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Chapter 1

MULTIPLE CHOICE QUESTIONS 1. Accountants refer to an economic event as a

a. purchase. b. sale. c. transaction. d. change in ownership.

e. Ans: c

2. The process of recording transactions has become more efficient because

a. fewer events can be quantified in financial terms. b. computers are used in processing business events. c. more people have been hired to record business transactions. d. business events are recorded only at the end of the year.

e. Ans: b

3. Communication of economic events is the part of the accounting process

that involves a. identifying economic events. b. quantifying transactions into dollars and cents. c. preparing accounting reports. d. recording and classifying information.

e. Ans: c

4. Which of the following events cannot be quantified into dollars and cents

and recorded as an accounting transaction? a. The appointment of a new accounting firm to perform an audit. b. The purchase of a new computer. c. The sale of store equipment. d. Payment of income taxes.

e. Ans: a

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5. The use of computers in recording business events a. has made the recording process more efficient. b. does not use the same principles as manual accounting systems. c. has greatly impacted the identification stage of the accounting

process. d. is economical only for large businesses.

e. Ans: a

6. The accounting process involves all of the following except

a. identifying economic transactions that are relevant to the business. b. communicating financial information to users by preparing financial

reports. c. recording non quantifiable economic events. d. analyzing and interpreting financial reports.

e. Ans: c

7. The accounting process is correctly sequenced as a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication. d. communication, recording, identification.

e. Ans: c

8. Which of the following techniques are not used by accountants to

interpret and report financial information? a. Graphs. b. Special memos for each class of external users. c. Charts. d. Ratios.

e. Ans: b

9. Which of the following would not be considered an external user of

accounting data for the GHI Company? a. Taxing authority representative. b. Management. c. Creditors. d. Customers.

e. Ans: b


10. Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

a. Identification. b. Communication. c. Recording. d. Analysis.

e. Ans: c

11. Internal users of accounting information include all of following except the a. CEO of Sony. b. Human Resources department at Hyundai. c. Marketing department at Braun. d. Shareholders of Airbus.

e. Ans: d

12. Internal users of accounting information include

a. the shareholders of Royal Dutch Shell. b. the State Administration of Taxation of China. c. the Chief Financial officer of Credit Suisse. d. the International Accounting Standards Board.

e. Ans: c

13. External users of accounting information include all of following except a. the shareholders of Air Italy. b. the management of Pirelli. c. a potential customers of Olivetti. d. All of the above are external users of accounting information.

e. Ans: b

14. Financial accounting provides economic and financial information for all of the following except

a. creditors. b. investors. c. managers. d. other external users.

e. Ans: c

15. The cost principle requires that companies record assets at their

a. appraisal value. b. cost. c. market price. d. list price.

e. Ans: b


16. IFRSs are determined by the

a. Internal Accounting Standards Body. b. International Accounting Studies Board. c. International Accounting Standards Board. d. International Auditors' Standards Body.

e. Ans: c

17. GAAP stands for a. Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. c. Generally Accepted Auditing Principles. d. Generally Accepted Accounting Procedures.

e. Ans: b

18. The Duce Company has five plants nationwide that cost $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at

a. $100 million. b. $600 million. c. $400 million. d. $500 million.

e. Ans: a

19. The fair value principle

a. is one of the two costing principles followed by the IASB. b. is more useful than the cost principle for valuing some assets. c. dictates that an asset should be valued at the price at which it could

be sold. d. All of the above.

e. Ans: d

20. Most assets should be valued at cost because fair values

a. are not useful for decision-making. b. may not be representationally faithful. c. are not relevant. d. may be higher or lower than historical cost.

e. Ans: b

نسجل األصول بقيمتها


21. Harrod's inc. purchased land for ₤50,000 in 2001. At December 31, 2010, an appraisal determined the fair value of the land is ₤65,000. If Harrod's follows the cost principle, in the 2010 financial statements, the land will be reported at

a. ₤50,000 on the statement of financial position. b. ₤65,000 on the statement of financial position. c. ₤50,000 on the income statement. d. ₤65,000 on the income statement.

e. Ans: a

22. Bumi Corporation purchased an investment in the ordinary shares of another corporation for Rp250,000,000 in 2009. The shares are actively traded on the Indonesian Stock Exchange. The fair value of the investment at December 31, 2011 is Rp266,000,000. If the company follows the fair value principle, the investment will be reported in the 2011 financial statement at

a. Rp250,000,000 on the statement of financial position. b. Rp266,000,000 on the statement of financial position. c. Rp250,000,000 on the retained earnings statement. d. Rp265,000,000 on the retained earnings statement.

e. Ans: b f.

23. Asian Company purchased land for W96,000,000 in 2000. At December 31, 2011, an appraisal determined the fair value of the land is W106,000,000. The company has an investment in the ordinary shares of another company for which it paid W49,000,000 in 2009.The shares are actively traded on the South Korea Stock Exchange. The fair value of the investment at December 31, 2011 is W66,000,000. The land and investment will be reported on the December 31, 2011 statement of financial position at

a. W96,000,000 and W49,000,000, respectively. b. W96,000,000 and W66,000,000, respectively. c. W106,000,000 and W49,000,000, respectively. d. W106,000,000 and W66,000,000, respectively.

e. Ans: b

24. The proprietorship form of business organization

a. must have at least three owners in most states. b. requires that the owner be personally liable for all debts of the

business. c. combines the records of the business with the personal records of

the owner. d. is characterized by a legal distinction between the business as an

economic unit and the owner.

e. Ans: b

ذاكر بالسؤال انه يتبع ال

cost فنسجله فيه حتى لو سعره

بال

fv غير

ذاكر بالسؤال انه يتبع ال

FV فنسجله فيه

تتبع الشركهاالرض مو ذاكر شنو

COST OR FV فلألصول نسجلها

cost ولكن لألسهم من الطبيعي ان

نسجلها بقيمتها الحاليه الي اهيا

fv


25. The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are

corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal

economic events of its owners. d. of an entity be kept separate from the activities of its owner.

ans:d 88. A business organized as a corporation

e. is not a separate legal entity in most states. f. requires that shareholders be personally liable for the debts of the

business. g. is owned by its shareholders. h. terminates when one of its original shareholders dies.

i. Ans: c

26. The partnership form of business organization

a. is a separate legal entity. b. is a common form of organization for service-type businesses. c. enjoys an unlimited life. d. has limited liability.

e. Ans: b

27. Which of the following is not an advantage of the corporate form of business

organization? a. Limited liability of shareholders b. Transferability of ownership c. Unlimited personal liability for shareholders d. Unlimited life

e. Ans: c

28. A small neighborhood barber shop that is operated by its owner would likely be organized as a

a. joint venture. b. partnership. c. corporation. d. proprietorship.

e. Ans: d


29. John and Sam met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a

a. joint venture. b. partnership. c. corporation. d. proprietorship.

e. Ans: b

30. Which of the following is true regarding the corporate form of business organization?

a. Corporations are the most prevalent form of business organization. b. Corporate businesses are generally smaller in size than

partnerships and proprietor-ships. c. The revenues of corporations are greater than the combined

revenues of partnerships and proprietorships. d. Corporations are separate legal entities organized exclusively

under federal law.

e. Ans: c

31. The assumption that enables accounting to quantify (measure) economic

events is the a. economic entity assumption. b. cost principle. c. historical cost principle. d. monetary unit assumption.

e. Ans: d

32. A business that enjoys limited liability is a a. proprietorship. b. partnership. c. corporation. d. sole proprietorship.

ans: c

33. The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit.

e. Ans: d


34. Equity is best depicted by the following: a. Assets = Liabilities. b. Liabilities + Assets. c. Residual equity + Assets. d. Assets – Liabilities.

e. Ans: d

35. The basic accounting equation may be expressed as

a. Assets = Equities. b. Assets – Liabilities = Equity. c. Assets = Liabilities + Equity. d. all of these.

e. Ans: d

36. Liabilities a. are future economic benefits. b. are existing debts and obligations. c. possess service potential. d. are things of value used by the business in its operation.

e. Ans: b .

37. Liabilities of a company would not include

a. notes payable. b. accounts payable. c. wages payable. d. cash.

e. Ans: d

38. Liabilities of a company are owed to

a. debtors. b. benefactors. c. creditors. d. underwriters.

e. Ans: c

39. Equity can be described as

a. creditorship claim on total assets. b. ownership claim on total assets. c. benefactor's claim on total assets. d. debtor claim on total assets.

e. Ans: b

A = L + E

so

E= A - L


40. Equity is often referred to as a. residual equity. b. leftovers. c. spoils. d. second equity.

e. Ans: a

41. When assets are distributed to the shareholders of a corporation, these distributions are termed

a. depletions. b. consumptions. c. dividends. d. a credit line.

e. Ans: c

42. A dividend is a. a distribution of the company's earnings to its stockholders. b. equal to liabilities minus equity. c. equal to assets minus equity. d. equal to revenues less expenses.

e. Ans: a

43. Revenues would not result from a. sale of merchandise. b. issuance of common stock. c. performance of services. d. rental of property.

e. Ans: b

44. Sources of increases to equity are

a. sales of shares. b. purchases of merchandise. c. dividends. d. expenses.

e. Ans: a

45. The basic accounting equation cannot be restated as

a. Assets – Liabilities = Equity. b. Assets – Equity = Liabilities. c. Equity + Liabilities = Assets. d. Assets + Liabilities = Equity.

e. Ans: d


46. 110. Equity is decreased by all of the following except a. sales of shares. b. dividends. c. expenses. d. net losses.

e. Ans: a

47. If total liabilities increased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?

a. ¥40,000 decrease b. ¥40,000 increase c. ¥50,000 increase d. ¥60,000 increase

e. Ans: b

48. 112. If total liabilities decreased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?

a. ¥40,000 increase b. ¥20,000 decrease c. ¥20,000 increase d. ¥30,000 decrease

e. Ans: b

49. The equity section of a statement of financial position has two components:

a. share capital and liablities. b. assets and liablities. c. share capital and retained earnings. d. share capital and assets.

e. Ans: c

50. A company increases its share capital by

a. selling ordinary shares to its investors. b. performing services for cash. c. selling goods on account. d. paying dividends to its shareholders.

e. Ans: a

A = L + E

= +30 +10

= 40

A = L + E

= -30 +10

= 20


51. The retained earnings section of the statement of financial position is determined by

a. assets,liabilities anad share capital. b. revenues, expenses and share capital. c. share capital. dividends and residual equity. d. revenues,expenses and dividends.

e. Ans: d

52. All of the following transactions increase revenue except the

a. sale of additional ordinary shares by British Airways. b. sale of clothing by the French Connection. c. performance of acccounting services by PricewatershouseCoopers. d. sale of pertroleum by Royal Dutch Shell.

e. Ans: a

53. As of December 31, 2011, Dolce & Gabanna Inc. had assets of

€5,700,000, share capital of €2,100,000 and retained earnings of €2,400,000. Total liabilities as of that date are

a. €0. b. €1,200,000. c. €14,500,000. d. €10,200,000.

e. Ans: b

54. On its December 31, 2011 statement of financial position, Adaro

Corporation reported liabilities of Rp2,566,000,000, share capital of Rp1,331,000,000 and retained earnings of Rp2,101,000,000. Total assets as of December 31, 2011 are

a. Rp866,000,000. b. Rp2,101,000,000. c. Rp3,432,000,000. d. Rp5,998,000,000.

e. Ans: d

55. As of December 31, 2011, Oxford-welsh Inc. had assets of ₤3,260,000,

liabilities of ₤990,000, and share capital of ₤1,410,000. Retained earnings as of that date are

a. ₤860,000. b. ₤1,850,000. c. ₤2,270,000. d. ₤3,260,000.

e. Ans: a

A = L + E >> A = L+ SH.C + RE

5700 = L+2100 + 2400

5700 = L + 4500

L = 5700 - 4500 >> 1200

A = L + E >> A = L+ SH.C + RE

A = 2566 + 1331 + 2101

A = 5998

A = L + E >> A = L+ SH.C + RE

3260 = 990+1410 + RE

3260 = 2400 + RE

RE = 3260 - 2400 >> 860


56. As of December 31, 2011, Lojas Company reported assets of R$3,700,000, liabilities of R$1,100,000, share capital of R$990,000 and retained earnings of R$1,610,000. Total equity reported on the statement of financial position as of that date is

a. R$620,000. b. R$2,600,000. c. R$2,700.000. d. R$3,700,000.

e. Ans: b

57. On January 11,2011, Britannica Corporation sold ordinary shares to investors for ₤6,550,000. This transaction will increase assets and

a. decrease liabilities by ₤6,550,000. b. decrease equity by ₤6,550,000 c. increase revenues by ₤6,550,000. d. increase equity by ₤6,550,000.

e. Ans: d

58. Burgundy Inc. purchased supplies on account for €26,000. This

transaction will a. increase liabilities and decrease equity by €26,000. b. increase assets and decrease equity by €26,000 c. increase assets and increase liabilities by €26,000. d. have no effect on the accounting equation.

e. Ans: c

59. Sao Paulo Company performed services on account for R$160,000. This

transaction will a. increase assets and liabilities by R$160,000. b. increase assets and equity by R$160,000. c. increase liabilities and equity by R$160,000. d. have no effect on the accounting equation.

e. Ans: b

60. Bennoit Corporation paid dividends totaling €295,000 to its shareholders.

This transaction will decrease assets and a. decrease equity by €295,000. b. decrease liabilities by €295,000 c. increase expenses by €295,000. d. have no effect on the accounting equation.

e. Ans: a

div is a dr account, Equity is a cr account, so increasing in div leads to decreasing in Equity.

