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DELTA UNIVERSITY FOR SCIENCE & TECHNOLOGY

Introduction to Accounting 1 Final Revision

Mr. Omar Ahmed Hashish 12/14/2017

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Mr. Omar Ahmed Hashish Introduction To Accounting 1

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Final Revision

First: Multiple Choice Questions:

1- Accountants refer to an economic event as a

a. purchase.

b. sale.

c. transaction.

d. change in ownership.

2- 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.

3- Which of the following would not be considered an internal user of accounting data for the GHI

Company?

a. President of the company

b. Production manager

c. Merchandise inventory clerk

d. President of the employees' labor union

4- GAAP stands for

a. Generally Accepted Auditing Procedures.

b. Generally Accepted Accounting Principles.

c. Generally Accepted Auditing Principles.

d. Generally Accepted Accounting Procedures.

5- 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.

6- Owner's equity is best depicted by the following:

a. Assets = Liabilities.

b. Liabilities + Assets.

c. Residual equity + Assets.

d. Assets – Liabilities.

7- Liabilities of a company would not include

a. notes payable.

b. accounts payable.

c. wages payable.

d. cash.


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8- Owner's 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.

9- When an owner withdraws cash or other assets from a business for personal use, these withdrawals are

termed

a. depletions.

b. consumptions.

c. drawings.

d. a credit line.

10- Capital is

a. an owner's permanent investment in the business.

b. equal to liabilities minus owner's equity.

c. equal to assets minus owner's equity.

d. equal to liabilities plus drawings.

11- Revenues would not result from

a. sale of merchandise.

b. initial investment of cash by owner.

c. performance of services.

d. rental of property.

12- Sources of increases to owner's equity are

a. additional investments by owners.

b. purchases of merchandise.

c. withdrawals by the owner.

d. expenses.

13- The basic accounting equation cannot be restated as

a. Assets – Liabilities = Owner's Equity.

b. Assets – Owner's Equity = Liabilities.

c. Owner's Equity + Liabilities = Assets.

d. Assets + Liabilities = Owner's Equity.

14- Owner's equity is decreased by all of the following except

a. owner's investments.

b. owner's withdrawals.

c. expenses.

d. owner's drawings.


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15- A net loss will result during a time period when

a. liabilities exceed assets.

b. drawings exceed investments.

c. expenses exceed revenues.

d. revenues exceed expenses.

16- If total liabilities increased by $15,000 and owner’s equity increased by $5,000 during a period of time,

then total assets must change by what amount and direction during that same period?

a. $20,000 decrease

b. $20,000 increase

c. $25,000 increase

d. $30,000 increase

17- If total liabilities decreased by $25,000 and owner’s equity increased by $5,000 during a period of time,

then total assets must change by what amount and direction during that same period?

a. $20,000 decrease

b. $20,000 increase

c. $25,000 increase

d. $30,000 increase

18- The accounting equation for Gudgeyes Enterprises is as follows:

Assets Liabilities Owner’s Equity

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

If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will

change to

Assets Liabilties Owner’s Equity

a. $120,000 = $60,000 + $60,000

b. $132,000 = $60,000 + $72,000

c. $132,000 = $66,000 + $66,000

d. $132,000 = $72,000 + $60,000

19- 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 owner's equity $500.

d. decreases an asset $500; decreases a liability $500.

20- If an individual asset is increased, then

a. there must be an equal decrease in a specific liability.


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b. there must be an equal decrease in owner's equity.

c. there must be an equal decrease in another asset.

d. none of these is possible.

21- If services are performed on credit, then

a. assets will decrease.

b. liabilities will increase.

c. owner's equity will increase.

d. liabilities will decrease.

22- If expenses are paid in cash, then

a. assets will increase.

b. liabilities will decrease.

c. owner's equity will increase.

d. assets will decrease.

23- If supplies that have been purchased are used in the course of business, then

a. a liability will increase.

b. an asset will increase.

c. owner's equity will decrease.

d. owner's equity will increase.

