QUESTION 1

1. On July 1, 2014, Allen Company signed a $100,000, one-year, 6 percent note payable. The principal
and interest will be paid on June 30, 2015. How much interest expense should be reported on the
income statement for the year ended December 31, 2014?

A. $0

B. $6,000

C. $3,000

D. $1,500

2 points
QUESTION 2
1. The dual effects concept states that:
A. Every transaction has at least two effects on the accounting equation.
B. There are only two accounts involved in every transaction
C. Both the income statement and balance sheet are impacted by every transaction.
D. Every transaction has an impact on assets and stockholders' equity.

2 points
QUESTION 3
1. Which of the following journal entries is prepared by an auto repair shop when a customer will pay
cash subsequent to delivery of goods or services?

A. Accounts Receivable
Earned Revenues

B. Earned revenues
Accounts Receivable

C. Earned Revenues
Unearned Revenues

D. Unearned Revenues
Earned Revenues

2 points
QUESTION 4
1. A landlord collected $5,000 cash from a tenant for December 2015's rent but the tenant's rent for
December is $8,000. Which of the following is true with respect to the landlord's financial
statements?
 A. $8,000 would appear on the income statement as rent revenue earned.
B. $8,000 would appear on the balance sheet as rent receivable.
C. $8,000 would be reported on the statement of cash flows.
D. $5,000 would appear on the balance sheet as prepaid rent.

2 points
QUESTION 5
1. Which of the following journal entries is correct when a business entity purchases land costing
$30,000 by signing a note?
A. Land 30,000
Note Payable 30,000

B. Land 30,000
Note Receivable 30,000
C. Note Payable 30,000
Land 30,000
D. Note receivable 30,000
Land 30,000

2 points
QUESTION 6
1. Which of the following describes the impact on the balance sheet of paying a current liability using
cash?
A. Current assets will decrease
B. Stockholders' equity will decrease.
C. Current liabilities will increase.
D. Total assets will remain the same

2 points
QUESTION 7
1. Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing
$8,700 were used to make pizzas during July. Which of the following statements is false with
respect to the use of the ingredients?

A. Cost of goods sold was debited for $8,700.

B. Operating expenses increased $8,700.
C. Operating income decreased $8,700.
D. Inventory was debited for $8,700.

2 points
QUESTION 8
 Bass Company started its operation on June 30, 2014. The year-end of Bass
Company is December 31. On July 1, 2014, Bass Company paid a two-year
insurance premium. On that date the following journal entry was made:

Prepaid Insurance 4,800

Cash 4,800

the annual accounting period ends on December 31, 2014.

Required: (2 points each)

A. How much of the premium should be reported as expense on the 2014

income statement? Format your answer the following way: $XX,XXX ($
before the amount, no pennies, and a comma separating the
thousands) $1,200

(A. 4,800 x 6/24= 1,200)

B. What is the amount of prepaid insurance that should be reported on the

balance sheet at December 31, 2014? $XX,XXX ($ before the amount, no
pennies, a comma separating the thousands) $3,600

(B. 4,800 x18/24= 3,600)

C. Should there be a debit or a credit to prepaid insurance when the

adjusting entry is prepared? Credit

(C. Insurance expense 1,200

Prepaid insurance 1,200)

6 points
QUESTION 9
1. A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in
retained earnings. What is the balance in the contributed capital accounts?
A. $32,000

B. $44,000

C. $56,000

D. $48,000
 2 points
QUESTION 10
1. Assume Idaho Company recorded the following adjusting journal entry at year-end:

Insurance Expense 2,000

Prepaid Insurance 2,000

If the beginning balance in prepaid insurance was $500, and $2,500 was paid for an insurance
premium during the year, what is the ending balance in the prepaid insurance account after the
above adjusting entry?

A. $3,000

B. $5,000

C. $1,200.
D. $1,000

2 points
QUESTION 11
1. Which of the following journal entries is prepared when cash is received from a customer prior to
delivery of the goods or services?

A. Unearned Revenue
Cash

B. Unearned Revenue
Earned Revenue

C. Cash
Earned Revenue

D. Cash
Unearned Revenue

2 points
QUESTION 12
1. Assets, liabilities, and stockholders' equity are all found within which of the following financial
statements?

A. Statement of Cash Flows

B. Balance Sheet
 C. Income Statement

D. Statement of Stockholders' Equity

2 points
QUESTION 13
1. On July 1, 2014, Goode Company borrowed $100,000. The company signed a note payable with
interest at 6 percent per year. The note and interest are due on December 31, 2014. On December
31, 2014, Goode paid $103,000 to settle the debt in full. Assuming no accruals for interest have
been made during the year, transaction analysis of the $103,000 cash payment on December 31,
2014 should reflect which of the following?