Equity = RE + SH.C

= 1610 + 990 >> 2600

or

A=L+E >> E=A-L

=3700-1100 >>2600

Cash 6550

SH.C 6500

cash = Assets // SH.C = Equity

Sup 26000

A/P 26000

cash = Assets

A/P = liab

A/R 160

Rev 160

A/R = Assets

Rev = Equity

Div 295

Cash 295

cash = Assets

Div = Equity


61. Gafisa Inc. performed services for R$195,000. The company collected R$95,000 in cash. The balance will be collected in 30 days. This transaction will increase

a. assets by R$95,000 and equity by R$100,000. b. assets by R$95,000, liablities by R$100,000

and equity by R$195,000 c. liabilites and equity by R$195,000. d. assets and equity by R$195,000.

e. Ans: d

62. On June 6, Wing Wah Inc. purchased supplies on account for HK$50,000.

On June 30, the company paid half of the balance due. The June 30 payment will

a. decrease Cash and increase Supplies Expense by HK$ 50,000. b. increase Cash and decrease Accounts Receivable by HK$25,000 c. decrease Cash and decrease Accounts Payable by HK$25,000 d. decrease Supplies and increase Supplies Expense by HK$25,000.

e. Ans: c

63. On November 4, Vivo Company performed services on account for R$295,000. On November 26, the company collected the balance due. The November 26 transaction will increase

a. Cash and Accounts Payable by R$295,000. b. Accounts Receivable and Revenue by R$295,000 c. Cash and decrease Accounts receivable by R$295,000 d. Revenue and decrease Accounts Receivable by R$295,000.

e. Ans: c

64. Freirs Company paid the monthly rent of €6,000. This transaction will a. increase cash and decrease Rent Expense by €6,000. b. decrease cash and decrease Rent Expense by €6,000 c. decrease cash and increase Rent Expense by €6,000

d. have no effect on the accounting equation e. Ans: c

Cash 95

A/R 100 (195-95)

Rev 195

cash, AR = Asset

Rev = Equity

Sup 50 AP 25 the Q wants what happens on June 30

AP 50 Cash 25

then on June 30

AR 295 Cash 295 the Q wants what happens on Nov 26

Rev 295 AR 295

then on Nov 26

Exp 6000

cash 6000


65. 134. Vita Corporation performed services on account for €22,000. This transaction will

a. increase Cash and increase Revenues by €22,000. b. increase Accounts Receivable and increase Revenue by €22,000 c. decrease Accounts Payable and increase Cash by €22,000 d. increase Cash and decrease Accounts Receivable by €22,000.

e. Ans: b

66. On February 1, Potter Company paid £900 for advertisements to run

during the month of February. This transaction will a. decrease Cash and increase Advertising Expense by £900. b. increase Advertiing Expense and increase Accounts

Payable by £900. c. decrease Accounts payable and decrease Cash by £900. d. decrease Cash and decrease Advertising Expense by £900.

e. Ans: a

67. McDonagal Inc. sold ordinary shares for £2,200,000. This transaction will increase

a. Cash and increase Retianed earning by £2,200,000. b. Cash and increase Share Capital by £2,200,000. c. Revenue and increase Share Capital by £2,200,000. d. Revenue and increase Cash by £2,200,000.

e. Ans: b

68. An investment of cash by an owner of a business increases assets and a. increases liabilities. b. increases equity. c. decreases equity. d. decreases liabilities.

e. Ans: b

69. The purchase of supplies on account increases assets and a. also decreases assets so there is no net change. b. increases liabilities. c. decreases equity. d. increases equity.

e. Ans: b

AR 22

Rev 22

Exp 900

Cash 900

Cash 2200

SH.C 22

Cash XX

SH.C XX

Sup XX

AP XX


70. A payment on account decreases a. assets and equity. b. liabilities and equity. c. assets and liabilities. d. assets, liabilities and equity.

e. Ans: c السؤال : تم شراء شيء و تأجيل دفعه, حزت الدفع شنو الي راح يقل عندنا ؟

71. The accounting equation for Gudgeyes Enterprises is as follows: i.Assets Liabilities Equity

$120,000 = $60,000 + $60,000

If Gudgeyes purchases office equipment on account for

$12,000, the accounting equation will change to ii. Assets Liabilities Equity

b. a. $120,000 = $60,000 + $60,000 c. b. $132,000 = $60,000 + $72,000 d. c. $132,000 = $66,000 + $66,000 e. d. $132,000 = $72,000 + $60,000

f. Ans: d

72. As of June 30, 2011, Dallas Company has assets of $120,000 and equity of $10,000. What are the liabilities for Dallas Company as of June 30, 2011?

a. $130,000 b. $100,000 c. $110,000 d. $120,000

e. Ans: c

73. Equity is increased by a. dividends. b. revenues. c. expenses. d. liabilities.

e. Ans: b

AP XX

Cash XX

Equ 12

AP 12

A = L + E >> (120 + 12) = (60 + 12) + (60)

132 = 72 + 0

A = L + E

120 = L + 10

L = 120 - 10

L = 110


74. Equity is decreased by a. assets. b. revenues. c. expenses. d. liabilities.

e. Ans: c

75. If total liabilities increased by $4,000, then a. assets must have decreased by $4,000. b. equity must have increased by $4,000. c. assets must have increased by $4,000, or equity must have

decreased by $4,000. d. assets and equity each increased by $2,000.

e. Ans: c

76. Collection of a $500 Accounts Receivable a. increases an asset $500; decreases an asset $500. b. increases an asset $500; decreases a liability $500. c. decreases a liability $500; increases equity $500. d. decreases an asset $500; decreases a liability $500.

e. Ans: a

77. Revenues are a. the cost of assets consumed during the period. b. gross increases in equity resulting from business activities. c. the cost of services used during the period. d. actual or expected cash outflows.

e. Ans: b

78. If an individual asset is increased, then a. there must be an equal decrease in a specific liability. b. there must be an equal decrease in equity. c. there must be an equal decrease in another asset. d. none of these is possible.

e. Ans: c

79. If services are rendered for credit, then a. assets will decrease. b. liabilities will increase. c. equity will increase. d. liabilities will decrease.

e. Ans: c service revenue, revenues increase equity.

Cash 500

AR 500


80. If expenses are paid in cash, then

a. assets will increase. b. liabilities will decrease. c. equity will increase. d. assets will decrease.

e. Ans: d

81. If a corporation distributes cash to its shareholders, then

a. there has been a violation of accounting principles. b. equity will increase. c. equity will decrease. d. there will be a new liability showing the shareholders

owe money to the business.

e. Ans: c

82. Which of the following events is not a business transaction?

a. Issuance of shares in exchange for cash. b. Hired employees. c. Incurred utility expenses for the month. d. Earned revenue for services provided.

e. Ans: b

83. Net income results when a. Assets > Liabilities. b. Revenues = Expenses. c. Revenues > Expenses. d. Revenues < Expenses.

e. Ans: c

84. Retained earnings at the end of the period is equal to a. Retained earnings at the beginning of the period plus net income

minus liabilities. b. Retained earnings at the beginning of the period plus net income

minus dividends. c. net income. d. assets plus liabilities.

e. Ans: b

Exp XX

Cash XX

Div XX

Cash XX


85. A statement of financial position shows a. revenues, liabilities, and equity. b. expenses, dividends and equity. c. revenues, expenses, and dividends. d. assets, liabilities, and equity.

e. Ans: d

86. An income statement a. summarizes the changes in equity for a specific period of time. b. reports the changes in assets, liabilities, and equity over a period of

time. c. reports the assets, liabilities, and equity at a specific date. d. presents the revenues and expenses for a specific period of time.

e. Ans: d

87. If the retained earnings account increases from the beginning of the year to the end of the year, then

a. net income is less than dividends. b. a net loss is less than dividends. c. the company must have sold stock. d. net income is greater than dividends.

e. Ans: d

Use the following information for questions 88–90.

88. Carla’s Computer Repair Shop started the year with total assets of $360,000

and total liabilities of $240,000. During the year, the business recorded $600,000 in computer repair revenues, $340,000 in expenses, and the company paid dividends of $60,000.

Equity at the end of the year was a. $320,000. b. $300,000. c. $380,000. d. $260,000.

e. Ans: a

89. The net income reported by Carla's Computer Repair Shop for the year was a. $200,000. b. $260,000. c. $120,000. d. $540,000.

e. Ans: b

equity قبل التغييرات الزم أول شي نطلع ال

A=L+E >>360 =240 + E >> 120 صار الحين نشوف شنو

Rev = 600 >> inc the Equity

Exp = 340 >> dec the Equity

Div = 60 >> dec the Equity

Equity = 120 + 600 - 340 - 60 = 320

NI = Rev - Exp

= 600 - 340

=260


90. Total equity changed by what amount from the beginning of the year to the end of the year?

a. $60,000. b. $260,000. c. $120,000. d. $200,000.

e. Ans: d

91. The statement of financial position is frequently referred to as a. an operating statement. b. the balance sheet. c. the statement of cash flows. d. the statement of changes in equity.

e. Ans: b

92. The primary purpose of the statement of cash flows is to report a. a company's investing transactions. b. a company's financing transactions. c. information about cash receipts and cash payments of a company. d. the net increase or decrease in cash.

e. Ans: c

93. All of the financial statements are for a period of time except the

a. income statement. b. retained earnings statement. c. statement of financial position. d. statement of cash flows.

e. Ans: c

94. The ending retained earnings amount is shown on a. the statement of financial position only. b. the retained earnings statement only. c. both the income statement and the retained earnings statement. d. both the statement of financial position and the retained earnings

statement.

e. Ans: d

Beg Equity = 120

Ending Equity = 320

the change >> 320 - 120 =200


95. Benito Company began the year with equity of $350,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Benito’s equity at the end of the year?

a. $510,000. b. $430,000. c. $810,000. d. $470,000.

e. Ans: b

96. Carter Company issued ordinary shares to Sam Carter in exchange for his investment of $20,000 cash in the business. The company recorded revenues of $185,000, expenses of $160,000, and paid dividends of $10,000. What was Carter's net income for the year?

a. $15,000. b. $35,000. c. $25,000. d. $45,000.

e. Ans: c

97. Marilu Company began the year with equity of $30,000. During the year, Marilu issued additional ordinary shares in exchange for cash of $42,000, recorded expenses of $120,000, and paid dividends of $8,000. If Marilu’s ending equity was $92,000, what was the company’s revenue for the year?

a. $140,000. b. $148,000. c. $182,000. d. $190,000.

e. Ans: b

Use the following information for questions 98–99.

Saira’s Service Shop started the year with total assets of $150,000 and total liabilities of $120,000. During the year, the business recorded $315,000 in revenues, $165,000 in expenses, and paid dividends of $30,000.

98. Equity at the end of the year was

a. $180,000. b. $150,000. c. $120,000. d. $135,000.

e. Ans: b

Equity = 350 + 500 - 380 - 40

=

430

NI = Rev - Exp

= 185 - 160

= 25

beg Equity + Rev - Exp - Div + SH.C = end Equity

30 + Rev - 120 - 8 + 42 = 92

Rev - 98 = 92

Rev = 92 + 98 >>190

A=L+E >> 150 = 120 + E

Equity = 30

end Equity = 30 + 315 - 165 - 30

= 150


99. The net income reported by Saira’s Service Shop for the year was a. $120,000. b. $150,000. c. $90,000. d. $285,000.

e. Ans: b

Use the following information for questions 100 –101.

Metzger Company compiled the following financial information as of

December 31, 2011:

f. Revenues €140,000 g. Retained earnings (1/1/11)

70,000 h. Equipment 40,000 i. Expenses 125,000 j. Cash 35,000 k. Dividends 10,000 l. Supplies 5,000 m. Accounts payable 20,000 n. Accounts receivable 15,000 o. Share capital ordinary

25,000

100. Metzger’s assets on December 31, 2011 are a. €235,000. b. €170,000. c. €80,000. d. €95,000.

e. Ans: d

101. Metzger’s retained earnings on December 31, 2011 is a. €70,000. b. €60,000. c. €75,000. d. €85,000. e. Ans: c

102. Copper Company’s equity at the beginning of August 2011 was $450,000. During the month, the company earned net income of $90,000 and paid dividends of $30,000. At the end of August 2011, what is the amount of equity?

a. $390,000 b. $450,000 c. $510,000

NI = Rev - Exp

= 315 - 165

= 150

40 + 35 + 5 + 15 = 95

END RE = Beg RE + NI - Div

= Beg RE + ( Rev - Exp ) - Div

= 70 + ( 140 - 125 ) - 10

= 75

END E = Beg E + NI - Div

= 450 + 90 - 30

= 510


d. $570,000

e. Ans: c

103. On January 1, 2011, Affleck Company reported equity of $470,000. During the year, the company paid dividends of $20,000. At December 31, 2011, the amount of equity was $500,000. What amount of net income or net loss would the company report for 2011?

a. Net income of $30,000 b. Net loss of $50,000 c. Net income of $10,000 d. Net income of $50,000

e. Ans: d

104. During the year 2011, Diego Company earned revenues of $45,000, had

expenses of $25,000, purchased assets with a cost of $5,000 and paid dividends of $3,000. Net income for the year is

a. $45,000. b. $20,000. c. $17,000. d. $15,000.

e. Ans: b

105. At October 1, Smithson Enterprises reported equity of $70,000. During

October, capital shares of $10,000 were issued and the company posted a net loss of $6,000. If equity at October 31 totals $74,000, what amount of dividends were paid during the month?

a. $0 b. $4,000 c. $6,000 d. $10,000

e. Ans: a

106. During May, Brunhilde Company earned revenue of €53,000, incurred

expenses of €34,000, of which €24,000 were on account, and paid dividends of €8,000. Net income (loss) for the month is

a. (€10,000). b. €11,000 c. €19,000 d. €29,000

e. ans:c

END E = Beg E + NI - Div

500 = 470 + NI - 20

500 = 450 + NI

NI= 50

NI = Rev - Exp

= 45 - 25

= 20

End E = Beg E + Rev - Exp - Div + SH.C

74 = 70 + -6 + Div + 10

74 = 74 + Div

Div = 0

NI = Rev - Exp

= 53 - 34

= 19


107. During March, Bindi Company earned revenue of €135,000 on account of which €89,000 had been collected by the end of the month. The company incurred expenses of 78,000. The company paid all of its expenses in cash as well as paying dividends of €23,000. Net income (loss) for the month is

a. (€12,000) b. €11,000 c. €34,000 d. €57,000

e. Ans: d

108. Mica inc. began operations in October, 2011.During October, Mica sold

ordinary shares for €200,000,earned revenue of €22,000, incurred expenses of €12,000, and paid dividends of €1,000. Retained earnings at the end the month is

a. €9,000 b. €10,000 c. €209,000 d. €210,000

e. Ans: a

Use the following information for questions 109–113

O' Hara Company began operations on December 1, 2011. Presented

below is selected information related to O' Hara Company at

December 31, 2011.

