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Question(s) / Instruction(s):

Midterm - HFT 3403 

Question 1

The net income reported on the income statement is $90,000. However, adjusting entries have not been made at the end of the period for supplies expense of $2,700 and accrued salaries of $1,300. Net income, as corrected, is

a)            $87,300

b)            $90,000

c)            $88,700

d)            $86,000

 

Question 2

A basic assumption of accounting assumes that the dollar is

a)            unrelated to business transactions.

b)            a poor measure of economic activities.

c)            the common unit of measure for all business transactions.

d)            useless in measuring an economic event.

 

Question 3

What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance?

a)            The Adjusted Trial Balance will show the net income (loss) as an additional account.

b)            Both will need to be in balance in order to continue with the end-of-period processing

c)            The Adjusted Trial Balance includes the postings of the adjustments for the period in the balance of the accounts.

d)            The Unadjusted Trial Balance will be used to record the adjustments for the period)

 

Question 4

The entry to adjust for the cost of supplies used during the accounting period is

a)            Supplies Expense, debit; Supplies, credit

b)            James Smith, Capital, debit; Supplies, credit

c)            Accounts Payable, debit; Supplies, credit

d)            Supplies, debit; credit James Smith, Capital

 

Question 5

 At September 1, Harry's Hotel reported Stockholders' Equity of $30,000. During September, no additional investments were made and the company earned net income of $10,000. If Stockholders' Equity at September 30 totals $25,000, what amount of dividends were paid during the month?

a)            $0

b)            $15,000

c)            $20,000

d)            $6,000

 

Question 6

 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

c)            $9,700

d)            $5,700

Question 7

A catering company supplies food for a large event for $20,000 on October 30. The customer is sent a statement on November 5 and a check is received on November 10. The catering company follows GAAP and applies the revenue recognition principle) When is the $20,000 considered to be earned?

a)            November 5

b)            November 10

c)            October 30

d)            November 1

 

Question 8

 Stockholders' equity is best depicted by the following:

a)            Assets = Liabilities.

b)            Liabilities + Assets.

c)            Residual equity + Assets.

d)            Assets - Liabilities.

 

Question 9

 A current asset is

a)            the last asset purchased by a business.

b)            an asset which is currently being used to produce a product or service)

c)            usually found as a separate classification in the income statement.

d)            expected to be realized in cash, sold or consumed within one year of the balance sheet or the company's operating cycle, whichever is longer.

Question 10

 ABC owes Sugar Surplus $1,000 on account. When ABC pays the debt, the transaction recorded on Sugar Surplus' books will

a)            increase an asset $1,000 and decreases an asset $1,000.

b)            increase an asset $1,000 and decrease a liability $1,000.

c)            decrease a liability $1,000 and increase Stockholders' equity $1,000.

d)            decrease an asset $1,000 and decrease a liability $1,000.

 

Question 11

 The fiscal year of a business is usually determined by

a)            the IRS.

b)            a lottery.

c)            the business.

d)            the SEC)

 

Question 12

 When cash or other assets are distributed to stockholders, these distributions are termed

a)            depletions.

b)            consumptions.

c)            dividends.

d)            a credit line)

 

Question 13

 During the end-of-period processing which of the following best describes the logical order of this process

a)            Preparation of adjustments, adjusted trial balance, financial statements

b)            Preparation of Income Statement, adjusted trial balance, Balance Sheet

c)            Preparation of adjusted trial balance, cross-referencing, journalizing

d)            Preparation of adjustments, adjusted trial balance, posting

Question 14

 Expenses are recognized when

 a)           cash is paid)

b)            the work is performed)

c)            the product is produced)

d)            they make their contribution to revenue)

 

Question 15

 The account type and normal balance of Prepaid Expense is

a)            revenue, credit

b)            expense, debit

c)            liability, credit

d)            asset, debit

 

Question 16

 If generally accepted accounting principles did not exist,

a)            comparability between companies' financial statements would be enhanced)

b)            financial statements of different companies would be presented more uniformly.

c)            each company would have to develop its own set of accounting practices.

d)            social welfare would have greater potential of being maximized)

 

Question 17

Which of the following is an example of a prepaid expense?

a)            Supplies

b)            Accounts Receivable

c)            Unearned Subscriptions

d)            Unearned Fees

 

Question 18

 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, $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, $11,500; credit Insurance Expense, $11,500

d)            debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

 

Question 19

 Which account would normally not require an adjusting entry?

a)            Wages Expense

b)            Accounts Receivable

c)            Accumulated Depreciation

d)            Smith, Capital

 

Question 20

 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.

