Chapter 2 Smart Book

chapter 2 – smart book.
1. The type of system that integrates the information of departments and functions of a company
into a single computer system is called a(n)
Multiple choice question.
Electronic Data Processing system.
Enterprise Resource Planning (ERP) system.
Accounting Data system.
2. Economic events cause changes in the:

cash position of a company
operating activities of a company
financial position of a company
operating results of a company
3. An internal event involves an exchange between the company and a separate economic entity.
True false question.
True
False
4. Which of the following is an internal economic event?
Issuing stock
Borrowing from a bank
Depreciating equipment
Collecting on accounts receivable
5. Which of the following represents the accounting equation?

Assets = Liabilities - Owners' Equity
Assets = Liabilities + Owners' Equity
Owners' Equity - Liabilities = Assets
Assets + Liabilities = Owners' Equity
6. The objective of an Enterprise Resource Planning (ERP) system is to create a customized

software program that integrates the information of departments and functions of a company into
a single computer system.
True
False
7. Which of the following make up shareholders' equity? (Select all that apply.)
Multiple select question.
amounts invested by shareholders
assets owned by shareholders
assets purchased by the corporation
liabilities owed by the corporation
amounts earned by the corporation
8. Which of the following are economic events? (Select all that apply.)
The payment of employee salaries for the week.
Borrowing $10,000 from the bank.
A proposal to purchase $1,000 of inventory from supplier.
9. Which of the following are external events? (Select all that apply.)
Using supplies purchased in the previous month.
Borrowing from the bank.
Paying employee salaries.
Collecting on a customer account.
10. Which of the following is an internal event?

payment of rent expense
use of supplies
payment of salaries
repayment of a note payable
11. The left side of the accounting equation represents _____, while the right side represents
_____.
the total economic resources of the company; the total claims against the company
the total liabilities of the company; the total assets of the company
the total claims against the company; the total economic resources of the company
the total assets of the company; the total invested in the company
12. Retained earnings equals net income plus distributions to shareholders.

false
13. Which of the following is an external event?

borrowing from the bank
depreciating equipment
using supplies
Correct Answer
borrowing from the bank
14. An internal event (Select all that apply)
does not involve an exchange transaction with another entity.
does not affect the company's financial position.
affects the company's financial position.
involves an exchange transaction with another entity.
15. The accounting equation is: Assets = _______ + Owners' Equity.
Blank 1: Liabilities or liability
16. An event that has a dual effect on the accounting equation is referred to as a(n)
investment.
transaction.
indirect effect.
direct effect.
17. Which of the following make up shareholders' equity of a corporation? (Select all that apply.)
current assets
long-term liabilities
property and equipment
retained earnings
paid-in capital
18. A(n)________ event is any event that directly affects the financial position of the company.
(Enter one word per blank)
Economic
19. Each economic event, or transaction, affecting the accounting equation has
a(n)_______ effect because resources must always equal claims.
Blank 1: dual or double
20. Galaxy Corporation issues 500 shares of $1 par value common stock for $5,000. What is the
total effect on owners' equity?
Increases $4,500
Increases $500
Increases $5,000
No effect
21. Jarvis Company signs a note payable for $10,000 and receives the funds. This transaction
will increase the________ account and increase the note payable account.
Blank 1: cash
22. Conner Corporation purchases supplies on account. This transaction will ______ assets and
______ liabilities.
increase; increase
decrease; decrease
increase; decrease
decrease; increase
22. A transaction is an event that

increases or decreases total assets
has a single effect on the accounting equation
has a dual effect on the accounting equation
increases or decreases income
23. Ace Cleaning Services performs cleaning services for $2,000 cash. What are the effects on
the balance sheet equation for Ace Cleaning Services? (Select all that apply.)
decrease accounts receivable
increase cash
increase owners' equity
increase accounts receivable
decrease owners' equity
decrease cash
24. An individual invests $10,000 to open a new business. What is the effect on assets?
Decrease in total assets
Increase in total assets
No effect on assets
25. Pluto Corporation borrows $20,000 from the bank. What are the balance sheet effects of this
transaction? (Select all that apply.)
increase liabilities
increase assets
26. Bigelow Company purchases supplies on account. What are the effects on the balance sheet
equation? (Select all that apply.)
decrease assets
increase assets
decrease liabilities
27. Hargrave Professional Group performs legal services on account. What is the effect of this
transaction on the balance sheet equation for Hargrave?
Increase assets
Decrease liabilities
Decrease owners' equity
28. Purchasing supplies on account _________ the supplies account and ________ accounts
payable.
decreases; decreases
decreases; increases
increases; increases
increases; decreases
29. Salaries paid to employees________ owners' equity for the expense incurred. (Enter only
one word.)
Blank 1: decrease, debit, reduce, decreases, or lower
30. The use of office supplies purchased on account in the previous month will have what effects
on the balance sheet equation? (Select all that apply.)
decrease retained earnings
increase assets
decrease assets
31. An individual invests $10,000 to open a new business. What is the effect on assets?
No effect on assets
Decrease in total assets
Increase in total assets
32. Royce Corporation pays for supplies purchased in the previous month. What is the effect on
the accounting equation for the payment of the supplies? (Select all that apply.)
Decrease assets
Decrease owners' equity
Increase assets
Increase owners' equity
Decrease liabilities
Increase liabilities
33. The accounting system that refers to the effect that each transaction has on the accounting
system is called a(n)
enterprise resource planning system
database accounting system
double-entry system
34. An account is maintained for each financial statement element, whereas a(n) ______ ____-
______ contains all of the accounts of the entity.
Blank 1: general
Blank 2: ledger
35. Londa Corporation pays employees $3,000 for the month. What is the effect on the balance
sheet equation? (Select all that apply.)
increase assets
decrease assets
36. The effect on the accounting equation from using supplies which had been previously
recorded as an asset is:
assets increase and owners' equity decrease
assets decrease and liabilities increase
assets decrease and owners' equity decrease
assets increase and liabilities increase
37. The payment of an account for supplies purchased in the previous month will ______ the
cash account.
Increase
have no effect on
decrease
38. The double entry system of accounting means each transaction

effects only a single account
has a dual effect on the accounting equation
cannot effect more than one account
39. Elements of the accounting equation are represented by ________ which are contained in the
general ledger.
Blank 1: accounts
40. An account should have an account title, account number, a place for the date of the
transaction, and two columns for
revenues and expenses.
closing and post-closing.
assets and liabilities.
increases and decreases.
41. A company debits cash to increase its cash account. A bank _____ the customer's checking
account because the customer account represents a liability on the bank's balance sheet.
Blank 1: credits or credit
42. In a double-entry accounting system, each transaction has a _______effect on the accounting
equation. (Enter only one word.)
Blank 1: dual or double
43.
In a double-entry accounting system, the _____represents the left side of the account
Blank 1: debit or debits
44. Zircon Corporation has 100 clients and maintains a separate account receivable account for
each client. The account receivable account in the general ledger that contains the total accounts
receivable amount owed to Zircon by all customers is referred to as a
general journal account.
subsidiary account.
control account.
temporary account.
44. An account that is used for instructional purposes instead of drawing a formal general ledger
account is referred to as a(n) ______.
general account
T-account
bank account
dual account
45. In banking, a customer account is credited when cash is deposited because the customer
account represents a liability to the bank.
True
46. Which accounts require a credit to increase the account? (Select all that apply.)
inventory
common stock
equipment
revenue
47. JBM Accounting provides services to clients on account for $5,000. What is the indirect
effect on the balance sheet?
Retained earnings increase.
Liabilities increase.
Assets decrease.
48. Which of the following represents the right side of an account?

