Receivable | d. | cash received from customers on account was posted as a debit
of $140 to Cash and a credit of $140 to Accounts Payable | | |
|
|
|
17.
|
If
the effect of the credit portion of an adjusting entry is to increase the balance of a liability
account, which of the following describes the effect of the debit portion of the
entry? a. | increases the
balance of a contra asset account | b. | increases the balance of an asset
account | c. | decreases the balance of an owner's equity
account | d. | increases the balance of an expense
account | | |
|
|
|
18.
|
Accrued expenses have: a. | not yet been incurred, paid, or
recorded | b. | been incurred, not paid, but have been
recorded | c. | been incurred, not paid, and not
recorded | d. | been paid but have not yet been
incurred | | |
|
|
|
19.
|
Accrued revenue has: a. | been earned and cash received | b. | been earned and
not recorded as revenue | c. | not been earned but recorded as
revenue | d. | not been recorded as revenue but cash has been
received | | |
|
|
|
20.
|
Deferred expenses have: a. | not yet been recorded as expenses or
paid | b. | been recorded as
expenses and paid | c. | been incurred and paid | d. | not yet been
recorded as expenses | | |
|
|
|
21.
|
Deferred revenue is revenue that is: a. | earned and the
cash has been received | b. | earned but the cash has not been
received | c. | not earned and the cash has not been
received | d. | not earned but the cash has been
received | | |
|
|
|
22.
|
The
balance in the prepaid rent account before adjustment at the end of the year is $20,000, which
represents four months' rent paid on December 1. The adjusting entry required on December 31
is: a. | debit Rent
Expense, $15,000; credit Prepaid Rent, $15,000 | b. | debit Prepaid
Rent, $15,000; credit Rent Expense, $15,000 | c. | debit Rent
Expense, $5,000; credit Prepaid Rent, $5,000 | d. | debit Prepaid
Rent, $5,000; credit Rent Expense, $5,000 | | |
|
|
|
23.
|
The
balance in the prepaid rent account before adjustment at the end of the year is $20,000, which
represents five months' rent paid on November 1. The adjusting entry required on December 31
is: a. | debit Rent
Expense, $8,000; credit Prepaid Rent, $8,000 | b. | debit Rent
Expense, $12,000; credit Prepaid Rent, $12,000 | c. | debit Prepaid
Rent, $20,000; credit Rent Expense, $20,000 | d. | debit Prepaid
Rent, $8,000; credit Rent Expense, $8,000 | | |
|
|
|
24.
|
What
is the proper adjusting entry at May 31, the end of the fiscal year, based on a prepaid insurance
account balance before adjustment, $9,500, and unexpired amounts per analysis of policies,
$4,500? a. | debit Insurance
Expense, $4,500; credit Prepaid Insurance, $4,500 | b. | debit Prepaid
Insurance, $5,000; credit Prepaid Insurance, $5,000 | c. | debit Insurance
Expense, $13,500; credit Prepaid Insurance, $13,500 | d. | debit Insurance
Expense, $5,000; credit Prepaid Insurance, $5,000 | | |
|
|
|
25.
|
The
balance in the prepaid insurance account before adjustment at the end of the year is $10,000.
If the additional data for the adjusting entry is (1) "the amount of insurance expired during
the year is $8,500," as compared to additional data stating (2) "the amount of unexpired
insurance applicable to a future period is $1,500," for the adjusting entry: a. | the debit and
credit amount for (1) would be the same as (2) but the accounts would be
different | b. | the accounts for (1) would be the same as the accounts for (2)
but the amounts would be different | c. | the accounts and amounts would be the same for both (1) and
(2) | d. | there is not
enough information given to determine the correct accounts and amounts | | |
|
|
|
26.
|
The
supplies account has a balance of $1,150 at the beginning of the year and was debited during the year
for $1,800, representing the total of supplies purchased during the year. If $500 of supplies
are on hand at the end of the year, the supplies expense to be reported on the income statement for
the year is: a. | $2,950 | b. | $500 | c. | $2,450 | d. | $3,450 | | |
|
|
|
27.
|
The
supplies account has a balance of $975 at the beginning of the year and was debited during the year
for $2,700, representing the total of supplies purchased during the year. If $700 of supplies
are on hand at the end of the year, the supplies expense to be reported on the income statement for
the year would be: a. | $975 | b. | $950 | c. | $2,975 | d. | $3,675 | | |
|
|
|
28.
|
The
unearned rent account has a balance of $20,000. If $5,000 of the $20,000 is unearned at the end
of the accounting period, the amount of the adjusting entry is: a. | $5,000 | b. | $10,000 | c. | $15,000 | d. | $20,000 | | |
|
|
|
29.