Office Equipment ₤ 40,000 Utilities Expense ₤ 6,000

Cash 14,000 Accounts Receivable 27,000

Service Revenue 108,000 Wages Expense 47,000

Rent Expense 13,000 Notes Payable 10,000

Accounts Payable16,000 Dividends 15,000

Share Capital 28,000

109. At December 31, 2011, assets total

a. £54,000. b. £70,000. c. £81,000. d. £97,000.

e. Ans: c

NI = Rev - Exp

= 135 - 78

= 57

End RE = Beg RE + NI - Div

= 0 + ( 22 - 12 ) - 1

= 9

beg RE = 0 خلينا كر بالسؤال ان توا هالشهر بدا الشغلالن ذا

فماكو من قبل

40+ 14 + 27 = 81


110. At December 31, 2011, liabilities total

a. £16,000. b. £26,000. c. £37,000. d. £41,000.

e. Ans: b

111. Net income for the month of December is a. £27,000 b. £42,000 c. £56,000 d. £66,000

e. Ans: b

112. Retained earnings at December 31, 2011 is a. £15,000 b. £22,000 c. £27,000 d. £55,000

e. Ans: c

113. Equity at December 31, 2011, is a. £148,000 b. £121,000 c. £93,000 d. £55,000

e. Ans: d

114. Keeping a systematic, chronological diary of events that are measured in

dollars and cents is called a. communicating. b. identifying. c. processing. d. recording.

e. Ans: d

16 + 10 = 26

Rev - Exp

108 - ( 6 +13 + 47 ) =42

Beg RE + NI - Div

0 + 42 - 15 = 27

Beg Equity + NI - Div + SH.C

0 + 42 - 15 + 28 = 55


115. The Roy’s Downtown Diner received a bill of $400 from the Emeril

Advertising Agency. The owner, Roy James, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is

a. a decrease in Cash and an increase in Accounts Payable. b. a decrease in Cash and an increase in Retained Earnings. c. an increase in Accounts Payable and a decrease in Retained

Earnings. d. a decrease in Accounts Payable and an increase in Retained

Earnings.

e. Ans: c

116. Ryder Company purchases $600 of equipment from Montez Inc. for cash.

The effect on the components of the basic accounting equation of Ryder Company is

a. an increase in assets and liabilities. b. a decrease in assets and liabilities. c. no change in total assets. d. an increase in assets and a decrease in liabilities.

e. Ans: c

الن اثنينهم من االستس .. فواحد نقص وواحد زاد ولكن بنفس القيمة .. فالمعادله ماراح تتأثر.

117. Fontaine Fox Company buys a $12,000 van on credit. The transaction will

affect the a. income statement only. b. statement of financial position only. c. income statement and retained earnings statement only. d. income statement, retained earnings statement, and statement of

financial position.

e. Ans: b

Exp 600

AP 600

Equ 600

Cash 600

Equ 12

AP 12


Chapter 2

MULTIPLE CHOICE QUESTIONS 1. An account consists of

a. one part. b. two parts. c. three parts. d. four parts.

Ans: c

2. The left side of an account is a. blank. b. a description of the account. c. the debit side. d. the balance of the account.

e. Ans: c

3. Which one of the following is not a part of an account? a. Credit side b. Trial balance c. Debit side d. Title

e. Ans: b

4. An account is a part of the financial information system and is

described by all except which one of the following? a. An account has a debit and credit side. b. An account is a source document. c. An account may be part of a manual or a computerized accounting

system. d. An account has a title.

e. Ans: b

5. The right side of an account a. is the correct side. b. reflects all transactions for the accounting period. c. shows all the balances of the accounts in the system. d. is the credit side.


e. Ans: d

6. An account consists of a. a title, a debit balance, and a credit balance. b. a title, a left side, and a debit balance. c. a title, a debit side, and a credit side. d. a title, a right side, and a debit balance.

e. Ans: c

7. A T-account is a. a way of depicting the basic form of an account. b. what the computer uses to organize bytes of information. c. a special account used instead of a trial balance. d. used for accounts that have both a debit and credit balance.

e. Ans: a

8. Credits a. decrease both assets and liabilities. b. decrease assets and increase liabilities. c. increase both assets and liabilities. d. increase assets and decrease liabilities.

e. Ans: b

9. A debit to an asset account indicates a. an error. b. a credit was made to a liability account. c. a decrease in the asset. d. an increase in the asset.

e. Ans: d

10. The normal balance of any account is the a. left side. b. right side. c. side which increases that account. d. side which decreases that account.

e. Ans: c

11. The double-entry system requires that each transaction must be

recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.


e. Ans: a

12. A credit is not the normal balance for which account listed below? a. Share Capital–Ordinary account b. Revenue account c. Liability account d. Dividends account

e. Ans: d

13. Which one of the following represents the expanded basic

accounting equation? a. Assets = Liabilities + Share Capital–Ordinary account + Retained

Earnings + Dividends – Revenue – Expenses. b. Assets + Dividends + Expenses = Liabilities + Share Capital –

Ordinary + Retained Earnings + Revenues. c. Assets – Liabilities – Dividends Share Capital–Ordinary + Retained

Earnings + Revenues – Expenses. d. Assets = Revenues + Expenses – Liabilities.

e. Ans: b

14. Which of the following correctly identifies normal balances of

accounts?

a. a. Assets Debit

b. Liabilities Credit

c. Equity Credit

d. Revenues Debit

e. Expenses Credit

f. b. Assets Debit

g. Liabilities Credit

h. Equity Credit

i. Revenues Credit

j. Expenses Credit

k. c. Assets Credit

l. Liabilities Debit

m. Equity Debit

n. Revenues Credit

o. Expenses Debit

p. d. Assets Debit

q. Liabilities Credit

r. Equity Credit

s. Revenues Credit

t. Expenses Debit


u. Ans: d

15. The best interpretation of the word credit is the a. offset side of an account. b. increase side of an account. c. right side of an account. d. decrease side of an account.

e. Ans: c

16. In recording an accounting transaction in a double-entry system a. the number of debit accounts must equal the number of credit

accounts. b. there must always be entries made on both sides of the accounting

equation. c. the amount of the debits must equal the amount of the credits. d. there must only be two accounts affected by any transaction.

e. Ans: c

17. An accounting convention is best described as a. an absolute truth. b. an accounting custom. c. an optional rule. d. something that cannot be changed.

e. Ans: b

18. A debit is not the normal balance for which account listed below? a. Dividends b. Cash c. Accounts Receivable d. Service Revenue

e. Ans: d

19. An accountant has debited an asset account for $1,000 and

credited a liability account for $500. What can be done to

complete the recording of the transaction? a. Nothing further must be done. b. Debit an equity account for $500. c. Debit another asset account for $500. d. Credit a different asset account for $500.

e. Ans: d


20. An accountant has debited an asset account for $1,000 and

credited a liability account for $500. Which of the following would

be an incorrect way to complete the recording of the transaction? a. Credit an asset account for $500. b. Credit another liability account for $500. c. Credit an equity account for $500. d. Debit an equity account for $500.

e. Ans: d

21. Which of the following is not true of the terms debit and credit? a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase and decrease. c. They can be used to describe the balance of an account. d. They can be interpreted to mean left and right.

e. Ans: b

22. An account will have a credit balance if the a. credits exceed the debits. b. first transaction entered was a credit. c. debits exceed the credits. d. last transaction entered was a credit.

e. Ans: a

23. For the basic accounting equation to stay in balance, each

transaction recorded must a. affect two or less accounts. b. affect two or more accounts. c. always affect exactly two accounts. d. affect the same number of asset and liability accounts.

e. Ans: b

24. Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. d. Debits decrease liabilities and decrease assets.

e. Ans: c

all of them will balance

the equation except d

A=L+E

1000=500 + (-500)


25. 75. Assets normally show a. credit balances. b. debit balances. c. debit and credit balances. d. debit or credit balances.

e. Ans: b

26. An awareness of the normal balances of accounts would help you

spot which of the following as an error in recording? a. A debit balance in the dividends account b. A credit balance in an expense account c. A credit balance in a liabilities account d. A credit balance in a revenue account

e. Ans: b

27. If a company has overdrawn its bank balance, then a. its cash account will show a debit balance. b. its cash account will show a credit balance. c. the cash account debits will exceed the cash account credits. d. it cannot be detected by observing the balance of the cash account.

e. Ans: b

28. Which account below is not a subdivision of retained earnings? a. Dividends b. Revenues c. Expenses d. Share Capital-Ordinary

e. Ans: d

29. When a company pays dividends a. it doesn't have to be cash, it could be another asset. b. the dividends account will be increased with a credit. c. the retained earnings account will be directly increased with a debit. d. the dividends account will be decreased with a debit.

e. Ans: a


30. The Dividends account a. appears on the income statement along with the expenses of the

business. b. must show transactions every accounting period. c. is increased with debits and decreased with credits. d. is not a proper subdivision of retained earnings.

e. Ans: c

31. Which of the following statements is not true? a. Expenses increase equity. b. Expenses have normal debit balances. c. Expenses decrease equity. d. Expenses are a negative factor in the computation

of net income.

e. Ans: a

32. A credit to a liability account a. indicates an increase in the amount owed to creditors. b. indicates a decrease in the amount owed to creditors. c. is an error. d. must be accompanied by a debit to an asset account.

e. Ans: a

33. In the first month of operations, the total of the debit entries to the

cash account amounted to $900 and the total of the credit entries

to the cash account amounted to $600. The cash account has a(n) a. $600 credit balance. b. $900 debit balance. c. $300 debit balance. d. $300 credit balance.

e. Ans: c

34. Martin’s Mail Service purchased equipment for $3,000. Martin

paid $500 in cash and signed a note for the balance. Martin

debited the Equipment account, credited Cash and a. nothing further must be done. b. debited the retained earnings account for $2,500. c. credited another asset account for $500. d. credited a liability account for $2,500.

e. Ans: d

Because Exp is a

Dr account but

Equity is a Cr

account

Cash Dr 900

Cash Cr 600

900 - 600 = 300 Dr

Equ 3000

cash 500

NP 2500

NP is a liability account.


35. Taylor Industries purchased supplies for £1,000. They paid £500 in

cash and agreed to pay the balance in 30 days. The journal entry

to record this transaction would include a debit to an asset

account for ₤1,000, a credit to a liability account for ₤500. Which of

the following would be the correct way to complete the recording

of the transaction? a. Credit an asset account for ₤500. b. Credit another liability account for ₤500. c. Credit the retained earnings account for ₤500. d. Debit the retained earnings account for ₤500.

e. Ans: a

36. On January 14, Ericsson Industries purchased supplies of $500 on

account. The entry to record the purchase will include a. a debit to Supplies and a credit to Accounts Payable. b. a debit to Supplies Expense and a credit to Accounts Receivable. c. a debit to Supplies and a credit to Cash. d. a debit to Accounts Receivable and a credit to Supplies.

e. Ans: a

37. On June 1, 2011, Alma Inc. reported a cash balance of €12,000.

During June, Alma made deposits of €3,000 and made

disbursements totalling €17,000. What is the cash balance at the

end of June? a. €2,000 debit balance b. €15,000 debit balance c. €2,000 credit balance d. €5,000 credit balance

e. Ans: c

38. At January 1, 2010, LeAnna Industries reported retained earnings of

$130,000. During 2011, LeAnna had a net loss of $30,000 and paid

dividends of $20,000. At December 31, 2011, the amount of

retained earnings is a. $130,000. b. $140,000. c. $100,000. d. $80,000.

e. Ans: d

Sup 1000

cash 500

AP 500

Sup 500

AP 500

12,000 + 3000 - 17000 = -2000

End RE= Beg RE + NI - Div

= 130 - 30 - 20

= 80


39. Omega Company pays its employees twice a month, on the 7th

and the 21st. On June 21, Omega Company paid employee salaries

of $4,000. This transaction would a. increase equity by $4,000. b. decrease the balance in Salaries Expense by $4,000. c. decrease net income for the month by $4,000. d. be recorded by a $4,000 debit to Salaries Payable and a $4,000

credit to Salaries Expense.

e. Ans: c

40. In the first month of operations for Widget Industries, the total of the

debit entries to the cash account amounted to ₤8,000 (₤4,000

investment by the owner and revenues of ₤4,000). The total of the

credit entries to the cash account amounted to ₤5,000 (purchase of

equipment ₤2,000 and payment of expenses ₤3,000). At the end of

the month, the cash account has a(n) a. ₤2,000 credit balance. b. ₤2,000 debit balance. c. ₤3,000 debit balance. d. ₤3,000 credit balance.

e. Ans: c

41. Rusthe Company showed the following balances at the end of its

first year:

i. Cash $ 14,000

ii. Prepaid insurance 1,400

iii. Accounts receivable

7,000

iv. Accounts payable

5,600

v. Notes payable 8,400

vi. Share capital-ordinary

2,800

vii. Dividends 1,400

viii. Revenues 42,000

ix. Expenses 35,000

What did Rusthe Company show as total credits on its trial

balance?

a. $60,200

b. $58,800

c. $57,400

d. $61,600

Salaries Exp 4000

Cash 4000

8000 - 5000 = 3000 اي فقطمالنا شغل بالتفاصيل, الن تقولنا اجمالي المبلغ من شنو ي

5600 + 8400 + 2800 + 42000 = 58800


b. Ans: b

42. During February 2011, its first month of operations, the owner of

Alona Enterprises invested cash of $50,000. Alona had cash

revenues of $8,000 and paid expenses of $14,000. Assuming no

other transactions impacted the cash account, what is the balance

in Cash at February 28? a. $6,000 credit b. $44,000 debit c. $58,000 debit d. $36,000 credit

e. Ans: b

43. Which of the following statements is true regarding debits and

credits? a. On the income statement, debits are used to increase account

balances, whereas on the statement of financial position, credits are used to increase account balances.

b. The basic equation on the statement of financial position is Assets + Liabilities = Equity.

c. The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for liabilities.

d. On the income statement, revenues are increased by debits whereas on the statement of financial position retained earnings is increased by a credit.

e. Ans: c

44. Which of the following accounts is reported in the equity section of

the statement of financial position? a. Dividends. b. Share capital-ordinary. c. Revenues d. All of the choices are reported in the equity section of the statement

of financial position.

e. Ans: b Rev and Div are parts of Equity, but they are not presented in the statement of

financial position.