debit
decrease
credit
increase
49. An asset _____ by debit entries, and _________ by credit entries.
Blank 1: increases or increase
Blank 2: decreases or decrease
50.Indirectly, expenses will _____ retained earnings and revenues will _____ retained earnings.
decrease; increase
equal; equal
increase; decrease
51. Which of the following are permanent accounts? (Select all that apply.)
cost of goods sold
common stock
cash
revenue
equipment
52. A(n) ______ represents the left side of the account, whereas a(n) ______ represents the right
side of the account.
decrease; increase
credit; debit
increase; decrease
debit; credit
53. Which accounts are closed to retained earnings at the end of an accounting period?
Temporary
Both temporary and permanent
Permanent
54. The accounts receivable control account is found in the ______ ledger, whereas individual
customer accounts are located in the ______ ledger.
temporary; permanent
subsidiary; general
general; subsidiary
permanent; temporary
55. To increase a liability, one should _______ the liability account and to increase an asset, one
should _____ the asset account.
debit; debit
credit; credit
credit; debit
debit; credit
56. A ______ account represents the basic financial position elements of the accounting equation
and a _____ account keeps track of the changes in the retained earnings component of
shareholders' equity.
subsidiary; control
permanent; temporary
temporary; permanent
57 In a double entry accounting system, the right side of the account is represented by a(n)
Blank 1: credit
58. Permanent accounts are closed at the end of the accounting period.
True
False
59. The general ledger accounts serve as ________ accounts.

control
subsidiary
temporary
permanent
60. Which of the following are temporary accounts? (Select all that apply.)
accounts payable
salary expense
revenue
retained earnings
61. Temporary accounts are periodically closed, and the net effect is recorded in the
permanent_______. _______ account.
62.
1. Prepare an unadjusted trial balance

2. Record adjusting entries
3. Prepare an adjusted trial balance
4. Prepare financial statements
5. Close the temporary accounts
63. The primary purpose of a source document is to assist in

preparing a trial balance.
adjusting the accounts.
preparing financial statements.
analyzing a transaction.
64. Transaction analysis involves which of the following? (Select all that apply.)
Closing the temporary accounts.
Identifying the accounts to be debited and credited.
Identifying the elements involved in the transaction.
Posting the entry to the general ledger.
65. Repetitive transactions such as sales or purchases are usually recorded in a(n) ______ rather
than the general journal.
chart of accounts
special journal
ledger journal
subsidiary ledger
66. Which of the following steps occurs only at the end of the year?
Record adjusting entries and post to the general ledger accounts
Obtain information about external transactions from source documents
Close the temporary accounts to retained earnings
Prepare the financial statements
67. Sales invoices, bills from suppliers, and cash register tapes that relay information to the
accountant are referred to as ________ documents.
Blank 1: source
68. Transaction analysis includes _________ the source documents to determine the dual effect
on the accounting equation.
summarizing
identifying
recording
analyzing
69. Beck Company borrowed $50,000 from the bank and signed a note. The journal entry Beck
makes to record this transaction includes (Select all that apply.)
debit to notes payable $50,000
credit to notes payable $50,000
credit to cash for $50,000
debit to cash for $50,000
70. When rent is paid in advance, it is properly recorded on the balance sheet as
a contra asset.
a liability.
an asset.
retained earnings.
71.
69. A general journal entry should contain which of the following? (Select all that apply.)
Whether the account is temporary or permanent.
The date.
Supporting explanations.
The accounts and amounts debited and credited.
70. A chronological record of all economic events affecting a firm are recorded in
a(n) _________
Blank 1: journal
1.Analyze the transaction

2. Record the transaction
3.Post from the journal the the general ledger
4. Prepare the unadjusted trial balance.
71. The primary purpose of a source document is to assist in

adjusting the accounts.
preparing a trial balance.
preparing financial statements.
analyzing a transaction.
72. The process of reviewing the source documents to determine the dual effect on the
accounting equation and the specific elements involved is called
Blank 1: transaction, analyze, analyzing, or transactions
Blank 2: analysis, transactions, or transaction
73. In a journal entry, the amount to be _____ is entered in the first column, and the amount to be
_____ is entered in the second column.
debited; credited
credited; debited
added; subtracted
subtracted; added
74. In step 3 of the accounting processing cycle:

the transaction is recorded in the general ledger
information is obtained from source documents
the transaction is recorded in a journal
the transaction is analyzed
75. Which of the following serves to relay important information about a transaction to the
accountant? (Select all that apply.)
cash register tapes
quarterly tax return
bills from suppliers
sales invoices
annual report
76. The process of transferring debit and credit information from the journal to the ledger is
called:
identifying
posting
recording
analyzing
77. A chronological record of all economic events affecting a firm are recorded in a(n)
Blank 1: journal
78. To record the issuance of common stock at par value, (Select all that apply.)
credit cash
debit cash
credit common stock
debit common stock
79. The process of transferring information from a journal entry to the specific accounts affected
in the general ledger is referred to as
Blank 1: posting or post
80. Repetitive transactions such as sales or purchases are usually recorded in a(n) ______ rather
than the general journal.
subsidiary ledger
special journal
chart of accounts
ledger journal
81. The journal entry to record the issuance of 100 shares of $5 par value common stock for
$500 would include which of the following?
Credit retained earnings $500.
Credit additional paid-in capital $500.
Debit common stock $500.
Debit cash $500.
82. Carly Enterprises borrows $3,000 on a 9-month 8% note from Second National Bank. The
journal entry to record the note is
debit cash $3,000; credit note receivable $3,000.
debit cash $3,000; credit note payable $3,000.
debit account receivable $3,000; credit note payable $3,000.
debit note payable $3,000; credit note receivable $3,000.
83. Focus Corp. pays $12,000 for 2 years of rent. What is the journal entry to record this
transaction?
Debit prepaid rent $12,000; credit cash $12,000.
Debit cash $12,000; credit rent payable $12,000.
Debit cash $12,000; credit prepaid rent $12,000.
Debit prepaid rent $6,000; credit cash $12,000; credit rent payable $6,000.
84. The process of transferring debit and credit information from the journal to the ledger is
called:
posting
analyzing
identifying
recording
85. When a company pays rent in advance, prepaid rent is ________ and cash is ________.
credited, credited
debited, credited
credited, debited
debited, debited
86. The process of transferring information from the journal to the ledger is referred to as
preparing journal entries.
preparing closing entries.
adjusting.
posting.
87. Kendall Corp. purchased equipment for $100,000 by paying $20,000 in cash and signing a
note payable for $80,000. The journal entry to record this transaction would include a
debit to cash $20,000.
debit to equipment $80,000.
debit to note payable $80,000.
debit to equipment $100,000.
88. Tindall Corp. purchased inventory for $50,000 cash. The entry to record this transaction is
debit inventory $50,000; credit accounts payable $50,000.
debit inventory $50,000; credit cash $50,000.
debit inventory $50,000; credit revenue $50,000.
debit cash $50,000; credit revenue $50,000.
89. Identify which transaction would result in the following journal entry: debit to Cash for
$60,000 and credit to Common stock for $60,000.
Issue stock to investors
Sell goods to customers for cash
Collect from customers on account
90. Carly Enterprises borrows $3,000 on a 9-month 8% note from Second National Bank. The
journal entry to record the note is
debit cash $3,000; credit note receivable $3,000.
debit note payable $3,000; credit note receivable $3,000.
debit account receivable $3,000; credit note payable $3,000.
debit cash $3,000; credit note payable $3,000.
91. On July 1, Davis Corporation pays $10,000 for August rent. Which of the following are
correct? (Select all that apply.)
Davis credits prepaid rent for $10,000
Davis debits prepaid rent $10,000
Davis credits cash $10,000
Davis debits cash $10,000
92. Lemon Creek Industries purchased a building for $280,000. The journal entry to record this
transaction would include a
debit to building expense $280,000.
debit to building $280,000.
credit to prepaid building $280,000.
93. Ferguson Corp. purchased inventory on account for $20,000. The entry to record this
transaction would include (Select all that apply.)
debit to inventory $20,000.
debit to accounts payable $20,000.
credit to accounts payable $20,000.
credit to inventory $20,000.
94. To record the issuance of common stock at par value, (Select all that apply.)
credit cash
credit common stock
debit common stock
debit cash
95. Which transaction would result in the following journal entry: debit Cash for $40,000 and
credit Notes payable for $40,000?
Pay for items purchased on account.
Borrow from a bank.
Repay money owed to a bank.
Sell goods to customers for cash.
96. When rent is paid in advance, it is properly recorded on the balance sheet as
an asset.
retained earnings.
a liability.
a contra asset.
97. A perpetual system requires that merchandise purchases be recorded in the _______ account.
Blank 1: inventory
98. Samuel Corporation purchased a building for $500,000. To record this transaction (Select all
that apply.)
building expense is credited $500,000
cash is credited $500,000
building expense is debited $500,000
building is debited $500,000
99. Klondike Inc. sold goods to customers for $5,000 cash. The cost of the goods was $3,000.
The journal entry to record this transaction would include a
credit to sales $5,000.
debit to sales $3,000.
debit to net income $2,000.
credit to cost of goods sold $3,000.
100. In a periodic inventory system, cost of goods sold is debited for the cost of inventory sold
at the end of the accounting period
when inventory is sold
at the beginning of the accounting period
101. In a perpetual system, each time goods are sold, cost of goods sold is debited and______ is
credited.
Blank 1: inventory
102. Which transaction would require the following journal entry: debit Inventory for $60,000
and credit Accounts payable for $60,000?
Sell goods to customers.
Purchase inventory for cash.
Purchase inventory on account.
Pay for supplies on account.
103. Beginning inventory was $50,000. Inventory purchased during the year cost $75,000.
Inventory on hand at year-end was $40,000. Cost of goods sold was
$125,000
$65,000
$75,000
$85,000
$165,000
The journal entries to record this transaction include (Select all that apply.)
credit to cash $5,000.
debit to cost of goods sold $3,000.
105. The purchases account is debited to record purchases of inventory in a:

