A+ Answers

1. The balance sheet is used to report

A. the financial position on a specific date.

B. results of operations for a specific date.

C. the financial position for a specific period.

D. results of operations for a specific period.

2. The closing entries show a debit to retained earnings of $350 and a credit to retained earnings of $750. There was also a credit to dividends payable of $100. This company had a

A. net loss of $500

B. net income of $500.

C. net income of $400.

D. net loss of $400.

3. Collecting rent from a client three months in advance would be an example of a/an

A. deferred revenue.

B. accrued expense.

C. deferred expense.

D. accrued revenue.

4. Expenses paid in advance, such as rent and insurance, are classified as prepaid expenses. Into which category are they placed?

A. Liabilities

B. Assets

C. Revenues

D. Expenses

5. A T-account has a $509 debit balance. This account is most likely not

A. common stock.

B. advertising expense.

C. dividends.

D. land.

6. The account “Cash” had the following changes: increase of $250, decrease of $75, increase of $113, and decrease of $35. The final balance is a

A. debit balance of $253.

B. debit balance of $363.

C. credit balance of $253.

D. credit balance of $110.

7. The unadjusted trial balance for prepaid rent shows a $12,000 balance. At the end of the year, $7,000 of the rent had been used. The adjusted trial balance for prepaid rent is a

A. $7,000 debit.

B. $7,000 credit.

C. $5,000 debit.

D. $5,000 credit.

8. Which account would not appear on a post-closing trial balance?

A. Sales tax payable

B. Dividends

C. Common stock

D. Accounts receivable

9. Which financial statement illustrates the accounting equation?

A. Statement of retained earnings

B. Income statement

C. Statement of cash flows

D. Balance sheet

10. Rick lists his building at current replacement value, rather than the price he paid for the building. Which principle is Rick violating?

A. Entity

B. Reliability

C. Cost

D. Going concern

11. The matching principle in accounting requires the matching of revenue earned with the

A. assets used less the liabilities incurred.

B. assets used to produce the revenue.

C. expenses incurred to produce the revenue.

D. liabilities used to produce the revenue.

12. By definition, which type of organization has stockholders?

A. Corporations

B. Partnerships

C. Limited liability companies

D. Sole proprietorships

13. Beginning retained earnings are $31,000; sales are $46,800; expenses are $43,500; and dividends paid are $2,800. How much is the net income or loss for the company?

A. $500

B. $3,300

C. $34,300

D. ($3,300)

14. The total revenues of $6,500, total expenses of $3,500, and dividends of $500 were recorded in the closing entries. The net change in retained earnings for the month was

A. $6,000.

B. $3,000.

C. $3,500.

D. $2,500.

15. Which of the following is a disadvantage of the corporate form of business?

A. Limited resources

B. Ease of raising capital

C. Limited liability

D. Double taxation

16. Office equipment was purchased for $2,400 on account to Business Furniture Company. The journal entry would include a

A. credit to Cash and a debit to Office Equipment Expense.

B. debit to Accounts Payable and a credit to Cash.

C. debit to Office Equipment and a credit to Cash.

D. debit to Office Equipment and a credit to Accounts Payable.

17. During a recent week, incurred wages were $700. However, $280 of the wages hadn’t been paid. The adjusting entry for wages would be

A. debit wages payable, $280; credit wages expense, $280.

B. debit wages expense, $420; credit wages payable, $420.

C. debit wages expense, $280; credit wages payable, $280.

D. debit wages payable, 420; credit wages expense, $420.

18. Which business form is similar to a corporation in regard to owner liability?

A. Limited liability company

B. Sole proprietorship

C. Limited liability corporation

D. Partnership

19. Dividends are paid with cash to shareholders. Dividends are in which category of the chart of accounts?

A. Stockholders’ equity

B. Assets

C. Liabilities

D. Revenue

20. Which concept would not be considered if you were to compare the price of a Camaro in 1979 with the price of a Camaro in 2009?