A. A decrease in assets of $100,000, a decrease in stockholders' equity of $3,000, and a

decrease in liabilities of $103,000.

B. A decrease in stockholders' equity of $100,000, a decrease in liabilities of $3,000, and a

decrease in assets of $103,000.

C. A decrease in assets of $103,000 and a decrease in liabilities of $103,000.
D. A decrease in liabilities of $100,000, a decrease in stockholders' equity of $3,000, and a

decrease in assets of $103,000.

2 points
QUESTION 14
1. Yelena Company received cash from a customer in advance of providing the service to the
customer. Which of the following does not accurately describe the impact on the financial
statements when Yelena later provides the service?

A. Liabilities are decreased

B. Retained earnings increases
C. Operating income increases
D. Assets are increased.

2 points
QUESTION 15
1. Which of the following journal entries is correct when a business entity purchases a building by
paying cash and by signing a note for the balance?
A. Cash
Building
Note Payable
 B. Building
Cash
Note Payable

C. Building
Note Receivable
Cash

D. Building
Cash
Note Payable

2 points
QUESTION 16
1. The revenue realization principle requires four conditions to be met. Which of the following is one
of the four conditions?

A. The customer has paid for the goods or services.

B. The customer has signed a contract.
C. The price is fixed or determinable.
D. Delivery of goods or performance of service has occurred or is scheduled to occur.

2 points
QUESTION 17
1. On January 1, 2014, the general ledger of Global Corporation included supplies of $1,000. During
2014, supplies purchases amounted to $5,000. A physical count of inventory on hand at December
31, 2014 determined that the amount of supplies on hand was $1,200. How much is the 2014
supplies expense?

A. $6,000

B. $4,800

C. $1,200

D. $3,800

2 points
QUESTION 18
1. Superior has provided the following information for its recent year of operation.
The common stock account balance at the beginning of the year was $20,000 and the year-end
balance was $25,000.
The additional paid-in capital account balance increased $2,500 during the year.
The retained earnings balance at the beginning of the year was $75,000 and the year-end balance
 was $91,000.
Net income was $26,000.
How much were Superior's dividend declarations during its recent year of operation?
A. $42,000.
B. $10,000.
C. $26,000.
D. The dividend declarations cannot be determined given the above information

2 points
QUESTION 19
1. Which of the following statements is false?
A. The par value of common stock represents the stock's market value
B. The common stock account has a credit balance.
C. Common stock may be issued for more than par value
D. The retained earnings account has a credit balance.

2 points
QUESTION 20
1. On December 31, 2014, Krug Company reported pretax income of $120,000 prior to the following
adjusting entries.
Depreciation expense: $31,000.
Accrued service revenues: $29,000.
Accrued expenses: $12,000.
Used insurance: $9,000; the insurance was initially recorded as prepaid.
Rent revenue earned: $7,000; the rent was initially prepaid by the tenant and credited to unearned
rent revenue. How much is Krug's pretax income after adjusting entries?

A. $128,000

B. $104,000

C. $113,000

D. $106,000

2 points
QUESTION 21
1. Which of the following journal entries correctly records the receipt of a utility bill, which will be
paid for in later weeks?
 A. Utilities Expense
Utilities Payable

B. Utilities Payable
Utilities Expense

C. Utilities Expense
Retained Earnings

D. Retained Earnings
Utilities Payable

2 points
QUESTION 22
1. Which of the following correctly describes the effects of accruing income tax expense at year-end?

A. Liabilities are not affected.

B. A cash payment is made to pay the taxes due.
C. Retained earnings decreases.
D. Net income increases.

2 points
QUESTION 23
1. On April 1, 2014, the premium on a one-year insurance policy was purchased for $3,000 cash with
the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of
the following correctly describes the effect on the financial statements of the December 31, 2014
adjusting entry?

A. Insurance expense will increase $750.

B. Prepaid insurance will decrease $750.
C. Insurance expense will increase $2,250.
D. Prepaid insurance will increase $2,250.

2 points
QUESTION 24
1. Which of the following correctly describes the impact of collecting cash from customers for
services to be provided in the future?
A. Assets and stockholders' equity increase.
B. Assets and revenues increase.
C. Assets and liabilities increase.
D. None of the other answers are correct
 2 points
QUESTION 25
1. On October 1, 2014, Adams Company paid $4,800 for a two-year insurance policy with the
insurance coverage beginning on that date. As of December 31, 2014, which of the following
account balances are correct after adjusting entries have been made?