perpetual inventory system
permanent inventory system
periodic inventory system
temporary inventory system
106. Millburg Corp. uses the periodic inventory method. Millburg's beginning inventory is
$10,000. During the year, Millburg purchases $8,000 of inventory. Ending inventory is $5,000.
Cost of goods sold is
$18,000.
$13,000.
$3,000.
$7,000.
107. A temporary purchases account is used when the _________ inventory system is used.
Blank 1: periodic
108. In a perpetual system, each time goods are sold, cost of goods sold is debited and is
credited.
Blank 1: inventory
109. What account is debited when cash is collected from customers for a previous sale on
account?
Accounts receivable
Cash
Inventory
Sales revenue
110. Which of the following is the correct formula to calculate cost of goods sold?
Beginning inventory + purchases - ending inventory
Beginning inventory + ending inventory - purchases
Ending inventory + purchases - beginning inventory
Beginning inventory - purchases + ending inventory
111. When inventory is sold in a perpetual inventory system (Select all that apply.)
cost of goods sold is credited
sales revenue is credited
inventory is credited
inventory is debited
cost of goods sold is debited
sales revenue is debited
112. If the ______ inventory system is used, adjusting entries are made to the purchases,
inventory, and cost of goods sold accounts at the end of the period.
perpetual
permanent
temporary
periodic
123. Paying employees for services rendered during the current month _____ assets and _____
shareholders' equity.
124. Drake Corp. received $5,000 from customers for goods sold on account in the previous
month. The journal entry for this transaction will include a
credit to cash.
credit to accounts receivable.
debit to retained earnings.
credit to accounts payable.
The journal entries to record this transaction include (Select all that apply.)
credit to cash $5,000.
debit to cost of goods sold $3,000.
126. Brunson Company pays employees $4,000 for work performed in the current month. The
journal entry to record the transaction will include a
credit to accounts receivable.
credit to salaries payable.
debit to cash.
debit to salary expense.
127. Which transaction will require the following journal entry: debit Cash for $1,500 and credit
Accounts receivable for $1,500?
Pay for goods purchased on account.
Collect from customer on account.
Sell goods to customer on account.
Purchase goods on account.
128. Millburg Corp. uses the periodic inventory method. Millburg's beginning inventory is
$10,000. During the year, Millburg purchases $8,000 of inventory. Ending inventory is $5,000.
Cost of goods sold is
$3,000.
$7,000.
$13,000.
$18,000.
129. Glasser Corp. sold goods on account. The journal entry to record this transaction includes
(Select all that apply.)
Debit inventory
debit accounts receivable
credit accounts receivable
debit cost of goods sold
credit cost of goods sold
credit revenue
debit revenue
credit inventory
130. A trial balance proves:

all transactions have been recorded correctly
all transactions have been posted correctly
debits balances equal credit balances
131. Brunson Company pays employees $4,000 for work performed in the current month. The
journal entry to record the transaction will include (Select all that apply.)
a debit to cash
a credit to cash
a debit to salary expense
a debit to salaries payable
a credit to salaries payable
a credit to salary expense
132. Crater Corp. uses a separate dividend account to record dividends declared. When a
dividend is declared and paid, the journal entry will include (Select all that apply.)
credit to dividends
debit to cash
credit to cash
debit to dividends
133. Lassiter Corp. uses the periodic inventory method. During the year, Lassiter purchases
$10,000 of inventory. Ending inventory is $6,000. Cost of goods sold is $12,000. Beginning
inventory was:
$8,000
$18,000
$4,000
$16,000
134. Flounder Corp. sold $12,000 of goods on account. The entry to record this transaction
would include a debit to
accounts payable.
sales.
retained earnings.
accounts receivable.
135. At the end of the accounting period, before the adjusting entries are recorded:
an unadjusted trial balance is prepared
an adjusted trial balance is prepared
a closing balance is prepared
136. When a company declares a dividend, the temporary ______ account is often debited.
dividend
dividend income
dividend payable
dividend receivable
137. Adjusting entries are recorded:

after closing entries have been prepared
after the financial statements have been prepared
at the beginning of an accounting period
when the financial statements are prepared
138. Adjusting entries help a company accurately measure (Select all that apply.)
revenues and expenses for the period.
the company's financial performance.
the cash received and paid during the year.
139. At the end of the period, an unadjusted___________ balance, a listing of all accounts with
their respective balances, is used to assist in the preparation of adjusting entries, financial
statements, and closing entries.
Blank 1: trial or trail
140. Adjusting entries are recorded for (Select all that apply.)
Accruals
prepayments
post-payments
estimates
141. f a company uses the temporary account dividends then when a dividend is paid to
shareholders:
cash is debited
dividends is debited
retained earnings is debited
142. Entries made at the end of the accounting period before the financial statements are
prepared are called__________ entries.
Blank 1: adjusting, adjusted, or adjust
143. One of the purposes of adjusting entries is to

recognize all revenues earned during the period.
make assets equal liabilities plus owners' equity.
ensure debits equal credits.
record all external transactions at the end of the year.
144. Which of following is true regarding a trial balance?