|
Vertical analysis can be: a. | used to compare a single company with the industry
averages | b. | prepared for more than one period to identify trends within a
single company | c. | prepared for both the income statement and the balance
sheet | d. | all of the other choices are true | | |
|
|
|
30.
|
The
work sheet is a: a. | formal statement
issued to creditors | b. | working paper often used by accountants to summarize adjusting
entries | c. | replacement for the ledger | d. | replacement for
a set of financial statements | | |
|
|
|
31.
|
Which
of the following appears in the Balance Sheet columns of the work sheet? a. | Equipment | b. | Fees Earned | c. | Depreciation
Expense | d. | Supplies Expense | | |
|
|
|
32.
|
After
all of the account balances have been extended to the Balance Sheet columns of the work sheet, the
totals of the Debit and Credit columns are $39,750 and $21,750, respectively. What is the amount of
net income or net loss for the period? a. | $18,000 net income | b. | $18,000 net
loss | c. | $39,750 net
income | d. | $21,750 net income | | |
|
|
|
33.
|
After
all of the account balances have been extended to the Balance Sheet columns of the work sheet, the
totals of the Debit and Credit columns are $30,750 and $69,750, respectively. What is the amount of
net income or net loss for the period? a. | $39,000 net income | b. | $39,000 net
loss | c. | $30,750 net
income | d. | $69,750 net income | | |
|
|
|
34.
|
After
all of the account balances have been extended to the Income Statement columns of the work sheet, the
totals of the debit and credit columns are $89,900 and $67,600, respectively. What is the amount of
the net income or net loss for the period? a. | $22,300 net income | b. | $22,300 net
loss | c. | $89,900 net
income | d. | $67,600 net loss | | |
|
|
|
35.
|
After
all of the account balances have been extended to the Income Statement columns of the work sheet, the
totals of the debit and credit columns are $92,300 and $67,600, respectively. What is the amount of
the net income or net loss for the period? a. | $24,700 net income | b. | $24,700 net
loss | c. | $92,300 net
income | d. | $92,300 net loss | | |
|
|
|
36.
|
Unearned Fees appears on the: a. | balance sheet | b. | statement of
owner's equity | c. | income statement | d. | statement of
cash flows | | |
|
|
|
37.
|
Depreciation Expense appears on the: a. | balance
sheet | b. | statement of owner's equity | c. | income
statement | d. | statement of cash flows | | |
|
|
|
38.
|
Accounts Receivable appears on the: a. | balance
sheet | b. | statement of owner's equity | c. | income
statement | d. | statement of cash flows | | |
|
|
|
39.
|
Which
one of the fixed asset accounts listed below will not have a related contra asset
account? a. | Office
Equipment | b. | Land | c. | Delivery Equipment | d. | Building | | |
|
|
|
40.
|
Closing entries are dated in the journal as of: a. | the date they
are actually journalized, although they are generally prepared after the end of the accounting
period | b. | the last day of the accounting period, although they are
actually journalized after the end of the accounting period | c. | the first day of
the accounting period, although they are actually journalized after the end of the accounting
period | d. | the first day of the subsequent accounting
period | | |
|
|
|
41.
|
The
entry to close the appropriate insurance account at the end of the accounting period is
debit: a. | Income Summary;
credit Prepaid Insurance | b. | Prepaid Insurance; credit Income
Summary | c. | Insurance Expense; credit Income
Summary | d. | Income Summary; credit Insurance
Expense | | |
|
|
|
42.
|
The
following accounts were taken from the Adjusted Trial Balance columns of the work
sheet:
Accumulated
Depreciation | $
6,000 | Fees Earned | 25,000 | Depreciation
Expense | 1,500 | Insurance Expense | 1,000 | Prepaid
Insurance | 4,000 | Supplies | 500 | Supplies
Expenses | 4,500 | | |
Net income for
the period is: a. | $18,000 | b. | $7,500 | c. | $8,000 | d. | $19,000 | | |
|
|
|
43.
|
A
summary of selected ledger accounts appear below for Martinez Auto Services for the 2000 calendar
year end.