A. Prepaid insurance $2,400, and Insurance expense $2,400.

B. Prepaid insurance $4,800, and Insurance expense $0.
C. Prepaid insurance $0, and Insurance expense $4,800.
D. Prepaid insurance $4,200, and Insurance expense $600.

2 points
QUESTION 26
1. Which of the following is not considered to be a recordable transaction?
A. Buying equipment and agreeing to pay a note payable and interest at the end of a year.
B. Paying employees their wages.
C. Signing a contract to have an outside cleaning service clean offices nightly.
D. Selling stock to investors.

2 points

QUESTION 27
1. Which of the following describes the reporting of interest expense on the income statement?

A. It is reported as an operating expense.

B. It is a component of operating income
C. It is added to operating income
D. It is deducted from operating income

2 points
QUESTION 28
1. Cadet Company paid an amount of $1,000 due to one of its suppliers. This transaction should be
recorded on the payment date as follows:
A. Accounts Payable
Cash

B. Notes Payable
Cash

C. Cash
Notes Payable
 D. Cash
Accounts Payable

2 points
QUESTION 29
1. Which of the following statements is false when Mama June Pizza Company paid $47,000 cash on
accounts owed to suppliers?
A. The cash account was credited for $47,000.
B. Supplies expense was increased by $47,000.
C. Accounts payable was debited for $47,000.
D. Operating income was not changed by the payment to the suppliers.

2 points
QUESTION 30
1. Lantz Company has provided the following information:

Cash sales totaled $255,000.

Credit sales totaled $479,000.
Cash collections from customers for services yet to be provided totaled $88,000.
A $22,000 loss from the sale of property and equipment occurred.
Interest income was $7,700.
Interest expense was $19,900.
Cost of goods sold was $336,000.
Rent expense was $36,000.
Salaries expense was $49,000.
Other operating expenses totaled $79,000.
Unearned revenue was $4,000.

How much was Lantz's income before income taxes?

A. $531,800

B. $465,800

C. $199,800

D. $553,800

2 points
QUESTION 31
1. Which of the following transactions and events results in an increase in liabilities and a decrease in
net income?

A. The accrual of revenue earned at year-end.

B. The accrual of salaries expense at year-end.
C. Adjustment of the unearned revenue account for revenue earned during the period.
D. Collecting cash from a customer for services to be provided in the future.

2 points
QUESTION 32
1. Which of the following best describes the operating cycle?
A. It is the time that elapses from the cash payment to suppliers to collection of cash from

customers.
B. It is the length of the manufacturing process

C. It is the time that elapses from the completion of the manufacturing process to the cash

collection from sale of the manufactured goods.

D. It is the time that elapses from the purchase of inventory on account to the sale of

inventory on account

2 points
QUESTION 33
1. On December 31, 2014, The Bates Company's revenues total $300,000 and expenses total
$160,000 before consideration of the following.

Accrued wages total $11,000

Accrued revenues total $36,000
Depreciation expense is $17,000
Rental revenue of $9,000 was earned; the rent from a tenant was initially recorded by Bates as
unearned rent revenue.
The income tax rate is 40% of income before income taxes.
What is Bates' net income after consideration of the above information?

A. $157,000.
B. $140,000.
C. $94,200.
D. $88,800.

2 points
QUESTION 34
1. The following information has been provided by Hable Company.
Advertising expense $9,900
Interest expense $3,700
Rent expense $12,000
Loss on sale of property and equipment $5,700
Cost of goods sold $21,300
Depreciation expense $7,100
Prepaid insurance expense $1,000
How much were Hable's operating expenses?

A. $50,300
B. $54,000

C. $43,200

D. $59,700

2 points
QUESTION 35
1. A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note
payable. Which of the following correctly describes the recording of the delivery van purchase?
A. Cash is debited for $5,000.
B. Notes payable is debited for $25,000.
C. The delivery van account is debited for $30,000.
D. The delivery van account is debited for $25,000.

2 points
QUESTION 36
1. Which of the following transactions and events results in a decrease in both total assets and net
income?

A. Collecting cash from an account receivable.

B. Adjustment of the prepaid rent account for rent used during the period.
C. The accrual of salaries expense at year-end.
D. Recognizing previously recorded deferred revenue as revenue.

2 points
QUESTION 37
1. During 2014, Sigma Company earned service revenues amounting to $700,000, of which $630,000
was collected in cash; the balance will be collected in January, 2015. Also in 2014 there were
 collections of cash prior to the delivery of goods/services totaling $10,000. What amount should
the 2014 income statement report for service revenues?