The amount in retained earnings is ending retained earnings.
Debits must equal credits.
Assets equal liabilities.
Total debits equals the total assets.
145. Adjusting journal entries are necessary for three situations: deferrals, accruals, and
Blank 1: estimates, prepayments, estimate, or prepayment
146. Which of the following are examples of prepayments?
Purchasing supplies that will be used later
Expense paid when it is incurred
Revenue collected when it is earned
147. Adjusting journal entries are needed to record (Select all that apply.)
expense incurred, but not yet paid
cash that has been paid for expenses
revenue earned, but not yet received
cash that has been collected from customers
148. Prepaid expenses are:

expenses incurred before cash is paid
expenses paid at the time incurred
expensed in a later period than cash was paid
149. Adjusting journal entries are necessary for three situations: deferrals, _______ and
estimates.
Blank 1: accruals, prepayments, accrual, prepayment, accurals, accural, acrual, or acruals
150. Prepayments occur when:

customers are unable to pay the full amount due when goods are delivered
cash flow precedes expense or revenue recognition
sales are delayed pending credit approval
manufactured goods await quality control inspections
151. A company paying rent in advance for the month of April records:
an asset
revenue
an expense
a liability
152. Ragland Corp. purchases supplies on account for $1,000 and appropriately records the
transaction in an asset account. A count of inventory at year-end indicates that $300 of supplies
are remaining. The adjusting journal entry required at year-end includes (Select all that apply.)
debit to supplies expense $700.
credit to supplies on hand $300
debit to supplies on hand $300.
credit to supplies expense $700.
credit to supplies on hand $700
debit to supplies on hand $700.
153. One of the purposes of adjusting entries is to

ensure debits equal credits.
make assets equal liabilities plus owners' equity.
recognize all revenues earned during the period.
record all external transactions at the end of the year.
154. Prepaid expenses are the cost of ______ acquired in one accounting period and __________ in a
future period.
Blank 1: assets or asset
Blank 2: expensed or expense
155. When rent is paid in advance for 2 years, it is appropriately recorded as a(n) ,
__________whereas when rent is paid and used during one month, it is appropriately recorded as
a(n) _____________
Blank 1: asset or prepaid
Blank 2: expense
156. Logan Corp. purchases supplies on account and appropriately records the transaction in an
asset account. The adjusting journal entry at year-end when accounting for supplies used will
require a (Select all that apply.)
credit to supplies
debit to supplies
debit to supplies expense
credit to supplies expense
157. To adjust for rent used up during the year that was recorded to the prepaid rent account
when paid for,
rent expense is debited, prepaid rent is debited
prepaid rent is credited, rent expense is credited
rent expense is debited, prepaid rent is credited
prepaid rent is debited, rent expense is credited
158. On January 1, Poodle Company purchases equipment for $120,000. The equipment is
expected to have a useful life of 4 years and will have no value a the end of that period. Poodle
allocates the cost equally over the period of use so the depreciation expense that must be
recognized for the year is
$25,000.
$120,000.
$30,000.
$5,000.
159. A company paying rent in advance for the month of April records:
an expense
a liability
an asset
revenue
160. On October 1, Arcelia Corp. pays $24,000 for two years of rent. The transaction is
appropriately recorded in a prepaid rent account. On December 31, of the same year Arcelia
should make an adjusting entry for the rent expired, which includes (Select all that apply.)
credit to prepaid rent $3,000
credit to rent expense $9,000
debit to prepaid rent for $3,000.
debit to rent expense for $3,000.
credit to rent expense $3,000
debit to rent expense for $9,000.
161. Cost of assets acquired in one accounting period and expensed in a future accounting period
are
Blank 1: prepaid
Blank 2: expenses
162. On January 1, Noonan Company purchases equipment for $100,000. The equipment is
expected to have a useful life of 5 years and will have no value at the end of that period. Noonan
allocates the cost equally over the period of use so the depreciation expense that must be
recognized for the year is
$100,000.
$0.
$10,000.
$20,000.
163. On April 1, Larken Corp. pays $36,000 for 3 years of rent. The transaction is appropriately
recorded as prepaid rent. The adjusting entry on December 31, of the same year, will require a
credit to rent expense
debit to prepaid rent
credit to prepaid rent
debit to rent expense
164. The balance sheet account that depreciation is recorded to is:

Plant and equipment
depreciation expense
accumulated depreciation
165. An adjusting entry to record depreciation expense for the period will ______ total assets.
increase
not change
decrease
166. The normal balance in a contra asset account is

debit
either debit or credit
credit
167. The contra account used to record depreciation is ________ depreciation.

Blank 1: accumulated
168. If a company fails to record depreciation expense for the year, net income is
not affected.
understated.
overstated.
169. When an adjusting entry is made to record depreciation expense, the effect on the balance
sheet is to
increase retained earnings.
reduce total assets.
increase total liabilities.
170. A deferred revenue liability appears on the balance sheet for:

cash received before revenue is earned
revenue earned before cash is collected
cash received at the same time revenue is earned
171. To record depreciation expense (Select all that apply.)
accumulated depreciation is credited
accumulated depreciation is debited
depreciation expense is credited
depreciation expense is debited
172. An accrual expense is recorded by:
debiting an expense and crediting a payable
debiting an expense and crediting an asset
debiting an asset and crediting a payable
173. Revenue and expenses on the income statement are classified as: (Select all that apply.)
financing items
investing items
operating items
non-operating items
174. On October 1, Calloway signs a 5-year interest-bearing note payable for $4,000. The note
bears interest of 10%. The journal entry required on December 31 to accrue interest will include
a
credit to notes payable for $400.
debit to interest expense $400.
credit to interest payable $400.
175.
171. To increase the accumulated depreciation account, you would ______ the account, and to
increase depreciation expense, you would _____ the account.
debit, debit
debit, credit
credit, credit
credit, debit
172. Accumulated depreciation is (Select all that apply.)

a balance sheet account
a contra asset account
a stockholder's equity account
an expense account
173. If a company fails to record depreciation expense for the year, what are the effects on the
financial statements? (Select all that apply.)
Revenues are understated.
Assets are overstated.
Expenses are understated.
Liabilities are overstated.
174. Deferred revenue should be classified as a(n)_________ on the balance sheet.
Blank 1: liability
175. On June 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed
evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the
December 31 income statement for Year 1?
$7,000
$12,000
$6,000
$5,000
176. The adjusting journal entry required when deferred revenue is recognized includes
a ________ entry to revenue.
Blank 1: credit
177. On August 1, 2017, Clerk Company receives $15,000 from a customer on account for work
to be performed evenly over the next 18 months. Clerk records this transaction in the deferred
revenue account. If Clerk fails to record the adjusting entry on December 31, 2017, what is the
effect on the financial statements?
Owners' equity is overstated.
Assets are understated.
178. A prepayment may be recorded in prepaid rent, a balance sheet account. The alternative
method to record the prepayment is to debit the ______--- __________
Blank 1: rent
Blank 2: expense
179. On September 1, Year 1, Great Lakes Equipment receives $24,000 from a customer for
work to be performed evenly over the next 2 years. What is the amount of revenue that Great
Lakes Equipment should recognize on the income statement for the year ending December Year
1?
$4,000
$12,000
$3,000
$24,000
180. Deferred revenue is a(n):

liability on the balance sheet
expense on the income statement
revenue on the income statement
asset on the balance sheet
181. To record an adjusting entry when deferred revenue is recognized:

deferred revenue is debited
revenue is debited
revenue is credited
deferred revenue is credited
182. Failure to record the adjusting entry for deferred revenue now earned causes liabilities on the
balance sheet to be what?
This does not affect liabilities on the balance sheet
Understated
Overstated
183. An alternative approach to recording unearned revenue would be to ______ when cash is
collected from a customer in advance of providing goods and services.
credit sales revenue
debit sales revenue
credit rent expense
debit rent payable
184. On May 1, Year 1, Garcia Company paid $1,200 for 12 months of rent and recorded the
transaction in an income statement account. The adjusting journal entry required on December
31, Year 1, will require a
credit prepaid rent $400.
debit rent expense $800.
debit to prepaid rent $400.
credit rent expense $400
credit rent expense $800.
debit rent expense $400
185. On October 1, Company B records 1 year of prepaid rent in an income statement account
then adjusts for the unexpired prepaid rent at the end of the period. Which of the following
statements is true for Company B's financial statements at December 31 year-end?
Company B's assets will be lower than if the original entry were recorded in a balance sheet
account.
Company B's assets and expense should be the same regardless of which account was used
to record the original transaction.
Company B would have more expense than if the original entry were recorded in a balance sheet
account.
186. A deferred revenue liability appears on the balance sheet for:

cash received before revenue is earned
revenue earned before cash is collected
cash received at the same time revenue is earned
187. c from customers for services to be performed evenly over the next 12 months. Swift
recorded the original transaction in a balance sheet account. The adjusting journal entry on
December 31, Year 1, will include which of the following entries?
Credit to revenue $1,200.
Debit revenue $300.
Credit deferred revenue $1,200.
Debit to deferred revenue $300.
188. On November 1, Year 1, Thomasson paid rent on its building for 2 years in the amount of
$12,000. When the transaction was initially recorded, the full $12,000 was recorded as an
expense using an alternative approach to record the prepayment. The adjusting journal entry on
December 31, Year 1 requires a
credit to prepaid rent $11,000.
debit to rent expense $200.
credit to rent expense $11,000.
debit to prepaid rent $1,000.
189. The adjusting entry to record deferred revenue originally recorded as sales revenue includes
a:
debit to deferred revenue
debit to sales revenue
credit to deferred revenue
190. It is acceptable accounting practice to initially record prepaid rent in either a balance sheet
or income statement account.
True
False
191. Accruals occur when cash flow comes: (Select all that apply.)
before expense recognition
after revenue recognition
after expense recognition
before revenue recognition
192. On September 1, Newman Company received $1,200 of revenue in advance from customers
for work to be performed evenly over the next 12 months. The transaction was recorded in an
income statement account. What is the adjusting journal entry required on December 31?
Debit revenue $400.
Credit revenue $400.
Credit revenue $800.
Debit revenue $800.
193. Accruals involve transactions where the cash outflow or inflow takes place in a period
______ expense or revenue recognition.
before
the same as
after
194. Accrued liabilities are costs incurred in an accounting period:

before a cash payment
at the same time of a cash payment
after a cash payment
195. Majerek Company accrues salaries at year-end. What is the financial statement effect of this
adjusting entry? (Select all that apply.)
Assets are decreased.
Net income is decreased.
Expense is increased.
Retained earnings is decreased.
196. Revenue of $1,000 was collected in advance from customers for goods and was recorded
as sales revenue. At year end, $600 of the revenue collected in advance is earned. The adjusting
entry includes a:
credit to deferred revenue $600
credit to deferred revenue of $400
debit to revenue of $400
credit to revenue of $400
debit to deferred revenue of $400
197. The justification for a company initially recording prepaid rent in either an income
statement or balance sheet account is that
the same accounts are used to record the initial transaction regardless of which type of account is
used.
the accounts are adjusted at year-end to reflect the correct balances.
the balance sheet and income statement accounts are classified as current.
198. Accrued liabilities are:

expenses paid at the time incurred
expenses incurred before cash was paid
expensed in a later period than the cash was paid
199. Carradine Company prepares an adjusting journal entry to accrue salaries at year-end. What
effect will this entry have on the financial statements?
Liabilities will decrease.
Revenues will increase.
Expenses will increase.
Assets will increase.
200. The general formula used to calculate interest accrued on a note payable is principal times
rate times
number of months to maturity on the note payable.
number of months outstanding in the current year/12.
12 months.
201. Accruals involve transactions where the cash outflow or inflow takes place in a period
______ expense or revenue recognition.
after
before
the same as
entry includes a:

203. To calculate interest the following information is needed:

discount rate
interest rate
period of time
principal
204. Which transaction or event required the journal entry: debit Interest expense for $250 and
credit Interest payable for $250?
Collect interest on a receivable.
Pay interest on a note payable.
Record interest at the end of the period.
205. Mann Corporation signed a note with principal and interest due in 6 months. The stated rate
of interest on the note was 8%. If Mann accrues three months of interest at year-end, the formula
Mann will use will be: Principal________ x % x 3/12.
Blank 1: 8, eight, .08, or 8%
206. The balance sheet impact of accruing salaries expense is to:

increase assets
decrease assets
207. The adjusting entry to record deferred revenue originally recorded as sales revenue includes
a:
debit to sales revenue
debit to deferred revenue
credit to deferred revenue
208. On September 1, Paisley Corp. signed a 2-year interest-bearing note payable for $100,000.
The interest rate was 12%, and both principal and interest are paid at maturity. The amount of
interest that is accrued on December 31, is
$4,000.
Reason:
$100,000 x 12% x 4/12 = $4,000
Interest is stated at an annual rate so 4%/12 months.
209. On the last day of the period, a journal entry is made to record the amount of interest that
has been accrued but not
Blank 1: paid
210. On July 1, Perry Company signed a note with principal of $80,000 and a stated interest rate
of 4%. The principal and interest are due on April 1 of the following year. Perry will accrue
interest on December 31st of
$3,200
$4,800
$0
$1,600
Reason:
$80,000 x 4% x 6/12 - Interest is always stated as an annual rate regardless of loan term. The 4%
interest is annual and must by multiplied by 6/12 to account for the six months July-December
when recording the accrued interest on 12/31.
211. Persimmon Company fails to record an accrual for salaries at year-end. What are the
financial statement effects of this error? (Select all that apply.)
Liabilities are understated.
Net income is overstated.
Expense is understated.
212. On October 1, Hill Corporation signed a 6-month note with principal of $10,000 and interest
of $600 due in six months. The stated rate of interest on the note is
12%
6%
3%
12%
Reason:
$10,000 x 6/12 x I = $600; $5,000 x I = $600; I = 12%
$10,000 x 12% x 6/12 = $600 - Interest is an annual rate regardless of the length of the loan so
12% for the year x 6/12.
entry includes a:
213. If a company fails to record an adjusting entry for accrued interest on a note payable, what
are the financial statement effects? (Select all that apply.)
Retained earnings is overstated.
Income is understated.
Expenses are understate
214. Interest earned, but not yet received is an example of:

a prepaid expense
an accrued receivable
an accrued expense
215. Green Pro accrues interest at year-end on a note receivable. The adjusting journal entry to
record the accrual will include a
credit to interest receivable.
debit to cash.
credit to interest revenue.
debit to accounts payable.
216. On October 1, Callison accepts a 5-year interest bearing note receivable for $1,000. The note
bears interest of 12%. Both principal and interest are received at maturity. The journal entry
required on December 31, Year 1, to accrue interest will include (Select all that apply.)
credit to interest revenue $30
debit to interest receivable $30.
Reason:
$1,000 x 12% = $120/12 = $10 per month x 3 months = $30 interest expense
217. The stated interest rate on debt instruments is always stated as an annual rate.
True
False
218. Accrued receivables involve situations when the revenue is earned in a period ______ the
cash receipt.
after
the same as
before
219. Accruing a receivable ______ accounts receivable on the balance sheet and ______ revenues
on the income statement.
220. Accountants often have to make of future amounts to comply with the accrual accounting
model.
Blank 1: estimates or estimate
221. To accrue interest earned on a note receivable that has not yet been collected, _____ interest
receivable and ______ interest revenue.
debit, debit
credit, credit
debit, credit
credit, debit
222. A situation that requires an adjusting entry that is not a prepayment or an accrual entry is
collecting cash from customers.
paying suppliers on account.
closing the accounts at year-end.
estimating bad debts.
223. A company fails to accrue salaries at year-end. What is the financial statement effect of this
error?
Revenues are understated.
Net income is overstated.
224. The purpose of estimating bad debts is to

write off specific customer accounts.
recognize all accrued revenue.
comply with the accrual accounting model.
match assets with liabilities.
225. On September 1, Gina accepts a 6-month interest bearing note receivable for $1,000. The
note bears interest of 12%. Both principal and interest are received at maturity. The journal entry
required on December 31 to accrue interest will include a
credit to interest revenue $40.
Reason:
Interest is stated at an annual rate regardless of the term of the loan. $1,000 x 12% x 4/12
226. Which of the following is an example of an estimate?

accounting for expenses incurred not yet paid
accounting for bad debts
accounting for depreciation
227. If a company fails to record an adjusting entry for accrued interest on a note payable, what
are the financial statement effects?
228. To record depreciation expense (Select all that apply.)

depreciation expense is debited
accumulated depreciation is credited
depreciation expense is credited
accumulated depreciation is debited
229. Which of the following is an example of an accrued receivable?