45. Revenues are a. Impacted by debits and credits in the same way that expenses are

impacted by debits and credits. b. A subdivision of equity, providing information about why equity

increased. c. Reported on the statement of financial position as a current item. d. All of the choices are correct regarding revenues.

50000 + 8000 - 14000 = 44000


e. Ans: b

46. Basic steps in the recording process include all of the following

except a. Transfer the journal information to the appropriate account in the

statement of financial position. b. Analyze each transaction for its effect on the accounts. c. Enter the transaction information in a journal. d. All of the choices are correct regarding the basic steps in the

recording process.

e. Ans: a

47. At January 31, 2011, the balance in Bota Inc.’s supplies account

was $250. During February, Bota purchased supplies of $300 and

used supplies of $400. At the end of February, the balance in the

supplies account should be a. $250 debit. b. $350 credit. c. $950 debit. d. $150 debit.

e. Ans: d

48. At December 1, 2011, Gibson Company’s accounts receivable

balance was €1,800. During December, Gibson had credit revenues

of €7,500 and collected accounts receivable of €6,000. At

December 31, 2011, the accounts receivable balance is a. €1,800 debit. b. €3,300 debit. c. €9,300 debit. d. €3,300 credit.

e. Ans: b

49. At October 1, 2011, Padilla Industries had an accounts payable

balance of $30,000. During the month, the company made

purchases on account of $25,000 and made payments on account

of $40,000. At October 31, 2011, the accounts payable balance is a. $30,000. b. $10,000. c. $15,000. d. $40,000.

e. Ans: c

250 + 300 - 400 = 150

AR 7500

REV 7500

1800 + 7500 - 6000 = 3300

30 + 25 - 40 = 15


50. During 2011, its first year of operations, Yaspo’s Bakery had revenues

of $80,000 and expenses of $44,000. The business paid dividends of

$24,000. What is the amount of equity at December 31, 2011? a. $0 b. $24,000 debit c. $12,000 credit d. $36,000 credit

e. Ans: c

51. On July 7, 2011, Anaya Enterprises performed cash services of

$1,400. The entry to record this transaction would include a. a debit to Service Revenue of $1,400. b. a credit to Accounts Receivable of $1,400. c. a debit to Cash of $1,400. d. a credit to Accounts Payable of $1,400.

e. Ans: c

52. At September 1, 2011, Crews Co. reported equity of ₤136,000.

During the month, Crews generated revenues of ₤20,000, incurred

expenses of ₤12,000, purchased equipment for ₤5,000 and paid

dividends of ₤2,000. What is the amount of equity at September 30,

2011? a. ₤136,000 b. ₤8,000 c. ₤137,000 d. ₤142,000

e. Ans: d

53. The final step in the recording process is to a. analyze each transaction. b. enter the transaction in a journal. c. prepare a trial balance. d. transfer journal information to ledger accounts.

e. Ans: d

54. The usual sequence of steps in the transaction recording process is: a. journal analyze ledger. b. analyze journal ledger. c. journal ledger analyze. d. ledger journal analyze.

e. Ans: b

80 - 44 - 24 = 12

Cash or AR 1400

Rev 1400

136 + 20 - 12 - 2 = 142

purchasing Equ do not affect equity.


55. In recording business transactions, evidence that an accounting

transaction has taken place is obtained from a. business documents. b. the taxing authority. c. the public relations department. d. the IASB.

e. Ans: a

56. After a business transaction has been analyzed and entered in the

book of original entry, the next step in the recording process is to

transfer the information to a. the company's bank. b. equity. c. ledger accounts. d. financial statements.

e. Ans: c

57. The first step in the recording process is to a. prepare financial statements. b. analyze each transaction for its effect on the accounts. c. post to a journal. d. prepare a trial balance.

e. Ans: b

58. Evidence that would not help with determining the effects of a

transaction on the accounts would be a(n) a. cash register sales tape. b. bill. c. advertising brochure. d. check.

e. Ans: c

59. After transaction information has been recorded in the journal, it is

transferred to the a. trial balance. b. income statement. c. book of original entry. d. ledger.

e. Ans: d


The usual sequence of steps in the recording process is to analyze

each transaction, enter the transaction in the

f. journal, and transfer the information to the ledger accounts.

g. ledger, and transfer the information to the journal.

h. book of accounts, and transfer the information to the journal.

i. book of original entry, and transfer the information to the

journal.

j. Ans: a

60. The final step in the recording process is to transfer the journal

information to the a. trial balance. b. financial statements. c. ledger. d. file cabinets.

e. Ans: c

61. The recording process occurs a. once a year. b. once a month. c. repeatedly during the accounting period. d. infrequently in a manual accounting system.

e. Ans: c

62. A compound journal entry involves a. two accounts. b. three accounts. c. three or more accounts. d. four or more accounts.

e. Ans: c

63. A journal provides a. the balances for each account. b. information about a transaction in several different places. c. a list of all accounts used in the business. d. a chronological record of transactions.

e. Ans: d


When three or more accounts are required in one journal entry,

theentry is referred to as a f. compound entry. g. triple entry. h. multiple entry. i. simple entry.

j. Ans: a

64. When two accounts are required in one journal entry, the entry is

referred to as a a. balanced entry. b. simple entry. c. posting. d. nominal entry.

e. Ans: b

65. Another name for the journal is the a. listing. b. book of original entry. c. book of accounts. d. book of source documents.

e. Ans: b

66. The standard format of a journal would not include a. a reference column. b. an account title column. c. a T-account. d. a date column.

e. Ans: c

67. Transactions in a journal are initially recorded in a. account number order. b. dollar amount order. c. alphabetical order. d. chronological order.

e. Ans: d

68. A journal is not useful for a. disclosing in one place the complete effect of a transaction. b. preparing financial statements. c. providing a record of transactions. d. locating and preventing errors.

e. Ans: b


Acomplete journal entry does not show f. the date of the transaction. g. the new balance in the accounts affected by the transaction. h. a brief explanation of the transaction. i. the accounts and amounts to be debited and credited.

j. Ans: b

69. The name given to entering transaction data in the journal is a. chronicling. b. listing. c. posting. d. journalizing.

e. Ans: d

70. The standard form of a journal entry has the a. debit account entered first and indented. b. credit account entered first and indented. c. debit account entered first at the extreme left margin. d. credit account entered first at the extreme left margin.

e. Ans: c

71. When journalizing, the reference column is a. left blank. b. used to reference the source document. c. used to reference the journal page. d. used to reference the financial statements.

e. Ans: a

72. On June 1, 2011 Quang Le buys a copier machine for his business

and finances this purchase with cash and a note. When journalizing

this transaction, he will a. use two journal entries. b. make a compound entry. c. make a simple entry. d. list the credit entries first, which is proper form for this type of

transaction.

e. Ans: b


Which of the following journal entries is recorded correctly and inthe

standard format?

f. Wages Expense ..................................................... 600

i. ....................................................................... Cash 1,500

Advertising Expense . .................................................. 900

g. Wages Expense . .................................................... 600

Advertising Expense . .................................................. 900

i. ....................................................................... Cash 1,500

h. Cash ........................................................................ 1,500

i. ....................................................................... Wages

Expense ........................................................ 600

ii. ....................................................................... Advertising

Expense ........................................................ 900

i. Wages Expense ..................................................... 600

Advertising Expense ................................................... 900

i. ....................................................................... Cash . 1,500

j. Ans: d

73. Which of the following statements is true regarding simple and

compound entries? a. Simple entries can be prepared by anyone whereas compound

entries need to be prepared by a skilled accountant. b. Simple entries are recorded on the income statement whereas

compound entries are recorded on the statement of financial position.

c. Simple entries involve one account, whereas compound entries involved 2 or more accounts.

d. An example of a compound entry would be the purchase of a machine for $400 cash and a $2,000 note payable.

e. Ans: d

74. Compound entries a. Would include an entry to record the purchase of a computer for

cash. b. Include at least two debits or two credits. c. Require that all credits be listed before the debits for entries

affecting the statement of financial position. d. Should be broken into their component parts and recorded as

simple entries.

e. Ans: b


Accounts maintained within the ledger that appear on the

statement of financial position include all of the following except f. Salaries Expense. g. Interest Payable. h. Supplies. i. Share Capital-Ordinary.

j. Ans: a Expenses do not apear on the statement of financial position.

75. The entire group of accounts maintained by a company is called

the a. chart of accounts. b. general journal. c. general ledger. d. trial balance.

e. Ans: c

76. An accounting record of the balances of all assets, liabilities, and

equity accounts is called a. compound entry. b. general journal. c. general ledger. d. chart of accounts.

e. Ans: c

77. The usual ordering of accounts in the general ledger is a. assets, liabilities, share capital-ordinary, retained earnings,

dividends, revenues, and expenses. b. assets, liabilities, dividends, share capital-ordinary, retained

earnings, expenses, and revenues. c. liabilities, assets, share capital-ordinary, retained earnings,

revenues, expenses, and dividends. d. Share capital-ordinary, retained earnings, assets, liabilities,

dividends, expenses, and revenues.

e. Ans: a

78. Management could determine the amounts due from customers by

examining which ledger account? a. Service Revenue b. Accounts Payable c. Accounts Receivable d. Supplies

e. Ans: c


A three column form of account is so named because it has

columns for f. debit, credit, and account name. g. debit, credit, and reference. h. debit, credit, and balance. i. debit, credit, and date.

j. Ans: c

79. On August 13, 2011, Merrill Enterprises purchased office equipment

for $1,500 and office supplies of $300 on account. Which of the

following journal entries is recorded correctly and in the standard

format?

a. Office Equipment ................................................... 1,500

i. Account Payable ..................................... 1,800

Office Supplies ............................................................. 300

b. Office Equipment. .................................................. 1,500

Office Supplies ............................................................. 300

i. Accounts Payable.................................... 1,800

c. Accounts Payable ................................................. 1,800

i. Office Equipment ..................................... 1,500

ii. Office Supplies .......................................... 300

d. Office Equipment ................................................... 1,500

Office Supplies ............................................................. 300

i. Accounts Payable.................................... 1,800

e. Ans: d

80. Robitaille Company received a cash advance of $500 from a

customer. As a result of this event, a. assets increased by $500. b. equity increased by $500. c. liabilities decreased by $500. d. both a and b.

e. Ans: a

81. Pastorek Company purchased equipment for $1,800 cash. As a result

of this event, a. equity decreased by $1,800. b. total assets increased by $1,800. c. total assets remained unchanged. d. Both a and b.

e. Ans: c

Equ 1800

cash 1800 both of them are assets, one will increase the

asset and the other will decrease it with the same

amount.


Root Company provided consulting services and billed the client $2,500. As a result of this event,

f. assets remained unchanged. g. assets increased by $2,500. h. equity increased by $2,500. i. Both b and c.

j. Ans: d

82. The first step in posting involves a. entering in the appropriate ledger account the date, journal page,

and debit amount shown in the journal. b. writing in the journal the account number to which the debit amount

was posted. c. writing in the journal the account number to which the credit amount

was posted. d. entering in the appropriate ledger account the date, journal page,

and credit amount shown in the journal.

e. Ans: a

83. A chart of accounts usually starts with a. asset accounts. b. expense accounts. c. liability accounts. d. revenue accounts.

e. Ans: a

84. The procedure of transferring journal entries to the ledger accounts

is called a. journalizing. b. analyzing. c. reporting. d. posting.

e. Ans: d

85. A number in the reference column in a general journal indicates a. that the entry has been posted to a particular account. b. the page number of the journal. c. the dollar amount of the transaction. d. the date of the transaction.

e. Ans: a

86. Posting

Cash or AR 2500

Rev 2500


a. should be performed in account number order. b. accumulates the effects of journalized transactions in the individual

accounts. c. involves transferring all debits and credits on a journal page to the

trial balance. d. is accomplished by examining ledger accounts and seeing which

ones need updating.

e. Ans: b

.After journal entries are posted, the reference column a. of the general journal will be blank. b. of the general ledger will show journal page numbers. c. of the general journal will show "Dr" or "Cr". d. of the general ledger will show account numbers.

f. Ans: b

87. The explanation column of the general ledger a. is completed without exception. b. is nonexistent. c. is used infrequently. d. shows account titles.

e. Ans: c

88. A numbering system for a chart of accounts a. is prescribed by IFRS. b. is uniform for all businesses. c. usually starts with income statement accounts. d. usually starts with statement of financial position accounts.

e. Ans: d

89. The first step in designing a computerized accounting system is the

creation of the a. general ledger. b. general journal. c. trial balance. d. chart of accounts.

e. Ans: d

90. Posting


a. Accumulates the effects of ledger entries and transfers them to the general journal.

b. Is done only for income statement activity; activity related to the statement of financial position does not require posting.

c. is done at least once per year. d. Is done by posting all the debits and credits of one entry before

moving on to the next entry.

e. Ans: d

91. The trial balance a. Is a listing of all the accounts and their balances in the order the

accounts appear on the statement of financial position. b. Has as its primary purpose to prove (check) that all journal entries

were made for the period. c. Can be used to uncover errors in journalizing and posting. d. Is used to prepare the statement of financial position while the

general ledger is used to prepare the income statement.

e. Ans: c

92. Numerous errors may exist even though the trial balance columns

agree. Which of the following is not one of these types of errors? a. A transaction is not journalized. b. Transposition error related to the statement of financial position. c. A journal entry is posted twice. d. A journal entry to purchase $100 worth of equipment is posted as a