 

Question 21

 If there is a balance in the unearned subscriptions account (for example subscription dollars received by a magazine publisher or reservations dollars received by an airline company) after adjusting entries are made, it represents a(n)

a)            deferral

b)            accrual

c)            drawing

d)            revenue

Question 22

 As of June 31, 2008, Hobknob Club's assets are $700,000 and stockholders' equity is $75,000. What are the liabilities for Hobknob Club of June 31, 2008?

a)            $775,000.

b)            $650,000.

c)            $725,000.

d)            $625,000.

 

Question 23

 A basic assumption that requires that the activities of an entity be kept separate from its owners' activities is referred to as the

a)            stand alone concept.

b)            monetary unit assumption.

c)            corporate form of ownership.

d)            economic entity assumption.

 

Question 24

 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)

 

Question 25

 The following accounts were taken from the Adjusted Trial Balance columns of the worksheet:

Accumulated Depreciation                          $2,000,

Fees Earned                                                       $15,000,

Depreciation Expense                                    $1,000,

Insurance Expense                                          $500,

Prepaid Insurance                                           $4,500,

Supplies                                                               $1,200,

Supplies Expenses                                           $3,500.

Net income for the period is:

a)            $2,300

b)            $10,000

c)            $4,300

d)            $5,000

 

Question 26

 On October 1, the company pays rent for twelve months in advance and debits an asset account. At year end, the adjusting entry on the work sheet would

a)            increase an expense account

b)            decrease a liability account

c)            increase an asset account

d)            decrease an expense account

 

Question 27

Which of the items below would appear in the Income Statement columns of the work sheet?

a)            Equipment

b)            Unearned Fees

c)            Prepaid Expense

d)            Net Loss

Question 28

 Prepaid expenses are eventually expected to

a)            become expenses when their future economic value expires.

b)            become revenues when services are performed)

c)            become expenses in the period when they are paid)

d)            become revenues when the liability is no longer owed)

 

Question 29

 Which one of the following presents the correct order for the accounting cycle?

a)            Analyze transactions, post, adjusted trial balance, closing entries, post closing trial balance, financial statements

b)            Post closing trial balance, closing entries, financial statements, adjusted trial balance adjustments, analyze transactions, journalize, post, trial balance

c)            Analyze transactions, journalize, post, trial balance, adjustments, adjusted trial balance, financial statements, closing entries, post closing trial balance

d)            Adjustments, trial balance, posting, journalize, analyze transactions

 

Question 30

 Which of the items below does not appear on the trial balance work sheet?

a)            adjusting entries

b)            the unadjusted trial balance

c)            closing entries

d)            the drawing account

 

Question 31

 The balance in the supplies account, before adjustment at the end of the year is $625. The proper adjusting entry if the amount of supplies on hand at the end of the year is $325 would be

a)            debit Cash $325, credit Supplies $325

b)            debit Supplies Expense $300, credit Supplies $300

c)            debit Supplies Expense$325, credit Supplies $325

d)            debit Supplies $300, credit Supplies Expense $300

Question 32

 Unearned Fees appear on the

a)            balance sheet in the current assets section

b)            balance sheet as a current liability

c)            balance sheet in the owner's equity section

d)            income statement as revenue

 

Question 33

 An income statement

a)            summarizes the changes in stockholders' equity for a specific period of time)

b)            reports the changes in assets, liabilities, and stockholders' equity over a period of time)

c)            reports the assets, liabilities, and stockholders' equity at a specific date)

d)            presents the revenues and expenses for a specific period of time)