Receiving cash from clients.
Recording interest revenue before it is received.
Selling goods to customers for cash.
230. Longine Co. accrues 1 week of salaries at the end of November. The adjusting journal entry
to record this accrual will include which of the following?
Credit to salary expense.
Credit to salary payable.
Debit to salary expense.
Debit to salary payable.
231. Accountants often have to make_______ of future amounts to comply with the accrual
accounting model.
232. Depreciation expense is _____ and accumulated depreciation is ______ to record the cost of
equipment used up generating revenue in the current period.
credited, credited
debited, credited
debited, debited
credited, debited
233. To accrue utilities expense at year-end that has not been paid,
debit utilities expense and credit cash
debit cash and credit utilities payable
debit utilities payable and credit utilities expense
debit utilities expense and credit utilities payable
234. The purpose of estimating bad debts is to

comply with the accrual accounting model.
match assets with liabilities.
write off specific customer accounts.
recognize all accrued revenue.
235. Conner Corp. accrues interest on a note payable at year-end. The adjusting journal entry to
record the accrual will include which of the following?
Credit to interest expense.
Debit to interest expense.
Credit to interest payable.
Debit to interest receivable.
236. The effect of salaries and wages incurred but not yet paid would be reflected in the account
balances shown on the:
unadjusted trial balance
adjusted trial balance
237. The income statement summarizes the:
profit-generating activities of a company at a specific date
assets and liabilities of a company at a specific date
profit-generating activities of a company for a period of time
assets and liabilities of a company for a period of time
238. The adjusting journal entry required to record depreciation includes a(n) entry to
accumulated depreciation.
Blank 1: credit
239. On April 1, Gemini signs a 5-year interest-bearing note payable for $1,000. The note bears
interest of 12%. The journal entry required on December 31 to accrue interest will include a
credit to interest payable $120.
credit to notes payable for $90.
debit to interest expense $120
240. The account balances shown in the________ trial balance include adjusting entries.
Blank 1: adjusted or adjusting
241. The financial statement that summarizes the profit-generating activities of a company
during a particular period of time is the
statement of cash flows.
balance sheet.
statement of stockholders' equity.
income statement.
242.
Interest expense----Nonoperating item
Depreciation expense----Operating item
243. The components of the income statement are usually classified as: (Select all that apply.)
financing items
investing items
non-operating items
operating items
244. The account balances shown in the_______ trial balance include adjusting entries. (
Blank 1: adjusted or adjusting
245. Which statement reports the changes in shareholders' equity during the period that were not
a result of transactions by owners.
The statement of cash flows
The statement of comprehensive income
The income statement
The balance sheet
246. Which of the following items are classified as operating items on the income statement?
loss due to hurricane
utility expense
loss on sale of long-term investment
employee salary expense
247. Expenses and revenues that relate directly to the principal revenue-generating activities of
the company are classified as______ items on the income statement
Blank 1: operating
248. On October 1, Calloway signs a 5-year interest-bearing note payable for $4,000. The note
bears interest of 10%. The journal entry required on December 31 to accrue interest will include
a
249. After the adjusting entries have been posted to the general ledger, the next step in the
accounting processing cycle is to prepare an _________, trial balance
Blank 1: adjusted
250. The purpose of the statement of comprehensive income is to report current period changes
in equity that arose from
internal transactions
non-owner transactions
customers
owner transactions
251. Neumann Corporation prefers to present a separate income statement. Neumann can satisfy
the requirements for reporting comprehensive income by presenting comprehensive income
in the statement of change in shareholders' equity
immediately following the income statement
in the equity section of the balance sheet
252. In the two statement approach: (Select all that apply.)

the separate statement of comprehensive income begins with OCI items
there is a separate income statement
the income statement is immediately followed by a separate statement of comprehensive
income
the separate statement of comprehensive income begins with net income
253. The statement of comprehensive income reports the changes in shareholders' equity during
the period that:
equal the difference between assets and liabilities
equal the difference between revenues and expenses
were not a result of transactions with owners
were the result of transactions with owners
254. Operating items include (Select all that apply.)
gains and losses from peripheral activities.
revenues and expenses from peripheral activities.
revenues from the principal revenue-generating activities of the company.
expenses from the principal revenue-generating activities of the company.
255. Muller Company does not report other comprehensive income items. Muller Company
is not required to report comprehensive income
must use the one statement approach
must use the two statement approach
256. Expenses and revenues that relate directly to the principal revenue-generating activities of
the company are classified as items on the income statement. (Enter only one word.)
Blank 1: operating
257. Which formats are acceptable for reporting comprehensive income? (Select all that apply.)
A single statement included in the shareholders' equity statement
A single, continuous statement of comprehensive income
Two separate but consecutive statements
258. Greenbaum Corp. presents comprehensive income using the two statement approach. If the
company had chosen the one statement approach, the information presented would have
been the same
been different
been more detailed
259. A statement of comprehensive income is not needed, if the company does not have
other comprehensive income items
non-operating revenue and expense items
positive net income
260. The balance sheet:

presents a company's financial position at a particular date
summarizes profit generating transactions at a particular date
presents a company's financial position for a period of time
summarizes profit generating transactions for a period of time
261. : Under the one and two statement approaches to reporting comprehensive income the
content is the same.
True
False
262. Which of the following are current assets? (Select all that apply.)
accounts receivable
leased equipment
inventory
equipment
263. Which financial statement presents the financial position of the company on a particular
date?
statement of cash flows
income statement
statement of owners' equity
balance sheet
264. Which of the following are current liabilities? (Select all that apply.)
Salaries payable
Accounts payable
5 year note payable
265.________ are those that are cash, will be converted into cash, or will be used up within 1
year or the operating cycle, whichever is longer.
Noncurrent liabilities
Current liabilities
Current assets
Noncurrent assets
266. Which of the following are noncurrent assets?