$1,000 purchase.

e. Ans: b

93. Which of the following statements is false concerning use of

currency signs? a. Currency signs do not appear in journals or ledgers. b. Currency signs are generally only shown for the first item in a

column and for the column total. c. Currency signs are not typically used in the trial balance. d. All of the choices are correct regarding currency signs.

e. Ans: c

94. Which of the following statement is true regarding the recording

process?


a. Because IFRS rely more on fair value and less on historical cost than U.S. GAAP the double-entry accounting system is not widely used by companies who use IFRS.

b. Both IFRS and U.S. GAAP, use the same general rules of debits and credits and the steps in the recording process.

c. A trial balance using IFRS is organised by first showing the accounts from the statement of financial position followed by accounts from the income statement; a trial balance using U.S. GAAP is organized using the opposite order.

d. All of the choices are correct regarding the recording process.

e. Ans: b

95. The steps in preparing a trial balance include all of the following

except a. listing the account titles and their balances. b. totaling the debit and credit columns. c. proving the equality of the two columns. d. transferring journal amounts to ledger accounts.

e. Ans: d

96. A trial balance may balance even when each of the following

occurs except when a. a transaction is not journalized. b. a journal entry is posted twice. c. incorrect accounts are used in journalizing. d. a transposition error is made.

e. Ans: d

97. A list of accounts and their balances at a given time is called a(n) a. journal. b. posting. c. trial balance. d. income statement.

e. Ans: c

98. If the sum of the debit column equals the sum of the credit column

in a trial balance, it indicates a. no errors have been made. b. no errors can be discovered.


c. that all accounts reflect correct balances. d. the mathematical equality of the accounting equation.

e. Ans: d

99. A trial balance is a listing of a. transactions in a journal. b. the chart of accounts. c. general ledger accounts and balances. d. the totals from the journal pages.

e. Ans: c

100. Customarily, a trial balance is prepared a. at the end of each day. b. after each journal entry is posted. c. at the end of an accounting period. d. only at the inception of the business.

e. Ans: c

101. A trial balance would only help in detecting which one of the

following errors? a. A transaction that is not journalized b. A journal entry that is posted twice c. Offsetting errors are made in recording the transaction d. A transposition error when transferring the debit side of journal

entry to the ledger

e. Ans: d

An account is an individual accounting record of increases and

decreases in specific a. liabilities. b. assets. c. expenses. d. assets, liabilities, and equity items.

f. Ans: d


102. A debit is not the normal balance for which of the following? a. Asset account b. Dividends account c. Expense account d. Share capital-ordinary account

e. Ans: d

103. Which of the following rules is incorrect? a. Credits decrease the dividends account. b. Debits increase the share capital-ordinary account. c. Credits increase revenue accounts. d. Debits decrease liability accounts.

e. Ans: b

104. Which of the following statements is false? a. Revenues increase equity. b. Revenues have normal credit balances. c. Revenues are a positive factor in the computation of net income. d. Revenues are increased by debits.

e. Ans: d

105. Which of the following is the correct sequence of steps in the

recording process? a. Posting, journalizing, analyzing b. Journalizing, analyzing, posting c. Analyzing, posting, journalizing d. Analyzing, journalizing, posting

e. Ans: d

106. Which of the following is false about a journal? a. It discloses in one place the complete effects of a transaction. b. It provides a chronological record of transactions. c. It helps to prevent or locate errors because debit and credit

amounts for each entry can be readily compared. d. It keeps in one place all the information about changes in specific

account balances.

e. Ans: d


107. Sternberg Company purchases equipment for $1,200 and

supplies for $400 from Tran Co. for $1,600 cash. The entry for this

transaction will include a a. debit to Equipment $1,200 and a debit to

Supplies Expense $400 for Tran. b. credit to Cash for Tran. c. credit to Accounts Payable for Sternberg. d. debit to Equipment $1,200 and a debit

to Supplies $400 for Sternberg.

e. Ans: d

108. Wiser Inc. paid cash dividends of $300. The entry for this

transaction will include a debit of $300 to a. Dividends. b. Retained Earnings. c. Owner's Salary Expense. d. Salaries Expense.

e. Ans: a

109. On October 3, Josh Antonio, a carpenter, received a cash

payment for services previously billed to a client. Josh paid his

telephone bill, and he also bought equipment on credit. For the

three transactions, at least one of the entries will include a a. credit to Retained Earnings. b. credit to Notes Payable. c. debit to Accounts Receivable. d. credit to Accounts Payable.

e. Ans: d

110. Posting of journal entries should be done in a. account number order. b. alphabetical order. c. chronological order. d. dollar amount order.

e. Ans: c

111. The chart of accounts is a a. list of accounts and their balances at a given time. b. device used to prove the mathematical accuracy of the ledger. c. listing of the accounts and the account numbers which identify their

location in the ledger. d. required step in the recording process.

e. Ans: c

Equ 1200

Sup 400

cash 1600

Div 300

cash 300

because he bought on

credit يعني شرا على الحساب, بعدين راح يدفع


112. Which of the following is incorrect regarding a trial balance? a. It proves that the debits equal the credits after posting. b. It proves that the company has recorded all transactions. c. A trial balance uncovers errors in journalizing and posting. d. A trial balance is useful in the preparation of financial statements.

e. Ans: b

113. A trial balance will not balance if a. a journal entry is posted twice. b. a wrong amount is used in journalizing. c. incorrect account titles are used in journalizing. d. a journal entry is only partially posted.

ans: d


Creative teaching platform


Chapter 3

MULTIPLE CHOICE QUESTIONS

1. The time period assumption states that a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than

one time period. c. adjustments to the enterprise's accounts can only be made in the

time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time

periods.

e. Ans: d

2. An accounting time period that is one year in length, but does not begin on January 1, is referred to as

a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period.

Ans: a

3. Adjustments would not be necessary if financial statements were prepared to reflect net income from

a. monthly operations. b. fiscal year operations. c. interim operations. d. lifetime operations.

Ans: d

4. Management usually desires ________ financial statements and the IRS

requires all businesses to file _________ tax returns. a. annual, annual b. monthly, annual c. quarterly, monthly d. monthly, monthly

Ans: b


The time period assumption is also referred to as the e. calendar assumption. f. cyclicity assumption. g. periodicity assumption. h. fiscal assumption.

Ans: c

5. In general, the shorter the time period, the difficulty of making the proper

adjustments to accounts a. is increased. b. is decreased. c. is unaffected. d. depends on if there is a profit or loss.

Ans: a

which of the following is not a common time period chosen by businesses

as their accounting period? A. Daily B. Monthly C. Quarterly D. Annually

Ans: a

which of the following time periods would not be referred to as an interim period?

A. Monthly B. Quarterly C. Semi-annually D. Annually

Ans: d

The fiscal year of a business is usually determined by A. a government agency. B. a lottery. C. the business. D. the IASB.

Ans: c

Which of the following are in accordance with IFRS?

A. Accrual basis accounting B. Cash basis accounting C. Both accrual basis and cash basis accounting D. Neither accrual basis nor cash basis accounting

Ans: a


The revenue recognition principle dictates that revenue should be recognized in the accounting records

A. when cash is received. B. when it is earned. C. at the end of the month. D. in the period that income taxes are paid.

Ans: b

6. In a service-type business, revenue is considered earned

a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received.

Ans: c

7. The expense recognition principle matches

a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses.

Ans: b

8. Ron's Hot Rod Shop follows the revenue recognition principle. Ron

services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5. Ron receives the check in the mail on August 6. When should Ron show that the revenue was earned?

a. July 31 b. August 1 c. August 5 d. August 6

Ans: a

9. A company spends $10 million dollars for an office building. Over what

period should the cost be written off? a. When the $10 million is expended in cash. b. All in the first year. c. Over the useful life of the building. d. After $10 million in revenue is earned.

Ans: c المقام شنو نخليه ؟ ,dep قصدهم بالسؤال لمن بنحسب ال


10. The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that

a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. dividends to shareholders should be matched with shareholders'

investments. d. cash payments should be matched with cash receipts.

Ans: b

A flower shop makes a large sale for $1,000 on November 30. The

customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows IFRS and applies the revenue recognition principle. When is the $1,000 considered to be earned?

A. December 5. B. December 10. C. November 30. D. December 1.

Ans: c نسجل األرباح أو ما نبيع مو أول ما نحصل الفلوس

11. candy factory's employees work overtime to finish an order that is sold on

February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in

a. February. b. March. c. the period when the workers receive their checks. d. either in February or March depending on when the pay period

ends.

Ans: a

12. Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the time period?

a. Due from Employees. b. Due to Employer. c. Wages Payable. d. Wages Expense.

Ans: c . تم شرح مثل هذا المثال في الدروس المسجله


13. Under accrual-basis accounting a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash

inflows. c. events that change a company's financial statements are

recognized in the period they occur rather than in the period in which cash is paid or received.

d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under IFRS.

Ans: c

14. Adjusting entries are required a. yearly. b. quarterly. c. monthly. d. every time financial statements are prepared.

Ans: d

15. Which is not an application of revenue recognition?

a. Recording revenue as an adjusting entry on the last day of the accounting period.

b. Accepting cash from an established customer for services to be performed over the next three months.

c. Billing customers on June 30 for services completed during June. d. Receiving cash for services performed.

Ans: b

16. Which statement is correct?

a. As long as a company consistently uses the cash basis of accounting, IFRS allow its use.

b. The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.

c. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

d. As long as management is ethical, there are no problems with using the cash basis of accounting.

Ans: b


17. The following is selected information from Alpha-Beta-Gamma Corporation for the fiscal year ending October 31, 2011.

i. Cash received from customers $300,000

ii. Revenue earned 350,000

iii. Cash paid for expenses 170,000

iv. Cash paid for computers on November 1, 2010 that 48,000 will be used

v. for 3 years (annual depreciation is $16,000)

vi. Expenses incurred, not including any depreciation 200,000

vii. Proceeds from a bank loan, part of which was used to pay for the computers 100,000

Based on the accrual basis of accounting, what is Alpha-Beta-Gamma Corporation’s net income for the year ending October 31, 2011?

A. $114,000. B. $134,000. C. $82,000. D. $150,000.

Ans: b

Use the following information for questions 19 and 20.

Ling Company had the following transactions during 2011:

Sales of ¥9,000 on account Collected ¥4,000 for services to be performed in 2012 Paid ¥1,250 cash in salaries Purchased airline tickets for ¥500 in December for a trip to take place in 2012

18. What is Ling’s 2011 net income using accrual accounting?

a. ¥7,750. b. ¥11,750. c. ¥11,250. d. ¥7,250.

Ans: a

19. What is Ling’s 2011 net income using cash basis accounting?

a. ¥11,750. b. ¥2,750.

NI = Rev - Exp >> 350 - 216 = 134

Rev = 350

Exp = 16 + 200

NI = Rev - Exp >> 9000-1250 = 7750

Rev = 9000

Exp = 1250 ما خذينا االخيره الن التذكرة شريناها حق سنه يديدة, وال خذينا الثانيه الن

ايضا لسنة يديدة

NI = Rev - Exp >>

Rev = 4000

Exp = 1250 + 500

نحسب كل شي خذينا عليه فلوس او دفعنا فيه فلوس النه


c. ¥11,250. d. ¥2,250.

Ans: d

20. Under International Financial Reporting Standards (IFRS) a. The cash-basis method of accounting is accepted. b. Events are recorded in the period in which the event occurs. c. Interim period financial statements are either a calendar year or a

fiscal year. d. A fiscal year is an accounting time period encompassing less than

12 months.

Ans: b

21. The expense recognition principle refers to a. Recognizing revenue in the period when it is earned. b. Matching the revenue reported on the income statement with the

receivable reported on the statement of financial position. c. Letting expenses follow revenues. d. Dividing the life of the business into artificial time periods.

Ans: c

22. When companies record transactions in the period in which the events occur, ______ is being applied.

a. Accrual-basis accounting. b. The time period assumption. c. The matching of the income statement with the statement of

financial position. d. The expense recognition principle.

Ans: a

23. A company must make adjusting entries

a. To ensure that the revenue recognition and expense recognition principles are followed.

b. Each time it prepares an income statement and a statement of financial position.

c. To account for accruals or deferrals. d. All of the choices are correct regarding adjusting entries.

Ans: d


24. Which of the following adjustments would require decreasing the liabilities

reported on the statement of financial position? a. A company uses $400 worth of supplies during the year. b. A company records $400 worth of depreciation on equipment. c. A company has earned $400 of revenue collected at the beginning

of the year. d. A company records $400 of wages earned by employees that will

be paid next year.

Ans: c

25. Adjusting entries

a. Are often prepared after the statement of financial position date, but dated as of the statement of financial position date.

b. Are necessary to enable the financial statements to conform to international Financial Reporting Standard (IFRS).

c. Include both accruals and deferrals d. All of the choices are correct regarding adjusting entries.

Ans: d

26. Adjusting entries are required a. because some costs expire with the passage of time and have not

yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are

incurred. d. when revenues are recorded in the period in which they are earned.

Ans: a

27. A small company may be able to justify using a cash basis of accounting if

they have a. sales under $1,000,000. b. no accountants on staff.

c : تقولنا ان الشركة استحقت العوائد الي استلمت فلوسها مقدم من بداية السنه يعني الشركة استلمت فلوس ولكن لي الحين ما قدمت بمقابلها خدمة أو منتج فتتسجل جذي

cash 400

unearned rev 400 هذا من ال liabilities الحين الشركة قدمت الخدمة او المنتج, فراح نقلل الدين الي علينا

unearned rev 400

revenue 400


c. few receivables and payables. d. all sales and purchases on account.

Ans: c

28. Which one of the following is not a justification for adjusting entries?

a. Adjusting entries are necessary to ensure that revenue recognition principles are followed.

b. Adjusting entries are necessary to ensure that the expense recognition principle is followed.

c. Adjusting entries are necessary to enable financial statements to be in conformity with IFRS.

d. Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Ans: d

29. An adjusting entry

a. affects two statement of financial position accounts. b. affects two income statement accounts. c. affects a statement of financial position account and an income

statement account. d. is always a compound entry.