J. V. Martinez, Capital | 12/31 | 5,000 | 1/1 | 3,000 | | | | 12/31 | 20,000 | | | | | | R. V. Martinez, Drawing | 6/30 | 1,000 | 12/31 | 5,000 | 11/30 | 4,000 | | | | | | | | Income Summary | 12/31 | 5,000 | 12/31 | 25,000 | 12/31 | 20,000 | | | | | | |
Net income for
the period is: a. | $20,000 | b. | $23,000 | c. | $5,000 | d. | $20,000 | | |
|
|
|
44.
|
A
fiscal year: a. | ordinarily
begins on the first day of a month and ends on the last day of the following twelfth
month | b. | for a business is determined by the federal
government | c. | always begins on January 1 and ends on December 31 of the same
year | d. | should end at
the height of the business's annual operating cycle | | |
|
|
|
45.
|
In
the normal accounting cycle the: a. | financial statements are prepared after the adjusting entries
are posted | b. | financial statements are prepared before the closing entries
are posted | c. | adjusting and closing entries are journalized after the
financial statements are prepared | d. | post-closing trial balance is prepared before the closing
entries are posted | | |
|
|
|
46.
|
The
ability of a company to pay its debts is called: a. | working capital | b. | current
ratio | c. | return on investment | d. | solvency | | |
|
|
|
47.
|
A
current ratio of 6.5 means that: a. | there are $6.50 in current assets available to pay each dollar
of current liabilities. | b. | the company cannot pay its debts as they come
due | c. | there are $6.50
in current assets for every $6.50 in current liabilities | d. | there are $6 in
current assets for every $5 in current liabilities | | |
|
|
|
48.
|
The
system through which management is given financial information for use in conducting the affairs of
the business and in reporting to owners and other interested parties is called the: a. | accounting
system | b. | fiduciary system | c. | operations
system | d. | auditing system | | |
|
|
|
49.
|
The
three phases of setting up an accounting system are, in order: a. | design,
implementation, analysis | b. | analysis, design, implementation | c. | design,
analysis, implementation | d. | implementation, design, analysis | | |
|
|
|
50.
|
When
a firm uses internal auditors, it is adhering to which one of the following internal control
elements? a. | risk
assessment | b. | monitoring | c. | proofs and
security measures | d. | separating responsibilities for related
operations | | |
|
|
|
51.
|
The
objectives of internal control are to: a. | control the internal organization of the accounting department
personnel and equipment | b. | provide reasonable assurance that operations are managed to
achieve goals, financial reports are accurate, and laws and regulations are complied
with | c. | prevent fraud,
and promote the social interest of the company | d. | provide control
over "internal-use only" reports and employee internal conduct | | |
|
|
|
52.
|
An
element of internal control is: a. | risk assessment | b. | journals | c. | subsidiary ledgers | d. | controlling
accounts | | |
|
|
|
53.
|
The
controlling account that summarizes the debits and the credits to the individual accounts in the
creditors ledger is entitled: a. | Accounts Receivable | b. | Wages
Payable | c. | Accounts Payable | d. | Fees
Earned | | |
|
|
|
54.
|
The
total on the "schedule of accounts payable" at January 31 should equal: a. | the sum of the
accounts payable and notes payable controlling accounts totals at January
31 | b. | the total of the
purchases journal on January 31 | c. | the amount reported in the post-closing trial balance at
January 31 for Accounts Payable | d. | the balance in Accounts Receivable at January
31 | | |
|
|
|
55.
|
In
which journal would an adjustment for an overcharge by a creditor be recorded? a. | general
journal | b. | purchases journal | c. | cash payments
journal | d. | cash receipts journal | | |
|
|
|
56.
|
Which
of the following transactions is recorded in the revenue journal? a. | sale of excess
office equipment for cash | b. | rendering services for cash | c. | rendering
services on account | d. | sale of excess office equipment on
account | | |
|
|
|
57.
|
Which
of the following is recorded in the cash receipts journal? a. | cash withdrawn
by the owner | b. | cash purchase of equipment | c. | cash received on
customer's account | d. | adjusting entry for depreciation | | |
|
|
|
58.
|
Entries in a special journal for revenues are posted in the: a. | accounts
receivable subsidiary ledger | b. | accounts payable subsidiary ledger | c. | fixed asset
subsidiary ledger | d. | cash subsidiary ledger | | |
|
|
|
59.
|
If a
company uses special journals: a. | it must have one for cash, receivables, and
payables | b. | it may have no more than four | c. | the quantity and
design depend on the needs of the company | d. | no matter the quantity, the design must comply with the FASB
requirements | | |
|
|
|
60.
|
Which
of the following explains why there is no month-end posting to controlling accounts in a computerized
accounting system? a. | controlling accounts are the sum of the balances in the
subsidiary | b. | when transactions are entered, they are posted immediately to
all affected accounts | c. | the computer does not make posting and mathematical
errors | d. | computerized accounting keeps a "running balance" on
all accounts; therefore, posting is not necessary. | | |
|