ACC 556 Week 2 Quiz 1

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Week 2 Quiz

Question 1

 If total liabilities decreased by $4080, then

o   Stockholders’ equity must have decreased by $4080.

o   Assets must have increased by $4080.

o   Assets and stockholders’ equity each increased by $2040.

o   Assets must have decreased by $4080, or stockholders’ equity must have increased by $4080.

Question 2

 Collection of a $610 Accounts Receivable

o   Increases an asset $610; decreases a liability $610.

o   Decreases a liability $610; increases stockholders’ equity $610.

o   Decreases an asset $610; decreases a liability $610.

o   Increases an asset $610; decreases an asset $610.

Question 3

 If an individual asset is increased, then

o   There could be an equal decrease in a specific liability.

o   There could be an equal decrease in stockholders’ equity.

o   There could be an equal decrease in another asset.

o   None of these answer choices are correct.

Question 4

 If services are rendered on account, then

o   Liabilities will increase.

o   Stockholders’ equity will increase.

o   Assets will decrease.

o   Liabilities will decrease.

Question 5

 Waterway Industries had a transaction that caused a $5500 increase in both assets and liabilities. This transaction could have been a(n)

o   Purchase of office equipment for $13200, paying $7700 cash and issuing a note payable for the balance.

o   Investment of $5500 cash in the business by the stockholders.

o   Purchase of office equipment for $5500 cash.

o   Repayment of a $5500 bank loan.

Question 6

 Tamarisk, Inc. began the year 2022 with $131000 in its Common Stock account and a debit balance in Retained Earnings of $56200. During the year, the company earned net income of $28100, and declared and paid $9400 of dividends. In addition, the company sold additional common stock amounting to $34300. Based on this information, what should the transaction analysis show for total stockholders' equity at the end of 2022?

o   $259000

o   $127800

o   $171500

o   $240200

Question 7

 Kingbird, Inc. started the year with $68400 in its Common Stock account and a credit balance in Retained Earnings of $50200. During the year, the company earned net income of $54700, and declared and paid $22800 of dividends. In addition, the company sold additional common stock amounting to $31900. As a result, the balance in retained earnings at the end of the year would be

o   $82100.

o   $150500.

o   $114000.

o   $182400.

Question 8

 All of the following are characteristics of every accounting information system except it is a system

o   Of data storage hardware for the chart of accounts.

o   That collects transaction data.

o   That processes transaction data.

o   That communicates financial information to decision makers.

Question 9

 The normal balance of any account is the

o   Side which increases that account.

o   Left side.

o   Side which decreases that account.

o   Right side.

Question 10

 If a company has overdrawn its bank balance, then

o   Its Cash account will show a credit balance.

o   The Cash account debits will exceed the cash account credits.

o   It cannot be detected by observing the balance of the Cash account.

o   Its Cash account will show a debit balance.

Question 11

 An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

o   A credit balance in an expense account

o   A debit balance in the Dividends account

o   A credit balance in a liabilities account

o   A credit balance in a revenue account

Question 11

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

o   A credit balance in an expense account

o   A debit balance in the Dividends account

o   A credit balance in a liabilities account

o   A credit balance in a revenue account

Question 12

 Assets normally show

o   Credit balances.

o   Debit balances.

o   Debit and credit balances.

o   Debit or credit balances.

Question 13

 The adjusting entry would recognize insurance expense of $1,500.

At December 31, 2017, before any year-end adjustments, Macarty Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

o   $1,900.

o   $1,500.

o   $2,700.

o   $1,200.

Question 14

 This entry correctly adjusts the accounts and amount to be charged for the 5 months between August 1 and December 31 for $700 or ($1,680/12 x 5)

On August 1 the Darius Co. purchased a photocopy machine for $8,000. The estimated annual depreciation on the machine is $1,680. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be

o   Depreciation Expense                     $700  

            Equipment                             $700

o   Depreciation Expense                     $700  

Accumulated Depreciation                         $700

o   Depreciation Expense                     $140  

Accumulated Depreciation                         $140

o   Depreciation Expense                     $1,680           

Accumulated Depreciation                               $1,680

Question 15

 This entry correctly reduces the liability and recognizes the revenue earned in the period by $7,500 or (($30,000 /12) x 3).

Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entry to make on December 31 of the first year would be:

o   Unearned Rent Revenue                 $7,500           

Rent Revenue                                   $7,500

o   Rent Revenue                       $22,500         

Unearned Rent Revenue                                   $22,500

o   Rent Revenue                       $2,500           

Unearned Rent Revenue                             $2,500

Unearned Rent Revenue                 $22,500         

o   Rent Revenue                                   $22,500

Question 16

  Adjustments for prepaid expenses decrease assets and increase expenses.

Adjustments for prepaid expenses

o   Decrease revenues and increase assets.

o   Decrease expenses and increase assets.

o   Decrease assets and increase expenses.

o   Decrease assets and increase revenues.

Question 17

  This entry correctly adjusts supplies to a balance of $1,300 and records the expense for the period of $3,700 ($5,000-$1,300).

Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be:

o   Supplies Expense                 $3,700           

Supplies                                 $3,700

o   Supplies                     $1,300           

Supplies Expense                             $4,000

o   Supplies Expense                 $1,300           

Supplies                                 $1,300

o   Supplies                     $3,700           

Supplies Expense                             $3,700

Question 18

 This entry will correctly reduce the Prepaid Rent account by one month's rent and correctly record one month of Rent Expense of $4000 or ($12,000 / 3).

On September 1 the Petite-Sizes Store paid $12,000 to the Mega-Mall Co. for 3-month rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be

o   Prepaid Rent             $8,000           

o   Rent Expense                                    $8,000

o   Rent Expense                        $8,000           

o   Prepaid Rent                         $8,000      

o   Rent Expense                        $4,000           

o   Prepaid Rent                         $4,000

o   Prepaid Rent             $4,000           

o   Rent Expense                                    $4,000

Question 19

 This entry correctly adjusts the accounts to recognize for the 6-month policy. Insurance Expense needs to be debited to recognize the expense and Prepaid Insurance needs to be credited to reduce the asset accordingly for $2,100 ($12,600 / 6).

On July 1, Mesa Verde, Inc. purchased a 6-month insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. The adjusting entries to recognize the expired cost were made each month. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry would be

o   Insurance Expense               $10,500         

Prepaid Insurance                            $10,500

o   Insurance Expense               $2,100           

Prepaid Insurance                            $2,100

o   Prepaid Insurance                $2,100           

o   Insurance Expense                           $2,100

o   Prepaid Insurance                $10,500         

o   Insurance Expense                           $10,500

Question 20

 Book value is cost less accumulated depreciation.

The difference between an asset's cost and its accumulated depreciation is called

o   Market value.

o   Real value.

o   Fair value.

o   Book value.

Question 21

 Cash received before services are performed should be recorded as a liability because it represents a future obligation for the organization.

Cash received before services are performed are recorded as

o   Revenues.

o   Equity.

o   expenses.

o   Liabilities.

Question 22

 Wages are seldom prepaid since employees may not fulfill their obligations if they receive their wages before doing their work.

Which of the following is not a typical example of a prepaid expense?

o   Supplies

o   Rent

o   Insurance

o   Wages

Question 23

  Cash received before the performance obligation is satisfied is an unearned revenue.

Cash received before services are performed which is recorded as a debit to a Cash account and a credit to a liability account is called

o   An accrued revenue.

o   An unearned revenue.

o   An unrecorded revenue.

o   None of these answer choices are correct.

Question 24

 Each of the following is a major type (or category) of adjusting entry except

o   Earned expenses.

o   Prepaid expenses.

o   Accrued revenues.

o   Accrued expenses.

Question 25

 Adjusting entries are made to ensure that

o   Expenses are recognized in the period in which they are incurred.

o   Revenues are recorded in the period in which the performance obligation is satisfied.

o   Balance sheet and income statement accounts have correct balances at the end of an accounting period.

o   All of these answer choices are correct.