Ans: c

30. The preparation of adjusting entries is

a. straight forward because the accounts that need adjustment will be out of balance.

b. often an involved process requiring the skills of a professional. c. only required for accounts that do not have a normal balance. d. optional when financial statements are prepared.

Ans: b

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

A. an expense should be recorded when the bill is received. B. an expense should be recorded when the cash is paid out. C. an adjusting entry should be made recognizing the expense. D. it is optional whether to record the expense before the bill is received.

Ans: c accrual basis مالنا شغل بالفلوس استلمناها وال الء الن نتبع ال 31. Accounts often need to be adjusted because

a. there are never enough accounts to record all the transactions. b. many transactions affect more than one time period.


c. there are always errors made in recording transactions. d. management can't decide what they want to report.

Ans: b

32. Adjusting entries are a. not necessary if the accounting system is operating properly. b. usually required before financial statements are prepared. c. made whenever management desires to change an account

balance. d. made to statement of financial position accounts only.

Ans: b

33. Expenses incurred but not yet paid or recorded are called

a. prepaid expenses. b. accrued expenses. c. interim expenses. d. unearned expenses.

Ans: b

34. A law firm received $2,000 cash for legal services to be rendered in the

future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.

Ans: d

35. Adjusting entries can be classified as

a. postponements and advances. b. accruals and deferrals. c. deferrals and postponements. d. accruals and advances.

Ans: b

36. Accrued revenues are

a. received and recorded as liabilities before they are earned. b. earned and recorded as liabilities before they are received. c. earned but not yet received or recorded. d. earned and already received and recorded.


Ans: c

37. Prepaid expenses are

a. paid and recorded in an asset account before they are used or consumed.

b. paid and recorded in an asset account after they are used or consumed.

c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

Ans: a

38. Accrued expenses are

a. paid and recorded in an asset account before they are used or consumed.

b. paid and recorded in an asset account after they are used or consumed.

c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

Ans: c

39. Unearned revenues are

a. received and recorded as liabilities before they are earned. b. earned and recorded as liabilities before they are received. c. earned but not yet received or recorded. d. earned and already received and recorded.

Ans: a

40. A liability—revenue relationship exists with

a. prepaid expense adjusting entries. b. accrued expense adjusting entries. c. unearned revenue adjusting entries. d. accrued revenue adjusting entries.

Ans: c

41. Which of the following reflect the balances of prepayment accounts prior

to adjustment? a. accounts are understated and income statement accounts are

understated.

cash xx

unearned rev xx

adjusting:

Unearned rev xx

Revenue xx

unearned Rev is a liability.


b. accounts are overstated and income statement accounts are overstated.

c. accounts are overstated and income statement accounts are understated.

d. accounts are understated and income statement accounts are overstated.

Ans: c ( prepayment accounts are prepaid accounts )

42. An asset—expense relationship exists with

a. liability accounts. b. revenue accounts. c. prepaid expense adjusting entries. d. accrued expense adjusting entries.

Ans: c

43. Bee-In-The-Bonnet Company purchased office supplies costing $8,000

and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $3,200 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

a. Debit Office Supplies Expense, $3,200; Credit Office Supplies, $3,200.

b. Debit Office Supplies, $4,800; Credit Office Supplies Expense, $4,800.

c. Debit Office Supplies Expense, $4,800; Credit Office Supplies, $4,800.

d. Debit Office Supplies, $3,200; Credit Office Supplies Expense, $3,200.

Ans: c

44. If an adjustment is needed for unearned revenues, the

a. liability and related revenue are overstated before adjustment. b. liability and related revenue are understated before adjustment. c. liability is overstated and the related revenue is understated before

adjustment. d. liability is understated and the related revenue is overstated before

adjustment.

Ans: c

45. The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is

a. $4,500. b. $2,500.

prepaid exp xx

cash xx

adjusting:

Exp xx

prepaid exp xx

prepaid exp is an asset.

Supplies 8000

cash 8000

adjusting:

Supplies exp 4800

supplies 4800

8000 - 3200 = 4800 ( used )

Supplies = 5200 + 2500 = 7700

June 30 on hand : 2000

Used = 7700 - 2000 = 5700


c. $9,700. d. $5,700.

Ans: d

46. Depreciation expense for a period is computed by taking the

a. original cost of an asset – accumulated depreciation. b. depreciable cost ÷ depreciation rate. c. cost of the asset ÷ useful life. d. market value of the asset ÷ useful life.

Ans: c

47. Accumulated Depreciation is

a. an expense account. b. an equity account. c. a liability account. d. a contra asset account.

Ans: d

48. Hercules Company purchased a computer for $3,600 on December 1. It is

estimated that annual depreciation on the computer will be $720. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

a. Debit Depreciation Expense, $720; Credit Accumulated Depreciation, $720.

b. Debit Depreciation Expense, $60; Credit Accumulated Depreciation, $60.

c. Debit Depreciation Expense, $2,880; Credit Accumulated Depreciation, $2,880.

d. Debit Office Equipment, $3,600; Credit Accumulated Depreciation, $3,600.

Ans: b ( 720/12 ) = 60, only for one month Dec 1 to Dec 31.

49. Action Real Estate received a check for $18,000 on July 1 which

represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full $18,000. Financial statements will be prepared on July 31. Action Real Estate should make the following adjusting entry on July 31:

a. Debit Unearned Rent, $3,000; Credit Rental Revenue, $3,000. b. Debit Rental Revenue, $3,000; Credit Unearned Rent, $3,000. c. Debit Unearned Rent, $18,000; Credit Rental Revenue, $18,000. d. Debit Cash, $18,000; Credit Rental Revenue, $18,000.

عند استالم المبلغ

Cash 18000

Unearned rev 18000

adjusting: بنهاية شهر سبعة


Ans: a

50. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a

a. debit to an asset account and a credit to an expense account. b. debit to an expense account and a credit to an asset account. c. debit to an asset account and a credit to an asset account. d. debit to an expense account and a credit to an expense account.

Ans: b

51. A company usually determines the amount of supplies used during a

period by a. adding the supplies on hand to the balance of the Supplies

account. b. summing the amount of supplies purchased during the period. c. taking the difference between the supplies purchased and the

supplies paid for during the period. d. taking the difference between the balance of the Supplies account

and the cost of supplies on hand.

Ans: d

52. If a company fails to make an adjusting entry to record supplies expense, then

a. equity will be understated. b. expense will be understated. c. assets will be understated. d. net income will be understated.

Ans: b

53. What is the proper adjusting entry at June 30, the end of the fiscal year,

based on a prepaid insurance account balance before adjustment, € 20,500, and unexpired amounts per analysis of policies of € 6,000?

a. Debit Insurance Expense, € 6,000; Credit Prepaid Insurance, € 6,000.

b. Debit Insurance Expense, € 20,500; Credit Prepaid Insurance, € 20,500.

c. Debit Prepaid Insurance, € 14,500; Credit Insurance Expense, € 14,500.

d. Debit Insurance Expense, € 14,500; Credit Prepaid Insurance, € 14,500.

prepaid insurance 20500

cash 20500

adjusting:

insurance exp 14500

prepaid insurance 14500 , و بنهاية 20500يقول السؤال ان دافعين مقدم تأمين

نما استحق لي الحي 6000السنه شافو ان

للي استحق فقط Adj احنا نسوي

20500 - 6000 = 14500


Ans: d

54. At December 31, 2011, before any year-end adjustments, Cable Car Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

a. $3,000. b. $1,450. c. $4,450. d. $2,250.

Ans: c

55. Depreciation is the process of a. valuing an asset at its fair value. b. increasing the value of an asset over its useful life in a rational and

systematic manner. c. allocating the cost of an asset to expense over its useful life in a

rational and systematic manner. d. writing down an asset to its real value each accounting period.

Ans: c

56. A new accountant working for Unitas Company records $800 Depreciation

Expense on store equipment as follows: i. Depreciation Expense .............................. 800

1. ............................................................ Cash 800 The effect of this entry is to

a. adjust the accounts to their proper amounts on December 31. b. understate total assets on the statement of financial position as of

December 31. c. overstate the book value of the depreciable assets at December 31. d. understate the book value of the depreciable assets as of December

31.

Ans: c

Insurance exp = 1450 + 3000 = 4450 1450فيه insurance exp يقول السؤال ان اكاونت

و اكاونت prepaid insurance 3800فيه

3000 prepaid insurance had expired exp يعني بهالقيمة تحول لي

insurance exp ألكاونت ال balance الحين المطلوب شنو ال

3000و نزيد عليه الي صار 1450لي اهوا فنشوف جم كان فيه قبل ا


57. From an accounting standpoint, the acquisition of productive facilities can be thought of as a long-term

a. accrual of expense. b. accrual of revenue. c. accrual of unearned revenue. d. prepayment for services.

Ans: d

58. The balance in the Prepaid Rent account before adjustment at the end of

the year is ¥12,000, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to

a. debit Rent Expense, ¥4,000; credit Prepaid Rent, ¥4,000.

b. debit Rent Expense, ¥8,000; credit Prepaid Rent ¥8,000.

c. debit Prepaid Rent, ¥4,000; credit Rent Expense, ¥4,000.

d. debit Prepaid Rent, ¥8,000; credit Rent Expense, ¥8,000.

Ans: a

59. An accumulated depreciation account

a. is a contra-liability account. b. increases on the debit side. c. is offset against total assets on the STATEMENT OF POSITION. d. has a normal credit balance.

Ans: d

60. The difference between the cost of a depreciable asset and its related

accumulated depreciation is referred to as the a. fair value of the asset. b. blue book value of the asset. c. book value of the asset. d. depreciated difference of the asset.

Ans: c

61. If a business has several types of long-term assets such as equipment,

buildings, and trucks, a. there should be only one accumulated depreciation account. b. there should be a separate accumulated depreciation account for

each type of asset. c. all the long-term asset accounts will be recorded in one general

ledger account. d. there won't be a need for an accumulated depreciation account.

Ans: b

adj بنسوي 12شهر, الحين بنهاية شهر أ 3دفع مقدم ألجار ل 12بشهر فراح نسويله لشهر واحد فقط ألن مر علينا شهر بس

12000/3 = 4000

Prepaid rent exp 12000

cash 12000 adjusting entries : المطلوب

rent exp 4000

prepaid rent exp 4000


62. Which of the following would not result in unearned revenue?

a. Rent collected in advance from tenants b. Services performed on account c. Sale of season tickets to football games d. Sale of two-year magazine subscriptions

Ans: b

63. If business pays rent in advance and debits a Prepaid Rent account, the

company receiving the rent payment will credit a. cash. b. prepaid rent. c. unearned rent revenue. d. accrued rent revenue.

Ans: c

64. Unearned revenue is classified as

a. an asset account. b. a revenue account. c. a contra-revenue account. d. a liability.

Ans: d

65. If a business has received cash in advance of services performed and

credits a liability account, the adjusting entry needed after the services are performed will be

a. debit Unearned Revenue and credit Cash. b. debit Unearned Revenue and credit

Service Revenue. c. debit Unearned Revenue and

credit Prepaid Expense. d. debit Unearned Revenue and

credit Accounts Receivable.

Ans: b

66. Speedy Clean Laundry purchased € 6,500 worth of laundry supplies on

June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only € 1,500 on hand. The adjusting entry that should be made by the company on June 30 is

a. Debit Laundry Supplies Expense, € 1,500; Credit Laundry Supplies, € 1,500.

b. Debit Laundry Supplies, € 1,500; Credit Laundry Supplies Expense, € 1,500.

b :

A/R XX

Service revenue xx

يقول السؤال, بزنز دفع مقدم ألجار لشركة ثانية , الشركة الثانيه شلون راح تسجل ؟

ركة األولى الي دفعتالش

Prepaid rent exp XX

cash XX الشركة الثانية الي استلمت ) المطلوب (

Cash xx

unearned rent rev xx

cash xx

unearned rev xx adjusting entries : المطلوب

unearned rev xx

revenue xx

supplies 6500

cash 6500

adjusting:

supplies exp 5000

supplies 500

6500 - 1500 = 5000


c. Debit Laundry Supplies, € 5,000; Credit Laundry Supplies Expense, € 5,000.

d. Debit Laundry Supplies Expense, € 5,000; Credit Laundry Supplies, € 5,000.

Ans: d

67. On July 1, Runner’s Sports Store paid $8,000 to Acme Realty for 4

months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner’s Sports Store is

a. Debit Rent Expense, $8,000; Credit Prepaid Rent, $2,000.

b. Debit Prepaid Rent, $2,000; Credit Rent Expense, $2,000.

c. Debit Rent Expense, $2,000; Credit Prepaid Rent, $2,000.

d. Debit Rent Expense, $8,000; Credit Prepaid Rent, $8,000.

Ans: c

68. Southwestern City College sold season tickets for the 2011 football

season for $180,000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30

a. is not required. No adjusting entries will be made until the end of the season in November.

b. will include a debit to Cash and a credit to Ticket Revenue for $45,000.

c. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $67,500.

d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $60,000.

Ans: c


season for $180,000. A total of 8 games will be played during September, October and November. In September, two games were played. In October, three games were played. The balance in Unearned Revenue at October 31 is

a. $0. b. $45,000. c. $67,500. d. $112,500.

prepaid exp 8000

cash 8000

adjusting entries : المطلوب

exp 2000

prepaid exp 2000

8000/4=2000

cash 180,000

unearned rev 180,000

this for 8 games ( each

game 180,000/8 = 22,500 )

Sep only 3 games ( 22,500*3

=67500)

adjusting entries:

Unearned rev 67,500

revenue 67,500

cash 180,000


Sep 2 games ( 22,500*2 =45,000)

adjusting entries end of Sep

Unearned rev 45,000

revenue 45,000

Oct 3 games ( 22,500*3 =67,500)

Unearned rev 67,500

revenue 67,500


Ans: c


season for $180,000. A total of 8 games will be played during September, October and November. Assuming all the games are played, the Unearned Revenue balance that will be reported on the December 31 STATEMENT OF FINANCIAL POSITION will be

a. $0. b. $67,500. c. $112,500. d. $180,000.