inventory
cash
equipment
land
267. Shareholders’ equity includes only retained earnings and the accounts associated with
retained earnings.
True
False
268. The financial statement that presents the financial position of the company on a particular
date is the
Blank 1: balance
Blank 2: sheet
269. A note payable that is due within 6 months is classified as a(n) _____liability.
Blank 1: current, short-term, shortterm, or short term
270. A ______ liability is a liability that will be satisfied in more than 1 year or operating cycle,
whichever is longer, in the future.
current
noncurrent
271. Which of the following make up the major components of retained earnings? (Select all that
apply.)
assets
gains
losses
revenues
expenses
liabilities
272.
Shareholders’ equity includes (Select all that apply.)
Accounts payable
Retained earnings
Common stock
Accounts receivable
273. Jackson Corp. has beginning retained earnings of $400. During the year Jackson had $800
of revenues and $200 in expenses. Jackson paid a dividend of $100. What is retained earnings at
year-end?
$1,100
$1,300
$300
$900
Reason:
Beginning balance $400 + $800 revenues – $200 expenses – $100 dividend = $900 retained
earnings at year-end.
274. The financial statement that reports the changes in a company's cash balance during the
period is the:
balance sheet
income statement
275. Inflows and outflows of cash from transactions with creditors and owners are
investing activities.
financing activities.
operating activities.
276. Which of the following are cash outflows from operating activities? (Select all that apply.)
payment of suppliers
payment of cash dividends
payment of salaries
purchase of equipment
277. Common stock and are included in shareholders’ equity.
Blank 1: retained
Blank 2: earnings
278. Milton Corp. has beginning retained earnings of $800. During the year Milton had $2,000
of revenues and $900 in expenses. Milton paid a dividend of $100. What is retained earnings at
year-end?
$1,000
$2,000
$1,800
$1,100
Reason:
Beginning balance $800 + $2,000 revenues – $900 expenses – $100 dividend = $1,800 retained
earnings at year-end.
279. The purpose of the statement of cash flows is to summarize the transactions that
caused______ to change during the period
Blank 1: cash
280. Cash flows are classified on the statement of cash flows as: (Select all that apply.)
non-operating
investing
operating
financing
281. Which item is classified as an operating activity on the statement of cash flows?
purchase of land
issue of stock
payment of salaries
borrowing on note payable
282. Which of the following is classified as an investing activity on the statement of cash flows?
collection on account
purchase of inventory
issue of stock to investors
sale of land
283. The financial statement that reports the changes in a company's cash balance during the
period is the:
income statement
balance sheet
284.
Inflows and outflows of cash from transactions with creditors and owners are
285.
Which item is classified as an operating activity on the statement of cash flows?
collection from customers
issue of stock
sale of equipment
payment of dividends
286. Which of the following items are classified as financing activities on the statement of
cash flows? (Select all that apply.)
purchase inventory
pay dividend
purchase land
issue stock
287. Which of the following are cash inflows from investing activities? (Select all that apply.)
sale of building
purchase of land
sale of long-term investment
collection from customers
288. The purpose of the statement of cash flows is to summarize the transactions that
caused______ to change during the period.
Blank 1: cash
289. Inflows and outflows of cash involving the acquisition and sale of long-term assets are
290 Which of the following items is a financing activity on the statement of cash flows?
purchase land
pay suppliers
issue stock
purchase inventory
sale of land
292. The purpose of the statement of cash flows is to summarize the transactions that caused
cash to change during the period.
True
False
293. The two methods used to prepare a statement of cash flows are the ______ method and the
______ method.
basic; diluted
direct; indirect
current; noncurrent
revenue; expense
294. The categories on a statement of cash flows are

assets, liabilities, and owners' equity.
operating, investing, and financing activities.
current and noncurrent items.
operating and nonoperating items.
295. The statement of shareholders' equity indicates the changes in the various permanent equity
accounts.
True
False
payment of dividend
cash sale to customers
purchase of land
297. The two methods for preparing the statement of cash flows are the: (Select all that apply.)
operating method
direct method
classified method
indirect method
298. Which accounts are found on the statement of shareholders' equity? (Select all that apply.)
common stock
gain on sale of equipment
accounts receivable
retained earnings
299. Which financial statement shows the sources of the changes in the various permanent equity
accounts?
balance sheet
statement of shareholders' equity
income statement
300. Which of the following items is a financing activity on the statement of cash flows?
issue stock
pay suppliers
purchase land
purchase inventory
296. Which of the following are inflows of cash from financing activities? (Select all that apply.)
borrowing on note payable
sale of equipment
collection of accounts receivable
297. Which account is found on the statement of shareholders' equity?

Sales
Depreciation expense
Common stock
Inventory
302. An interim reporting period includes:
monthly
quarterly
annually
cash sale to customers
payment of dividend
purchase of land
304. The process in which temporary accounts are reduced to zero balances and transferred to
retained earnings is the ______ process.
adjusting
opening
closing
zero
305. Which financial statement shows the sources of the changes in the various permanent equity
accounts?
income statement
balance sheet
statement of shareholders' equity
306. The following accounts are closed to income summary with a credit entry (Select all that
apply.)
sales revenue
cost of goods sold
salaries expense
307._______ reporting periods are periods when financial statements are produced other than at
the end of the fiscal year
Blank 1: Interim
sale of land
309. Closing the sales revenue account requires a__________- to sales revenue
Blank 1: debit
310. The first step in the closing process is to reduce the balances in the temporary accounts to
zero. The second step is to transfer the effects of step 1 to which account?
cash
dividends
common stock
retained earnings
311. Which accounts are temporary accounts? (Select all that apply.)
gain on sale of equipment
accumulated depreciation
retained earnings
312. The journal entry required to close expenses will require a(n)________ entry to each
expense account.
Blank 1: credit
313. Juergen is preparing the closing journal entries for the year. To close the revenue accounts,
Juergen should
debit revenue
debit income summary
credit income summary
credit revenue
314. The process in which temporary accounts are reduced to zero balances and transferred to
retained earnings is the ______ process.
opening
closing
adjusting
zero
315. Which account should be closed at the end of the period?

common stock
cash
revenues
inventory
316. The expense accounts are closed to income summary with (Select all that apply.)
debit to income summary
credit entry to expenses
debit entry to expenses
credit to income summary
317. To close the dividend account, the journal entry would require a(n) entry to retained
earnings.
Blank 1: debit
318. Revenues are $1,000. Expenses are $1,800. The journal entry required to close the income
summary account will require a _____ to income summary and a _____ to retained earnings.
credit; debit
319. Which account is a temporary account?

inventory
utility expense
common stock
accounts receivable
320. When dividends are declared, a debit is made to a dividends declared account or
the_______ ________ account
Blank 1: retained
Blank 2: earnings
321. To close the dividend account, the journal entry would require a(n) ______ entry to the
dividend account and a _____ entry to retained earnings.
debit; debit
credit; credit
debit; credit
credit; debit
322. After preparing closing entries, the last step in the accounting process is to prepare
a post-closing income statement.
an adjusted trial balance.
pro forma statements for the next year.
a post-closing trial balance.
323. Revenues are $1,000. Expenses are $200. The journal entry required to close the income
summary account will require a _____ to income summary and a _____ to retained earnings.
debit; debit
credit; credit
credit; debit
debit; credit
324. Which accounts should be closed at the end of the period? (Select all that apply.)
sales
cash
dividends
salary expens
325. Which transaction will require the following journal entry: debit Retained earnings for
$1,000 and credit Cash for $1,000?
Sell goods to customers.
Record expense for the period.
Declare and pay a dividend.
Collect on account.
326. The purpose of a post-closing trial balance is to

verify that closing entries were prepared and posted correctly.
adjust the financial statements for the following year.
correct errors in the current year financial statements.
verify that all asset accounts were properly closed.
327. A post-closing trial balance is prepared

after the closing process.
before making adjusting entries.
after posting a journal entry.
before financial statements are prepared.
328._______- basis accounting measures the difference between cash receipts and cash
disbursements during a reporting period.
Blank 1: Cash
329. To record the payment of a cash dividend: (Select all that apply.)
cash is debited
cash is credited
retained earnings is credited
retained earnings is debited
330. A post-closing trial balance is prepared _______ the closing entries are posted to the ledger
accounts.
Blank 1: after
331. After preparing closing entries, the last step in the accounting process is to prepare
an adjusted trial balance.
a post-closing trial balance.
a post-closing income statement.
pro forma statements for the next year.
332. Bosworth Corp. pays salary expense during the year of $10,000. At the end of the year, an
adjusting entry is made for accrued salaries in the amount of $2,000, which have not yet been
recorded. The beginning balance in salaries payable is $1,000, and the ending balance is $3,000.
What is the amount of salary expense on the income statement?
$12,000
$13,000
$2,000
$10,000
Reason:
Salary expense incurred $10,000 + accrued salaries $2,000 = $12,000 salary expense.
333. ___________ basis accounting measures income based on accomplishments and resource

sacrifices during the period.
Blank 1: Accrual
334. If a company makes end-of-year accruals, it must use reversing entries.