 

Question 34

 The unearned rent account has a balance of $40,000. If $3,000 of the $40,000 is unearned at the end of the accounting period, the amount of the adjusting entry is

a)            $3,000

b)            $40,000

c)            $37,000

d)            $43,000

 

Question 35

 Accumulated Depreciation appears on the

a)            balance sheet in the current assets section

b)            balance sheet in the property, plant and equipment section

c)            balance sheet in the long-term liabilities section

d)            income statement as an operating expense

 

Question 36

Which of the following correctly identifies normal balances of accounts?

a)            Assets-Debit Liabilities-Credit Common Stock-Credit Revenues-Debit Expenses-Credit

b)            Assets-Debit Liabilities-Credit Common Stock-Credit Revenues-Credit Expenses-Credit

c)            Assets-Credit Liabilities-Debit Common Stock-Debit Revenues-Credit Expenses-Debit

d)            Assets-Debit Liabilities-Credit Common Stock-Credit Revenues-Credit Expenses-Debit

 

Question 37 

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

a)            journalizing.

b)            analyzing.

c)            reporting.

d)            posting. 

 

Question 38

 During the year 2009, Rafael's Restaurant earned revenues of $250,000, had expenses of $50,000, purchased assets with a cost of $30,000 and paid dividends to the shareholders of $10,000. Net income for the year is:

a)            $170,000

b)            $200,000

c)            $160,000

d)            $190,000

 

Question 39

 The income statement should be prepared

a)            before the statement of retained earnings and balance sheet

b)            after the statement of retained earnings and before the balance sheet

c)            after the statement of retained earnings and balance sheet

d)            after the balance sheet and before the statement of retained earnings

 

Question 40

 Net income results when

a)            Assets > Liabilities.

b)            Revenues = Expenses.

c)            Revenues > Expenses.

d)            Revenues < Expenses.

 

Question 41

 Closing entries are made

a)            in order to terminate the business as an operating entity.

b)            so that all assets, liabilities, and stockholders' equity accounts will have zero balances

when the   next accounting period starts.

c)            in order to transfer net income (or loss) and dividends to the Retained Earnings account.

d)            so that financial statements can be prepared)

 

Question 42

Which of the following is true concerning the cost concept?

a)            It requires all assets to be valued at their market value on the date the financial statements are prepared)

b)            It requires property and equipment to be valued at their original cost on the date they were purchased)

c)            Neither of the above)

 

Question 43

 The balance in the prepaid rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December 1. The adjusting entry required on December 31 is

a)            debit Rent Expense, $5,000; credit Prepaid Rent, $5,000

b)            debit Prepaid Rent, $10,000; credit Rent Expense, $5,000

c)            debit Rent Expense, $10,000; credit Prepaid Rent, $5,000

d)            debit Prepaid Rent, $5,000; credit Rent Expense, $5,000

 

Question 44

 The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is

a)            Collected

b)            Earned

c)            most likely to be collected

d)            earned and collected

 

Question 45

 Which of the following type of business provides ownership in transferable shares of stock?

a)            Partnership

b)            Corporation

c)            Sole Proprietorship

d)            Limited Liability Partnership

 

Question 46

The account type and normal balance of Accumulated Depreciation is

a)            revenue, credit

b)            expense, debit

c)            contra-asset, credit

d)            contra-asset, debit

 

Question 47

 In the accounting cycle, the last step is

a)            preparing the financial statements

b)            journalizing and posting the adjusting entries

c)            preparing a post-closing trial balance

d)            journalizing and posting the closing entries

 

Question 48

 The cost principle requires that when assets are acquired, they be recorded at

a)            appraisal value)

b)            exchange price paid

c)            market price)

d)            list price from a catalog.

 

Question 49

Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

a)            expense, contra asset

b)            asset, contra liability

c)            revenue, asset

d)            contra asset, expense

 

Question 50

Accrued expenses are:

a)            items incurred but not yet paid

b)            items paid but not yet incurred

c)            items paid and incurred

d)            all of the above

e)            none of the above

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