24- Owner's capital at the end of the period is equal to

a. owner's capital at the beginning of the period plus net income minus liabilities.

b. owner's capital at the beginning of the period plus net income minus drawings.

c. net income.

d. assets plus liabilities.

25- A balance sheet shows

a. revenues, liabilities, and owner's equity.

b. expenses, drawings, and owner's equity.

c. revenues, expenses, and drawings.

d. assets, liabilities, and owner's equity.

Use this Information to answer (26 / 27 / 28)

Carla’s Computer Repair Shop started the year with total assets of $270,000 and total liabilities of $180,000.

During the year, the business recorded $450,000 in computer repair revenues, $255,000 in expenses, and

Carla withdrew $45,000.

26- Carla's Capital balance at the end of the year was

a. $240,000.

b. $225,000.

c. $285,000.


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d. $195,000.

27- The net income reported by Carla's Computer Repair Shop for the year was

a. $150,000.

b. $195,000.

c. $90,000.

d. $405,000.

28- Carla's Capital balance changed by what amount from the beginning of the year to the end of the year?

a. $45,000

b. $195,000

c. $90,000

d. $150,000

29- Benito Company began the year with owner’s equity of $175,000. During the year, the company

recorded revenues of $250,000, expenses of $190,000, and had owner drawings of $20,000. What

was Benito’s owner’s equity at the end of the year?

a. $255,000

b. $215,000

c. $405,000

d. $235,000

30- Frank Ito began the Ito Company by investing $20,000 of cash in the business. The company recorded

revenues of $185,000, expenses of $160,000, and had owner drawings of $10,000. What was Ito’s

net income for the year?

a. $15,000

b. $35,000

c. $25,000

d. $45,000

31- 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.

32- Which one of the following is not a part of an account?

a. Credit side

b. Trial balance

c. Debit side

d. Title

33- 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.


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c. An account may be part of a manual or a computerized accounting system.

d. An account has a title.

34- 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.

35- 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.

36- 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.

37- A credit is not the normal balance for which account listed below?

a. Capital account

b. Revenue account

c. Liability account

d. Drawing account

38- Which one of the following represents the expanded basic accounting equation?

a. Assets = Liabilities + Owner's Capital + Owner's Drawings – Revenue – Expenses.

b. Assets + Owner's Drawings + Expenses = Liabilities + Owner's Capital + Revenues.

c. Assets – Liabilities – Owner's Drawings = Owner's Capital + Revenues – Expenses.

d. Assets = Revenues + Expenses – Liabilities.

39- 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.

40- 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.


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41- A debit is not the normal balance for which account listed below?

a. Drawing

b. Cash

c. Accounts Receivable

d. Service Revenue

42- 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 owner's equity account for $500.

c. Debit another asset account for $500.

d. Credit a different asset account for $500.

43- 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 owner's equity account for $500.

d. Debit an owner's equity account for $500.

44- 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.

45- 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.

46- 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.

47- Assets normally show

a. credit balances.

b. debit balances.


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c. debit and credit balances.

d. debit or credit balances.

48- 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 drawing 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

49- Which account below is not a subdivision of owner's equity?

a. Drawing

b. Revenues

c. Expenses

d. Liabilities

50- The drawing 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 owner's equity.

51- Which of the following statements is not true?

a. Expenses increase owner's equity.

b. Expenses have normal debit balances.

c. Expenses decrease owner's equity.

d. Expenses are a negative factor in the computation of net income.

52- 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.

53- 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 $500. The cash account has a(n)

a. $500 credit balance.

b. $800 debit balance.

c. $400 debit balance.

d. $400 credit balance.

54- Martin’s Mail Service purchased equipment for $2,500. Martin paid $500 in cash and signed a note for

the balance. Martin debited the Equipment account, credited Cash and


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a. nothing further must be done.

b. debited the Martin, Capital account for $2,000.

c. credited another asset account for $500.

d. credited a liability account for $2,000.

55- 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.