A. $700,000.
B. $570,000.
C. $70,000.
D. $630,000.

2 points
QUESTION 38
1. The Pioneer Company has provided the following account balances:
Cash $38,000;
Short-term investments $4,000;
Accounts receivable $48,000;
Supplies $6,000;
Long-term notes receivable $2,000;
Equipment $96,000;
Factory Building $180,000;
Intangible assets $6,000;
Accounts payable $30,000;
Accrued liabilities payable $4,000;
Short-term notes payable $14,000;
Long-term notes payable $92,000;
Common stock $180,000;
Retained earnings $60,000.
What are Pioneer's total current assets?

A. $90,000

B. $48,000

C. $96,000

D. $42,000

2 points
QUESTION 39
1. What is the effect on the financial statements when a company fails to accrue salaries expense at
year-end?
 A. Expenses are understated and stockholders' equity is understated
B. Expenses and liabilities are both overstated.
C. Net income is overstated and liabilities are properly reported.
D. Net income is overstated and liabilities are understated.

2 points
QUESTION 40
1. The primary difference between revenues and gains is:
A. Revenues increase operating income and gains have no impact on net income.
B. Revenues cause increases in net assets as a result of peripheral activities and gains cause

increases through ongoing activities.

C. Gains result in an increase in operating income whereas revenues do not impact operating

income.
D. Gains are increases in net assets from peripheral activities while revenues are increases

from ongoing activities.

2 points
QUESTION 41
1. On December 31, 2014, Avery Corporation paid $10,000 for next year's insurance policy. This
transaction should be recorded as follows by Avery:

A. Insurance Expense
Insurance Payable

B. Prepaid Insurance
Cash

C. Cash
Insurance Payable

D. Insurance Expense
Prepaid Insurance

2 points
QUESTION 42
1. Which of the following journal entries is created to adjust for an accrual?
A. Accounts Receivable
Earned Revenues

B. Earned Revenues
Accounts Receivable
 C. Unearned Revenues
Earned Revenues

D. Earned Revenues
Unearned Revenues

2 points
QUESTION 43
1. Lantz Company has provided the following information:

Cash sales totaled $255,000.

Credit sales totaled $479,000.
Cash collections from customers for services yet to be provided totaled $88,000.
A $22,000 loss from the sale of property and equipment occurred.
Interest income was $7,700.
Interest expense was $19,900.
Cost of goods sold was $336,000.
Rent expense was $36,000.
Salaries expense was $49,000.
Other operating expenses totaled $79,000.
Unearned revenue was $4,000.

How much was Lantz's operating income?

A. $322,000

B. $221,800

C. $199,800

D. $234,000

2 points
QUESTION 44
1. Which of the following statements is false?
A. Interest expense is not a component of operating income
B. Rent expense is a component of operating income.
C. The income statement covers a period of time
D. A loss on the sale of plant and equipment is considered a peripheral activity and is not

reported on the income statement

2 points
 QUESTION 45
1. At the beginning of April, Warren Corporation's assets totaled $240,000 and liabilities totaled
$60,000. During April the following summarized transactions occurred.
Additional shares of stock were sold for $20,000 cash.
A building costing $95,000 was purchased using $10,000 cash and by signing an $85,000 long-
term note payable.
Short-term investments costing $9,000 were purchased using cash.
$10,000 was paid to an employee as a loan; the employee signed a six-month note in exchange for
the loan.

How much are Warren's total assets at the end of April?

A. $335,000

B. $345,000

C. $250,000

D. $249,000

2 points
QUESTION 46
1. Which of the following journal entries is correct when a company has incurred an expense for work
performed but has not yet paid for theses salaries to employees?

A. Salaries Expenses
Operating Income

B. Accrued Salaries Expense

Cash

C. Salaries Expenses
Accrued Salaries Payable

D. Salaries Expense
Cash

2 points
QUESTION 47
1.
The owner writes a check to create the company and receives common stock in exchange for his cash investment.
What is the journal entry in the company's books?

A. Common Stock
Cash

B. Cash
Common Stock

C. Investment
Cash

D. Cash
Investment

2 points
QUESTION 48
1. A company purchased supplies for cash, which will be consumed during future months. Which of
the following correctly describes the impact of the supplies purchase on the financial statements?

A. Total assets will remain unchanged.

B. Operating expenses will increase.
C. Total assets will decrease.
D. Total assets will increase.

2 points

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