Ans: a , because all the games that paid for were played

71. Henry-K Company purchased a computer system for $5,400 on January 1, 2011. The company expects to use the computer system for 3 years. It has no residual value. Monthly depreciation expense on the asset is

a. $0. b. $150. c. $1,800. d. $5,400.

Ans: b

72. Hardwood Supplies Inc. purchased a 12-month insurance policy on March

1,2011 for ₤ 900. At March 31, 2011, the adjusting journal entry to record expiration of this asset will include a

a. debit to Prepaid Insurance and a credit to Cash for ₤ 900.

b. debit to Prepaid Insurance and a credit to Insurance Expense for ₤ 100.

c. debit to Insurance Expense and a credit to Prepaid Insurance for ₤ 75

d. debit to Insurance Expense and a credit to Cash for ₤ 75.

Ans: c

73. Daly Investments purchased an 18-month insurance policy on May 31, 2011 for $4,500. The December 31, 2011 statement of financial position would report Prepaid Insurance of

a. $0 because Prepaid Insurance

5400 / 3 = 1,800 ( yearly)

1800/12= 150 ( monthly )


cash 900

adjusting

insurance exp 75


900/12= 75


cash 4500

adjusting

insurance exp 1750



is reported on the Income Statement. b. $1,750. c. $2,750. d. $4,500.

Ans: c

74. At March 1, Progressive Auto Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

a. equity will be overstated by $800. b. expenses will be understated by $750. c. assets will be understated by $150. d. net income will be understated by $800.

Ans: a

75. 140. Y-B-2 Inc. pays its rent of $90,000 annually on January 1. If the

February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

a. Failure to make the adjustment does not affect the February financial statements.

b. Expenses will be overstated by $7,500 and net income and equity will be understated by $7,500.

c. Assets will be overstated by $15,000 and net income and equity will be understated by $15,000.

d. Assets will be overstated by $7,500 and net income and equity will be overstated by $7,500.

Ans: d

76. On January 1, 2011, P.T. Scope Company purchased a computer system

for $3,240. The company expects to use the system for 3 years. The asset has no salvage value. The book value of the system at December 31, 2012 is

a. $0. b. $1,080. c. $2,160. d. $3,240.

Ans: b

77. On January 1, 2011, Grills and Grates Inc. purchased equipment for

$45,000. The company is depreciating the equipment at the rate of $600 per month. At January 31, 2012, the balance in Accumulated Depreciation is

a. $600.

when we consumed 800 we have to

adjust it:

supplies exp 800

supplies 800

there is no adjusting entry, exp

understated, equity overstated.

Adj تم دفع اجار مقدم لسنة كاملة, و كل شهر بسوون

فشنو راح يصير؟ adj تم مسح ال 2لكن في شهر

exp 7500

prepaid exp 7500 هذا القيد الي انمسح ^

b : لعكس مفروض ا

c : المبلغ غلط

d: صح الن ماراح نكون مقللين دفع االجار المقدم

فاالست بكون زايد, و الثاني ماراح نكون مسجلين

مصاريف فااليكوتي و االنكم بكون زايد

الدفاتر ؟ بعد مرور سنتين بعرف جم قيمة الكمبيوتر في

dep : 3240/3 = 1080 سنوي

2 years = 1080*2 = 2160

Bv= 3240 - 2160 = 1080

شهر 13و شهر يعني مر , الحين مر سنة 600بقيمة dep كل شهر تسويله

600*13=7800


b. $7,200. c. $7,800. d. $37,200.

Ans: c

78. On January 1, 2011, Masters and Masters Company purchased equipment for € 30,000. The company is depreciating the equipment at the rate of € 700 per month. The book value of the equipment at December 31, 2011 is

a. € 0. b. € 8,400. c. € 21,600. d. € 30,000.

Ans: c

79. O.K.C. Company collected $11,200 in September of 2011 for 4 months of

service which would take place from October of 2011 through January of 2012. The revenue reported from this transaction during 2011 would be

a. 0. b. $8,400. c. $11,200. d. $2,680.

Ans: b

Niagara Corporation purchased a one-year insurance policy in January 2011 for $54,000. The insurance policy is in effect from March 2011 through February 2012. If the company neglects to make the proper year-end adjustment for the expired insurance a. Net income and assets will be understated by $45,000. b. Net income and assets will be overstated by $45,000. c. Net income and assets will be understated by $9,000. d. Net income and assets will be overstated by $9,000.

Ans: b

dep = 700*12=8400

BV = 30,000 - 8400 = 21,600

أشهر 4مقابل خدمة راح تسويها على مدى 11,200تم دفع للشركة 9في شهر

ابتداء من شهر اكتوبر

Cash 11,200

Unearned rev 11,200

؟ 2011شنو العوائد الي تم الحصول عليها في سنة

شهر (ا 3, عندنا شهر اكتوبر لي ديسمبر ) 2011في سنة

Unearned rev 8400

revenue 8400

11200/4 = 2800

2800 * 3 = 8400

prepaid insurance was not adjusted means:

asset was not decreased so it will be overstated.

expense was not recorded, so equity and NI is

overstated.

this is the missing entry

Exp 45000

prepaid exp 45000


80. James Corporation purchased a one-year insurance policy in January

2011 for € 48,000. The insurance policy is in effect from May 2011 through April 2012. If the company neglects to make the proper year-end adjustment for the expired insurance

a. Net income and assets will be understated by € 32,000.

b. Net income and assets will be overstated by € 32,000.

c. Net income and assets will be understated by € 16,000.

d. Net income and assets will be overstated by € 16,000. Ans: b

81. Cara, Inc. purchased supplies costing ₤2,500 on January 1, 2011 and

recorded the transaction by increasing assets. At the end of the year ₤1,300 of the supplies are still on hand. How will the adjusting entry impact Cara, Inc.’s statement of financial position at December 31, 2011?

a. Decreased Assets ₤ 1,300. b. Increased Equity ₤ 1,300. c. Increased Liabilities ₤ 1,200. d. Decreased Assets ₤ 1,200.

Ans: d

82. Cara, Inc. purchased supplies costing ₤2,500 on January 1, 2011 and

recorded the transaction by increasing assets. At the end of the year ₤1,300 of the supplies are still on hand. If Cara, Inc. does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2011?

a. Assets overstated by ₤ 1,200. b. Equity understated by ₤ 1,200. c. Equity overstated by ₤ 1,300. d. Assets overstated by ₤ 1,300.

Ans: a

نفس السؤال الي قبله, لكن الي قبله ما سجلو وال شي, هني يبون

, يعني بس االشهر الي تخص هالسنة2011بنهاية سنة

May to Dec >> 8 months

48000/12= 4000 (monthly)

4000*8= 32000

this is the missing entry

Exp 32000

prepaid exp 32000

Supplies = 2500

on hand = 1300

used (exp) = 2500-1300= 1200

Supplies exp 1200

supplies 1200

نفس السؤال الي قبله, بس اهني لو ما سوو القيد شنو راح يصير ؟

االست ماراح نقلل فراح يكون زايد عندنا بالقيمة


83. Cara, Inc. purchased a building on January 1, 2011 for ₤ 500,000. The useful life of the building is 10 years. What impact will the appropriate adjusting entry at December 31, 2011 have on its statement of financial position at December 31, 2011?

a. Increased Equity ₤ 50,000. b. Increased Liabilities ₤ 50,000. c. Decreased Assets ₤ 50,000. d. Since the adjusting entry has

offsetting debits and credits, there is no impact on the statement of financial position.

Ans: c

84. Cara, Inc. purchased a building on January 1, 2011 for ₤ 500,000. The

useful life of the building is 10 years. The asset is reported on the December 31, 2011 statement of financial position at ₤ 450,000. What was the impact of the adjusting entry recorded by Cara, Inc.?

a. Decreased Equity ₤ 50,000. b. Increased Liabilities ₤ 50,000. c. Increased Assets ₤ 50,000. d. All of the choices are correct

regarding the impact of Cara, Inc.’s adjusting entry at December 31, 2011.

Ans: a

85. Wave Inn is a resort located in Canada. Wave Inn collects cash when

guests make a reservation. During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing unearned revenue. By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012. The adjusting entry required at December 31, 2011 would impact the statement of financial position by

a. Increased Equity $40,000. b. Decreased Liabilities $20,000. c. Increased Assets $60,000. d. Decreased Equity $20,000.

Ans: b

السؤال يبي شنو تاثير األدجستنق على ال

financial statement

adj:

dep exp xx

accu dep xx a: بقل مو يزيد

b: ماله شغل

c: صح الن يقلل من قيمة االست

نفس الي فوق راح نسجل مصاريف فااليكوتي

يقل

السؤال يبي شنو تاثير األدجستنق على ال

financial statement قيد لمن نستلم الفلوس

cash 60,000

unearned rev 60,000 من المصاريف استحقت فهذي الي راح 3\1الحين

تنقنسويلها ادجس

unearned rev 60,000

rev 60,000

60,000*1/3=20,000 a: 20,000الرقم الزم

b: صح قللناه

c: الكاش الي اهوا است زدناه بأول قيد مو باالدجستنق

d: يزيد مو يقل


86. Wave Inn is a resort located in Canada. During December 2011 Wave Inn

collects $120,000 cash related to a conference booked by the Spin Jammers. The conference is scheduled for February 12 and 13, 2012. Which of the following is true regarding how this transaction is reported on the December 31, 2011 statement of financial position?

a. Spin Jammers reports unearned revenue of $120,000. b. Wave Inn reports a prepaid asset of $120,000. c. Wave Inn reports unearned revenue of $120,000. d. All of the choices are correct regarding this transaction.

Ans: c

87. Bread Basket provides baking supplies to restaurants and grocery stores.

During December 2011, Bread Basket’s employees worked 2,400 hours at an average rate of €10 per hour. At December 31, 2011, Bread Basket has paid €11,000 of salary expense. If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2011 statement of financial position?

a. Equity is overstated by € 11,000. b. Equity is understated by € 13,000. c. Liabilities are understated by € 13,000. d. Liabilities are overstated by € 11,000.

Ans: c

cash 120,000


24000= 10*2400معاشات, و مجموع المعاش الي الزم يدفعه 11,000اهوا دفع

13000= 11000 - 24000بسويله ادجستنق فالي مو دافعه و

بس اهوا ما سوا هذا القيد 13,000الزم يسجل ادجستنق يبين فيه ان عليه دين دفع معاشات للعمال بقيمة

exp 13000

salaries payable 13000 a: 13000الرقم الزم

b: مفروض تكون زايدة مو ناقصه الن ماسجلنا مصاريف

c : صح

d: الرقم غلط و تكون ناقصه مو زايدة


88. Bread Basket provides baking supplies to restaurants and grocery stores. On November 1, 2011, Bread Basket signed a €500,000, 6-month note payable. The note requires Bread Basket to pay interest at an annual rate of 12%. Assuming Bread Basket makes the appropriate adjusting entry, what is the impact on its December 31, 2011 statement of financial position?

a. An expense of € 30,000. b. An expense of € 10,000. c. A liability of € 10,000. d. Two of the choices are correct.

Ans: c

89. Bread Basket provides baking supplies to restaurants and grocery

stores. On November 1, 2011, Bread Basket signed a €500,000, 6-month note payable. The note requires Bread Basket to pay interest at an annual rate of 12%. Bread Basket’s accountant is a recent college graduate who lacks practical experiences. Therefore, the appropriate adjusting entry is not made. What is the impact on its December 31, 2011 statement of financial position?

a. Assets are overstated by € 30,000. b. Equity is overstated by € 30,000. c. Liabilities are understated by € 30,000. d. Liabilities are understated by € 10,000.

Ans: d

90. Wave Inn is a resort located in Canada. During December 2011 Spin

Jammers held its annual conference at the resort. The charges related to the conference total $340,000, of which 25% has been paid by Spin Jammers. When Wave Inn makes the appropriate adjusting entry, which of the following is part of the adjustment made to its December 31, 2011 statement of financial position?

a. Debit cash $255,000. b. Credit revenues $255,000. c. Credit cash $255,000. d. Two of the choices are correct.

Ans: b

cash 500,000

N/P 500,000

Adj

interest exp 10,000

interest payable 10,000

500,000*12% = 60,000 annually

60,000/12 = 5000 monthly

2 months= 5000*2 = 10,000

نفس الي فوق, ما سوينا ادجستنق يعني ماراح

نكون مسجلين مصاريف وال دين

10,000فيكونون ناقصين عندنا بقيمة

لمن دفع

cash 85000

rev 85000 اخر الشهر نسجل الي مادفعه

AR 255000

Rev 25000

340,000-85000 = 255000

الزم نسجل العوائد في هذه الفترة النها مستحقه لهالفترة مو شرط

لمن نستلم مبلغها نسجلها


Which of the following statements is false regarding adjusting entries?

e. Cash is neither debited nor credited as a result of adjusting entries. f. Each adjusting entry affects one statement of financial position

account and one income statement account. g. Each adjusting entry affects one revenue account and one expense

account. h. Adjusting entries involve accruals or deferrals.

Ans: c

91. If an adjusting entry is not made for an accrued revenue,

a. assets will be overstated. b. expenses will be understated. c. equity will be understated. d. revenues will be overstated.

Ans: c

92. If an adjusting entry is not made for an accrued expense, a. expenses will be overstated. b. liabilities will be understated. c. net income will be understated. d. equity will be understated.

Ans: b

93. Failure to prepare an adjusting entry at the end of the period to record an

accrued expense would cause a. net income to be understated. b. an overstatement of assets and an overstatement of liabilities. c. an understatement of expenses and an understatement of

liabilities. d. an overstatement of expenses and an overstatement of liabilities.

Ans: c

94. Failure to prepare an adjusting entry at the end of a period to record an

accrued revenue would cause a. net income to be overstated. b. an understatement of assets and an understatement of revenues. c. an understatement of revenues and an understatement of liabilities. d. an understatement of revenues and an overstatement of liabilities.