56- On June 1, 2010, Alma Inc. reported a cash balance of $12,000. During June, Alma made deposits of

$3,000 and made disbursements totalling $16,000. What is the cash balance at the end of June?

a. $1,000 debit balance

b. $15,000 debit balance

c. $1,000 credit balance

d. $4,000 credit balance

57- At January 1, 2010, LeAnna Industries reported owner’s equity of $130,000. During 2010, LeAnna had

a net loss of $30,000 and owner drawings of $20,000. At December 31, 2010, the amount of owner’s

equity is

a. $130,000.

b. $140,000.

c. $100,000.

d. $80,000.

58- 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 owner’s 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.

59- 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.

60- At January 31, 2010, 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


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a. $250 debit.

b. $350 credit.

c. $950 debit.

d. $150 debit.


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61- Rusthe Company showed the following balances at the end of its first year:

Cash $ 7,000

Prepaid insurance 700

Accounts receivable 3,500

Accounts payable 2,800

Notes payable 4,200

Denton, Capital 1,400

Denton, Drawing 700

Revenues 21,000

Expenses 17,500

What did Rusthe Company show as total credits on its trial balance?

a. $30,100 b. $29,400 c. $28,700 d. $30,800

62- At December 1, 2010, Gibson Company’s accounts receivable balance was $1,200. During December,

Gibson had credit revenues of $5,000 and collected accounts receivable of $4,000. At December 31,

2010, the accounts receivable balance is

a. $1,200 debit.

b. $2,200 debit.

c. $6,200 debit.

d. $2,200 credit.

63- At October 1, 2010, 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, 2010, the accounts payable balance is

a. $30,000.

b. $10,000.

c. $15,000.

d. $40,000.

64- During 2010, its first year of operations, Yaspo’s Bakery had revenues of $60,000 and expenses of

$33,000. The business had owner drawings of $18,000. What is the amount of owner’s equity at

December 31, 2010?

a. $0

b. $18,000 debit

c. $9,000 credit

d. $27,000 credit


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65- On July 7, 2010, 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.

66- At September 1, 2010, Crews Co. reported owner’s equity of $136,000. During the month, Crews

generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and

withdrew cash of $2,000. What is the amount of owner’s equity at September 30, 2010?

a. $136,000

b. $8,000

c. $137,000

d. $142,000

67- 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.

68- In recording business transactions, evidence that an accounting transaction has taken place is obtained

from

a. business documents.

b. the Internal Revenue Service.

c. the public relations department.

d. the SEC.

69- 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.

70- 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.

71- 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.


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72- 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.

73- Which of the following journal entries is recorded correctly and in the standard format?

a. Wages Expense ..................................................................... 600

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

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

b. Wages Expense . .................................................................... 600

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

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

c. Cash ....................................................................................... 1,500

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

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

d. Wages Expense ..................................................................... 600

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

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

74- Pastorek Company purchased equipment for $1,800 cash. As a result of this event,

a. owner’s equity decreased by $1,800.

b. total assets increased by $1,800.

c. total assets remained unchanged.

d. Both a and b.

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

a. assets remained unchanged.

b. assets increased by $2,500.

c. owner’s equity increased by $2,500.

d. Both b and c.


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76- On August 13, 2010, Merrill Enterprises purchased office equipment for $1,000 and office supplies of

$200 on account. Which of the following journal entries is recorded correctly and in the standard

format?

a. Office Equipment ................................................................... 1,000

Account Payable .............................................................. 1,200

Office Supplies....................................................................... 200

b. Office Equipment. .................................................................. 1,000

Office Supplies....................................................................... 200

Accounts Payable ............................................................. 1,200

c. Accounts Payable ................................................................... 1,200

Office Equipment ............................................................. 1,000

Office Supplies................................................................. 200

d. Office Equipment ................................................................... 1,000

Office Supplies....................................................................... 200

Accounts Payable. ............................................................ 1,200

77- The procedure of transferring journal entries to the ledger accounts is called

a. journalizing.

b. analyzing.

c. reporting.

d. posting.