True
False
335. Goliath Corp. has beginning accounts receivable of $2,000. During the year, Goliath sold
goods to customers on account for $10,000. During the year, Goliath also sold goods to
customers for cash in the amount of $2,000. At the end of the year, the balance in Goliath's
accounts receivable is $3,000. What is accrual basis sales for the year?
$12,000
$11,000
$14,000
$9,000
Reason:
$10,000 sales on account + $2,000 cash sales = $12,000 accrual basis sales.
336.Accrual accounting measures:

an entity's accomplishments and resource sacrifices during the period
net income relative to timing of cash movement
the difference between cash receipts and cash disbursements
337. When dividends are declared, a debit is made to a dividends declared account or the ______
________ account.
Blank 1: retained
Blank 2: earnings
338. A reversing entry is used after accruing 3 days of salaries at year-end. To make the
subsequent entry when the 10-day salaries are paid the following year, the accountant would
debit salaries expense for
0 days of salary.
3 days of salary.
10 days of salary.
7 days of salary.
339. A reversing entry is used: (Select all that apply.)

most often with accruals.
at the end of the period.
to simplify journal entries recorded during the new period.
at the beginning of a reporting period.
340. During the year, Jenco paid $12,000 of rent in advance. The beginning balance in the
prepaid rent account was $4,000, and the ending balance is $1,000. What is the rent expense for
the period?
$16,000
$9,000
$12,000
$15,000
Reason:
Beginning balance in prepaid rent $4,000 + $12,000 rent paid – $1,000 ending balance in prepaid
rent = $15,000 rent expense for the period.
341. Martindale Company purchases supplies in June. As of June 30, Martindale had not used
any of the supplies. How should the supplies be disclosed on the June 30 financial statements?
asset
revenue
expense
liability
342. A reversing entry is used after accruing 3 days of salaries at year-end. To make the
reversing entry, the accountant would debit which account?
salaries payable
salaries expense
cash
343. Cash basis accounting measures income based on

matching cash to assets purchased.
operating, investing, and financing activities.
revenue recognition principals.
cash receipts and cash disbursements.
344. James Corporation paid $5,000 cash for supplies. The supplies account is _____ and the
cash account is ______.
debited, credited
debited, debited
credited, debited
credited, credited
345. Which of the following accounts would most likely use a subsidiary ledger?
Common stock
Retained earnings
Accrued expenses
Accounts receivable
346. Jason Corp. has beginning accounts receivable of $1,000. During the year, Jason sold goods
to customers on account for $3,000. During the year, Jason also sold goods to customers for cash
in the amount of $500. At the end of the year, the balance in Jason's accounts receivable is
$1,200. What is accrual basis sales for the year?
$2,300
$3,500
$3,000
$3,300
Reason:
$3,000 sales on account + $500 = $3,500 accrual basis sales.
347. Special journals record:

credits only
non-repetitive transactions
repetitive transactions
debits only
348. When special journals are used: (Select all that apply.)
individual transactions are not posted to the general ledger
individual transactions are posted to the general ledger
the recording process is simplified
the recording process is more complex
349. To record the purchase of supplies on account: (Select all that apply.)
debit accounts payable
credit supplies
debit supplies
credit accounts payable
350. A group of subsidiary accounts associated with a particular general ledger control account is
called a:
control ledger
subsidiary journal
subsidiary ledger
351. The types of special journals used in an accounting system include the (Select all that
apply.)
sales journal.
accounts receivable journal.
purchases journal.
accounts payable journal.
352. Special journals simplify the recording process by (Select all that apply.)
eliminating the need for posting.
posting a total to the general ledger accounts on a periodic basis.
utilizing individuals with specialized training in handling certain transactions.
requiring that each transaction is posted as it occurs.
353. The total in the sales journal is posted to which accounts at the end of the period?
cash and accounts payable
accounts receivable and accounts payable
sales and retained earnings
accounts receivable and sales
354. Which accounts most likely use a subsidiary ledger?

accounts receivable
common stock
accounts payable
short-term assets
355. Which of the following is not a type of special journal?

Depreciation journal
Cash receipts journal
Sales journal
Cash disbursements journal
356. When a sales journal is used, at the end of the period the total amount sold on credit is
debited to
Blank 1: accounts
Blank 2: receivable
357. the purpose of a sales journal is to record

all credit sales.
all cash sales.
all collections on account.
358. In a cash receipts journal, the debit column is for

accounts receivable.
cash.
other.
sales revenue.
359. In which special journal is a cash sale recorded?

sales
cash receipts
purchases
cash disbursements
360. Carrie uses a sales journal to record sales. At the end of the period, the total amount sold is
credited to which account?
accounts receivable
sales
retained earnings
accounts payable
361. In which journal would cash sales most likely be recorded?

cash receipts journal
cash disbursements journal
sales journal
purchases journal
362. The purpose of the cash receipts journal is to record all cash receipts, regardless of the
source.
True
False
363.
Each time a cash receipt from a customer is recorded in the cash receipts journal, a ________is
posted to the accounts receivable subsidiary ledger
Blank 1: credit
364. In which special journal is receipt of customer payment on account recorded?

purchases
sales
cash receipts
cash disbursements
365. At the end of the period, the total cash receipts from customers are posted to the accounts
receivable control account. Each individual customer receipt must also be posted to the
subsidiary ledger.
retained earnings account.
general journal.
purchases journal.
366.

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Chapter 2 Smart Book

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chapter 2 – smart book.

2. Economic events cause changes in the:

5. Which of the following represents the accounting equation?

6. The objective of an Enterprise Resource Planning (ERP) system is to create a customized

10. Which of the following is an internal event?

12. Retained earnings equals net income plus distributions to shareholders.

13. Which of the following is an external event?

15. The accounting equation is: Assets = _______ + Owners' Equity.

22. A transaction is an event that

38. The double entry system of accounting means each transaction

48. Which of the following represents the right side of an account?

49. An asset _____ by debit entries, and _________ by credit entries.

59. The general ledger accounts serve as ________ accounts.

1. Prepare an unadjusted trial balance

63. The primary purpose of a source document is to assist in

1.Analyze the transaction

71. The primary purpose of a source document is to assist in

74. In step 3 of the accounting processing cycle:

97. A perpetual system requires that merchandise purchases be recorded in the _______ account.

105. The purchases account is debited to record purchases of inventory in a:

107. A temporary purchases account is used when the _________ inventory system is used.

130. A trial balance proves:

137. Adjusting entries are recorded:

143. One of the purposes of adjusting entries is to

144. Which of following is true regarding a trial balance?

148. Prepaid expenses are:

150. Prepayments occur when:

153. One of the purposes of adjusting entries is to

164. The balance sheet account that depreciation is recorded to is:

166. The normal balance in a contra asset account is

167. The contra account used to record depreciation is ________ depreciation.

170. A deferred revenue liability appears on the balance sheet for:

172. Accumulated depreciation is (Select all that apply.)

174. Deferred revenue should be classified as a(n)_________ on the balance sheet.

180. Deferred revenue is a(n):

181. To record an adjusting entry when deferred revenue is recognized:

186. A deferred revenue liability appears on the balance sheet for:

194. Accrued liabilities are costs incurred in an accounting period:

198. Accrued liabilities are:

credit to deferred revenue of $400

203. To calculate interest the following information is needed:

206. The balance sheet impact of accruing salaries expense is to:

214. Interest earned, but not yet received is an example of:

224. The purpose of estimating bad debts is to

credit to interest revenue $40.

226. Which of the following is an example of an estimate?

228. To record depreciation expense (Select all that apply.)

229. Which of the following is an example of an accrued receivable?

234. The purpose of estimating bad debts is to

Depreciation expense----Operating item

debit to interest expense $100.

252. In the two statement approach: (Select all that apply.)

260. The balance sheet:

266. Which of the following are noncurrent assets?

269. A note payable that is due within 6 months is classified as a(n) _____liability.

Blank 1: current, short-term, shortterm, or short term

277. Common stock and are included in shareholders’ equity.

294. The categories on a statement of cash flows are

297. Which account is found on the statement of shareholders' equity?

315. Which account should be closed at the end of the period?

319. Which account is a temporary account?

326. The purpose of a post-closing trial balance is to

327. A post-closing trial balance is prepared

49. An asset _ by debit entries, and _____ by credit entries.