Ans: b


95. Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Betty make?

a. Debit Cash and credit Unearned Revenue b. Debit Accounts Receivable and credit Unearned Revenue c. Debit Accounts Receivable and credit Service Revenue d. Debit Unearned Revenue and credit Service Revenue

Ans: c

96. Betty Carson, an accountant, has billed her clients for services performed.

She subsequently receives payments from her clients. What entry will Betty make upon receipt of the payments?

a. Debit Unearned Revenue and credit Service Revenue b. Debit Cash and credit Accounts Receivable c. Debit Accounts Receivable and credit Service Revenue d. Debit Cash and credit Service Revenue

Ans: b we recorded the revenue once it earned.

97. Sherman Air Charter signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 6%. The amount of interest to be accrued at the end of September is

a. $160. b. $40. c. $480. d. $120.

Ans: b

98. Joyce’s Gifts signs a three-month note payable to help finance

increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $50,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

a. .................................................................................. Interest Expense ................................................................. 1,000

i. ....................................................................... Interest Payable 1,000 b. Interest Expense .................................................. 1,500

i. ....................................................................... Interest Payable 1,500 c. . ............................................................................ Interest

Expense ................................................................. 1,000 i. ....................................................................... Cash 1,000

d. Interest Expense .................................................. 1,000 i. ....................................................................... Note Payable 1,000

8000 * 6% = 480 annually

480 / 12 = 40 monthly


Ans: a

99. Cindi’s Candies paid employee wages on and through Friday, January 26,

and the next payroll will be paid in February. There are three more working days in January (29–31). Employees work 5 days a week and the company pays $700 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?

a. ............................................................................. Wages Expense 700 i. ....................................................................... Wages Payable 700

b. ............................................................................. Wages Expense 3,500 i. ....................................................................... Wages Payable 3,500

c. ............................................................................. Wages Expense 2,100 i. ....................................................................... Wages Payable 2,100

d. No adjusting entry is required.

Ans: c

100. A company shows a balance in Salaries Payable of ¥40,000 at the end

of the month. The next payroll amounting to ¥45,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

a. ............................................................................. Salaries Expense ................................................................. 45,000

i. ....................................................................... Salaries Payable ........................................................ 45,000

b. ............................................................................. Salaries Expense ................................................................. 45,000

i. ....................................................................... Cash 45,000 c. ............................................................................. Salaries

Expense ................................................................. 5,000 i. ....................................................................... Cash 5,000

d. ............................................................................. Salaries Expense ................................................................. 5,000 Salaries Payable..................................................... 40,000

i. ....................................................................... Cash 45,000

Ans: d

101. A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Thursday is

a. debit Salaries Payable, $20,000; credit Cash, $20,000. b. debit Salaries Expense, $20,000; credit Cash, $20,000. c. debit Salaries Expense, $20,000; credit Salaries Payable, $20,000. d. debit Salaries Expense, $5,000; credit Salaries Payable, $5,000.

Ans: c

50000*12%=6000 annually

6000/12= 500 per month

2 months = 2*500 = 1000

700 * 3 = 2100

خميس \اربعا \ثالثه \اثنين

يخصون الفترة الماليه الي راح تنتهي فالزم نسجل المصاريف عليها, و يوم

اليمعه لمن يحل وقت الدفع ندفع كاش

25000/5 = 5000 per day


102. Jenni’s Music Store borrowed $12,000 from the bank signing a 9%, 3-

month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be

a. Debit Interest Expense, $1,080; Credit Interest Payable, $1,080. b. Debit Interest Expense, $90; Credit Interest Payable, $90. c. Debit Note Payable, $1,080; Credit Cash, $1,080. d. Debit Cash, $270; Credit Interest Payable, $270.

Ans: b

103. Becki Jean Corporation issued a one-year, 6%, $200,000 note on

April 30, 2011. Interest expense for the year ended December 31, 2011 was

a. $12,000. b. $9,000. c. $8,000. d. $7,000.

Ans: c

Employees at Julian Corporation are paid $10,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary expense should be recorded two days later on January 2?

a. $10,000 b. $6,000 c. None, matching requires the weekly salary to be accrued on December

31. d. $4,000

Ans: d

104. Can financial statements be prepared directly from the adjusted trial balance?

a. They cannot. The general ledger must be used. b. Yes, adjusting entries have been recorded in the general journal

and posted to the ledger accounts.

12,000 * 9% = 1080 annually

1080/12 = 90 per month

200,000 * 6% = 12000 annually

12000/12 = 1000 per month

I have 8 months May to Dec

1000*8 = 8000

10,000 / 5 = 2000 per day

record for 2 days = 2*2000=4000


c. No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose.

d. They can because that is the only reason that an adjusted trial balance is prepared.

Ans: b

105. The adjusted trial balance is prepared

a. after financial statements are prepared. b. before the trial balance. c. to prove the equality of total assets and total liabilities. d. after adjusting entries have been journalized and posted.

Ans: d

106. An adjusted trial balance

a. is prepared after the financial statements are completed. b. proves the equality of the total debit balances and total credit

balances of ledger accounts after all adjustments have been made. c. is a required financial statement under IFRS. d. cannot be used to prepare financial statements.

Ans: b

107. Which of the statements below is not true?

a. An adjusted trial balance should show ledger account balances. b. An adjusted trial balance can be used to prepare financial

statements. c. An adjusted trial balance proves the mathematical equality of debits

and credits in the ledger. d. An adjusted trial balance is prepared before all transactions have

been journalized.

Ans: d

108. A document prepared to prove the equality of debits and credits after all adjustments have been prepared is the

a. Adjusted statement of financial position. b. Adjusted trial balance. c. Adjusted financial statements. d. Post-closing trial balance.

Ans: b

109. Similarities between International Financial Reporting Standards (IFRS) and U.S. GAAP include all of the following except

a. Cash-basis accounting is not in accordance with either IFRS or U.S. GAAP.


b. Both IFRS and U.S. GAAP allow revaluation of item such as land and building to fair value.

c. Both IFRS and U.S. GAAP divide the economic life of companies into artificial time periods.

d. The form and content of financial statements are very similar under IFRS and U.S. GAAP.

Ans: b

110. Cara, Inc. purchased supplies costing $2,500 on January 1, 2011 and recorded the transaction by debiting an expense. At the end of the year $1,300 of the supplies are still on hand. If Cara, Inc. does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2011?

a. Assets understated by $1,200. b. Equity understated by $1,200. c. Equity overstated by $1,300. d. Assets understated by $1,300.

Ans: d

111. Wave Inn is a resort located in Canada. Wave Inn collects cash when

guests make a reservation. During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing revenue. By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012. The adjusting entry required at December 31, 2011 would impact the statement of financial position by

a. Decreased Equity $40,000. b. Decreased Liabilities $40,000. c. Increased Assets $60,000. d. Increased Equity $20,000.

Ans: a

112. Myron is a barber who does his own accounting for his shop. When he

buys supplies he routinely debits Supplies Expense. Myron purchased $1,500 of supplies in January and his inventory at the end of January shows $600 of supplies remaining. What adjusting entry should Myron make on January 31?

a. ............................................................................. Supplies Expense ................................................................. 600

i. ....................................................................... Supplies 600 b. ............................................................................. Supplies

Expense ................................................................. 1,500 i. ....................................................................... Cash 1,500

c. ............................................................................. Supplies 600

salaries exp 2500

cash 2500 مفروض تسجلهم است و بنهاية الفترة تشوف شكثر استخدمت و

, بس اهيا من االساس سجلته مصروف, ولكن تسجله كمصروف

ما استخدمتهم يعني است و 1300بنهاية الفترة شافت ان عندها

اهيا مو مسجله است وال سوت ادجستنق عشان تعدل, فيكون

االست عندها قال

Cash 60000

Revenue 60000

الحين اهيا بس unearned rev المفروض تسجله

ض يكون عوائد, فراح تسوي من المبلغ الي مفرو 3\1استحقت

ادجستنق تقلل من الريفنيو و تسجله دين

تقليل الريفنيو يقلل االيكويتي

60,000*1/3 = 20000 ( rev )

60,000 - 20,000 = 40,000 ( lia)


i. ....................................................................... Supplies Expense ....................................................... 600

d. ............................................................................. Supplies Expense ................................................................. 900

i. ....................................................................... Supplies 900

Ans: c

113. Alternative adjusting entries do not apply to a. accrued revenues and accrued expenses. b. prepaid expenses. c. unearned revenues. d. prepaid expenses and unearned revenues.

Ans: a

114. . Mike Conway is a lawyer who requires that his clients pay him in

advance of legal services rendered. Mike routinely credits Legal Service Revenue when his clients pay him in advance. In June Mike collected $12,000 in advance fees and completed 75% of the work related to these fees. What adjusting entry is required by Mike's firm at the end of June?

a. ............................................................................. Unearned Revenue ................................................................ 9,000

i. ....................................................................... Legal Service Revenue ..................................................... 9,000

b. ............................................................................. Unearned Revenue ................................................................ 3,000

i. ....................................................................... Legal Service Revenue ..................................................... 3,000

c. ............................................................................. Cash 12,000 i. ....................................................................... Legal Service

Revenue ..................................................... 12,000 d. ............................................................................. Legal Service

Revenue ................................................................ 3,000 i. ....................................................................... Unearned

Revenue ..................................................... 3,000

Ans: d

Cash 12,000

Revenue 12,000

الحين unearned rev المفروض يسجله

% من المبلغ الي مفروض يكون عوائد, فراح تسوي 75ستحق ا

ادجستنق تقلل من الريفنيو و تسجله دين

12,000 *75%=9000 ( rev)

12,000- 9,000 = 3000 ( liabilities)


115. If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

a. assets to be understated. b. assets to be overstated. c. expenses to be understated. d. contra-expenses to be overstated.

Ans: a

116. If unearned revenues are initially recorded in revenue accounts and

have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

a. liabilities to be overstated. b. revenues to be understated. c. revenues to be overstated. d. accounts receivable to be overstated.

Ans: c

117. On January 2, 2011, National Credit and Cash purchased a general

liability insurance policy for ₤3,600 for coverage for the calendar year. The entire ₤3,600 was charged to Insurance Expense on January 2, 2011. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2011, will be:

a. ............................................................................. Insurance Expense ................................................................. 3,300

i. ....................................................................... Prepaid Insurance ..................................................... 3,300

b. ............................................................................. Prepaid Insurance ................................................................ 3,300

i. ....................................................................... Insurance Expense ....................................................... 3,300

c. ............................................................................. Insurance Expense ................................................................. 300

i. ....................................................................... Prepaid Insurance ..................................................... 300

d. ............................................................................. Prepaid Insurance ................................................................ 300

i. ....................................................................... Insurance Expense ....................................................... 300

Ans: b

118. For prepaid expense adjusting entries

we should record the unused

amount as an assets, but we

didn't.

الزم نسجل االشهر الي ما حل عليهم التأمين, التأمين حل فقط لشهر واحد

3600/12= 300 each month

300 * 11 = 3300


a. an expense—liability account relationship exists. b. prior to adjustment, expenses are overstated and assets are

understated. c. the adjusting entry results in a debit to an expense account and a

credit to an asset account. d. none of these.

Ans: c

119. Expenses paid and recorded as assets before they are used are called

a. accrued expenses. b. interim expenses. c. prepaid expenses. d. unearned expenses.

Ans: c

120. Sail & Surf Cruises purchased a five-year insurance policy for its ships

on April 1, 2011 for $100,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2011 is

a. ................................................. Prepaid Insurance 15,000 i. ....................................................................... Insurance

Expense ....................................................... 15,000 b. ................................................Insurance Expense 15,000


c. ................................................Insurance Expense 20,000 i. ....................................................................... Prepaid

Insurance ..................................................... 20,000 d. ................................................Insurance Expense 5,000


Ans: b

100,000 for 5 years

100,000 / 5 = 20,000 annually

20,000 / 12 = 1666 monthly

April to Dec = 9 months

1666*9= 15,000


121. CHS Company purchased a truck from JLS Corp. by issuing a 6-

month, 8% note payable for $37,500 on November 1. On December 31, the accrued expense adjusting entry is

a. No entry is required. b. Interest Expense ................................................... 3,000

i. ....................................................................... Interest Payable 3,000 c. ................................................... Interest Expense 6,000

i. ....................................................................... Interest Payable 6,000 d. ................................................... Interest Expense 500

i. ....................................................................... Interest Payable 500

Ans: d

122. If the adjusting entry for depreciation is not made, a. assets will be understated. b. equity will be understated. c. net income will be understated. d. expenses will be understated.

Ans: d

123. 124. BJ, an employee of Walker Corp., will not receive her paycheck until

April 2. Based on services performed from March 15 to March 30, her salary was $800. The adjusting entry for Walker Corp. on March 31 is

a. .................................................... Salaries Expense 800 i. ........................................................................ Salaries

Payable ......................................................... 800 b. No entry is required. c. .................................................... Salaries Expense 800

i. ........................................................................ Cash 800 d. ..................................................... Salaries Payable 800

i. ........................................................................ Cash 800

Ans: a

37500*8%= 3000 annually

3000 / 12 = 250 monthly

Nov to Dec = 2 months

250*2 = 500

a: accumulated depالعكس الن ماراح يكون في الي يقلل من االستست

b: اكو اكسبنسبتكون زايدة الن مافي دبرشيشن فم

c : حالها من حال االيكوتي

d: صح الن ماكو دبرشيشن

, 4و بندش شهر 3الموظفة ما استلمت معاشها المستحق لشهر

و تسجل ان 3فالشركة تسجل مصروف معاشها المستحق في شهر

عليها دين ان الزم تدفع معاش لها


125. Which of the following statements related to the adjusted trial balance is incorrect?

a. It shows the balances of all accounts at the end of the accounting period.

b. It is prepared before adjusting entries have been made. c. It proves the equality of the total debit balances and the total credit

balances in the ledger. d. Financial statements can be prepared directly from the adjusted

trial balance.

Ans: b

126. Financial statements are prepared directly from the a. general journal. b. ledger. c. trial balance. d. adjusted trial balance.

Ans: d

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