78- 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.

79- A trial balance may balance even when each of the following occurs except when


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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.

80- 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

81- 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.

82- 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.

83- 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

84- Which of the following are in accordance with generally accepted accounting principles?

a. Accrual basis accounting

b. Cash basis accounting

c. Both accrual basis and cash basis accounting

d. Neither accrual basis nor cash basis accounting

85- 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.

86- 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 GAAP and applies

the revenue recognition principle. When is the $1,000 considered to be earned?


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a. December 5

b. December 10

c. November 30

d. December 1

87- A 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.

88- 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 generally accepted accounting principles.

89- 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.

90- The following is selected information from Alpha-Beta-Gamma Corporation for the fiscal year ending

October 31, 2010.

Cash received from customers $300,000

Revenue earned 350,000

Cash paid for expenses 170,000

Cash paid for computers on November 1, 2009 that will be used

for 3 years (annual depreciation is $16,000) 48,000

Expenses incurred, not including any depreciation 200,000

Proceeds from a bank loan, part of which was used to pay for

the computers 100,000


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Based on the accrual basis of accounting, what is Alpha-Beta-Gamma Corporation’s net income for

the year ending October 31, 2010?

a. $114,000

b. $134,000

c. $82,000

d. $150,000

91- An adjusting entry

a. affects two balance sheet accounts.

b. affects two income statement accounts.

c. affects a balance sheet account and an income statement account.

d. is always a compound entry.

92- 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.

93- 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.

94- 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 balance sheet accounts only.

95- Expenses incurred but not yet paid or recorded are called

a. prepaid expenses.

b. accrued expenses.

c. interim expenses.

d. unearned expenses.

96- 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


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a. expenses to be overstated.

b. net income to be overstated.

c. liabilities to be understated.

d. revenues to be understated.

97- Adjusting entries can be classified as

a. postponements and advances.

b. accruals and deferrals.

c. deferrals and postponements.

d. accruals and advances.

98- 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.

99- Which of the following reflect the balances of prepayment accounts prior to adjustment?

a. Balance sheet accounts are understated and income statement accounts are understated.

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

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

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

100- An asset—expense relationship exists with

a. liability accounts.

b. revenue accounts.

c. prepaid expense adjusting entries.

d. accrued expense adjusting entries.

101- Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited Office Supplies for

the full amount. At the end of the accounting period, a physical count of office supplies revealed

$2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period

would be

a. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400.

b. Debit Office Supplies, $3,600; Credit Office Supplies Expense, $3,600.

c. Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600.

d. Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400.

102- 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.


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103- Hercules Company purchased a computer for $4,800 on December 1. It is estimated that annual

depreciation on the computer will be $960. If financial statements are to be prepared on December

31, the company should make the following adjusting entry:

a. Debit Depreciation Expense, $960; Credit Accumulated Depreciation, $960.

b. Debit Depreciation Expense, $80; Credit Accumulated Depreciation, $80.

c. Debit Depreciation Expense, $3,840; Credit Accumulated Depreciation, $3,840.

d. Debit Office Equipment, $4,800; Credit Accumulated Depreciation, $4,800.

104- 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.

105- What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance

account balance before adjustment, $15,500, and unexpired amounts per analysis of policies of

$4,500?

a. Debit Insurance Expense, $4,500; Credit Prepaid Insurance, $4,500.

b. Debit Insurance Expense, $15,500; Credit Prepaid Insurance, $15,500.

c. Debit Prepaid Insurance, $11,000; Credit Insurance Expense, $11,000.

d. Debit Insurance Expense, $11,000; Credit Prepaid Insurance, $11,000.

106- A new accountant working for Unitas Company records $800 Depreciation Expense on store

equipment as follows:

Dr. Depreciation Expense ............................................... 800

Cr. 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 balance sheet 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.

107- 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.


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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.

108- Southwestern City College sold season tickets for the 2010 football season for $160,000. 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 $40,000.

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

d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $53,333.

109- On January 1, 2009, 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, 2010 is

a. $0.

b. $1,080.

c. $2,160.

d. $3,240.

110- On January 1, 2009, Grills and Grates Inc. purchased equipment for $30,000. The company is

depreciating the equipment at the rate of $400 per month. At January 31, 2010, the balance in

Accumulated Depreciation is

a. $400.

b. $4,800.

c. $5,200.

d. $24,800.


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Answers

1 C 23 C 45 B 67 C 89 B

2 C 24 B 46 C 68 A 90 B

3 D 25 D 47 B 69 B 91 C

4 B 26 A 48 B 70 D 92 C

5 D 27 B 49 D 71 C 93 B

6 D 28 D 50 C 72 C 94 B

7 D 29 B 51 A 73 D 95 B

8 B 30 C 52 A 74 C 96 D

9 C 31 C 53 C 75 D 97 B

10 A 32 B 54 D 76 D 98 A

11 B 33 B 55 A 77 D 99 C

12 A 34 B 56 C 78 D 100 C

13 D 35 C 57 D 79 D 101 C

14 A 36 A 58 C 80 D 102 C

15 C 37 D 59 C 81 A 103 B

16 B 38 C 60 D 82 A 104 A

17 A 39 C 61 B 83 A 105 D

18 D 40 C 62 B 84 A 106 C

19 A 41 D 63 C 85 C 107 C

20 C 42 D 64 C 86 C 108 C

21 C 43 D 65 C 87 A 109 B

22 D 44 A 66 D 88 C 110 C


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Second: Problem on Work Sheet:

- On January 1st United Company had the following data in its trial Balance:

Account Title Dr. Cr.

Cash 300,000

Notes Receivable 40,000

Accounts Receivable 80.000

Prepaid Insurance 50,000

Supplies 10,000

Equipment 70,000

Land 100,000

Accounts Payable 80,000

Notes Payable 50,000

Unearned Service Revenue 60,000

Capital 130,000

Drawings 5,000

Sales Revenues 100,000

Service Revenues 250,000

Salaries Expense 8,000

Rent Expense 7,000

Totals 670,000 670,000

- The Company had the following Adjusting Entries:

Date Accounts Dr. Cr.

January 5th

Insurance Expense 10,000

Prepaid Insurance 10,000

January 8th

Cash 5,000

Accounts Receivable 5,000

January 19th

Unearned Service Revenue 10,000

Service Revenue 10,000

January 30th

Supplies Expense 5,000

Supplies 5,000

January 31st

Depreciation Expense 5,000

Accumulated Depreciation 5,000


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- Required:

Prepare the work sheet for United Company on January 31st.

Solution:

- The first step we have to add the column of Adjustments in the work sheet using the given adjusting

entries.

- If the adjusting entries contains accounts were not mentioned in the original trial balance so it should

be added.

- So the work sheet will appear as follows after this step.

Step 1:

Work Sheet

Account Title Trial Balance Adjustments

Adjusted

Trial

Balance

Income

Statement

Balance

Sheet

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Cash 300,000 5,000

Notes Receivable 40,000

Accounts

Receivable 80.000 5,000

Prepaid Insurance 50,000 10,000

Supplies 10,000 5,000

Equipment 70,000

Land 100,000

Accounts Payable 80,000

Notes Payable 50,000

Unearned Service

Revenue 60,000 10,000

Capital 130,000

Drawings 5,000

Sales Revenues 100,000

Service Revenues 250,000 10,000

Salaries Expense 8,000

Rent Expense 7,000

Insurance Expense 10,000

Supplies Expense 5,000

Depreciation

Expense 5,000

Accumulated 5,000


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Depreciation

Total 670,000 670,000 35,000 35,000

- After this operation we should prepare the adjusted trial balance which is prepared by adding both

trial balance and adjustments.

- If the account appeared only in the original trial balance and not in the adjustments so it will be

moved to the adjusted trial balance the same as it is.

- The same treatment if the account appeared only in the adjustments and not in the original trial

balance.

- But if the account appeared in both original trial balance and adjustments so the treatment will differ.

- If it appears on both columns as debit (or credit) so the two values will be added and move the result

to adjusted trial balance in the debit (or credit) side.

- If it appears on one column in the debit side and on the other one in the credit side so the two

volumes will be subtracted and the result will be moved to the adjusted trial balance in the side

which had greater value, as follows

Step 2:

Work Sheet

Account Title Trial Balance Adjustments

Adjusted Trial

Balance Income

Statement

Balance

Sheet

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Cash 300,000 5,000 305,000

Notes

Receivable 40,000 40,000

Accounts

Receivable 80.000 5,000 75,000

Prepaid

Insurance 50,000 10,000 40,000

Supplies 10,000 5,000 5,000

Equipment 70,000 70,000

Land 100,000 100,000

Accounts

Payable 80,000 80,000

Notes Payable 50,000 50,000

Unearned

Service Revenue 60,000 10,000 50,000

Capital 130,000 130,000

Drawings 5,000 5,000

Sales Revenues 100,000 100,000

Service

Revenues 250,000 10,000 260,000

Salaries Expense 8,000 8,000

Rent Expense 7,000 7,000

Insurance

Expense 10,000 10,000

Supplies

Expense 5,000 5,000


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Depreciation

Expense 5,000 5,000

Accumulated

Depreciation 5,000 5,000

Total 670,000 670,000 35,000 35,000 675,000 675,000

Third: Problem on Financial Statements:

- On August 1st National Company had the following Adjusted Trial Balance:

Account Title Dr. Cr.

Cash $100,000

Notes Receivables $5,000

Accounts Receivables $10,000

Prepaid Insurance $60,000

Prepaid Rent $70,000

Supplies $5,000

Equipment $150,000

Land $200,000

Accumulated Depreciation $20,000

Notes Payable $50,000

Salaries Payable $15,000

Accounts Payable $35,000

Unearned Service Revenues $60,000

National's Capital on July 1st $410,000

National's Drawings $10,000

Sales Revenues $40,000

Service Revenues $10,000

Interest Revenues $30,000

Rent Expenses $5,000

Insurance Expenses $15,000

Salaries Expenses $30,000

Depreciation Expenses $10,000

Total $670,000 $670,000

Required:

- Prepare the following financial Statements for the month ends July 30: 1- Income Statement 2- Owner's Equity Statement 3- Balance Sheet


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Solution: 1- Income Statement:

Income Statement

National Company

Prepared for the Month Ending July 30th

Revenues

Sales Revenues $40,000

Service Revenues $10,000

Interest Revenues $30,000

Total Revenues $80,000

Expenses

Rent Expenses $5,000

Insurance Expenses $15,000

Salaries Expenses $30,000

Depreciation Expenses $10,000

Total Expenses $60,000

Net Income $20,000

2- Owner's Equity Statement:

Owner's Equity Statement

National Company

Prepared for the Month Ending July 30th

National's Capital on July 1st $410,000

Adds

Net Income $20,000

Total Adds $20,000

Less

National's Drawings $10,000

TotalLess $10,000

National's Company on July 30th

$420,000


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3- Balance Sheet:

Balance Sheet

National Copmany

Prepared on July 31st

Assets

Cash $100,000

Notes Receivables $5,000

Accounts Receivables $10,000

Prepaid Insurance $60,000

Prepaid Rent $70,000

Supplies $5,000

Equipment $150,000

Land $20,000

Accumulated Depreciation ($20,000)

Total Assets $580,000

Liabilities & Owner's Equity

Liabilities

Notes Payable $50,000

Salaries Payable $15,000

Accounts Payable $35,000

Unearned Service Revenues $60,000

Total Liabilities $160,000

Owner's Equity

National's Company on July 30th

$420,000

Total Liabilities & Owner's Equity $580,000

Good Luck Dears

Mr. Omar Ahmed Hashish

introduction to accounting 1 - delta univ · mr. omar ahmed hashish introduction to accounting 1 5...

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