Accounting problem explained in this answer

Please show calculations as you work on your worksheet.

1. Owners of business firms are the only people who need accounting
information.
a. True b. False

2. The study of accounting is not useful for a business career unless
your career objective is to become an accountant.
a. True b. False

3. The Securities and Exchange Commission has the power to require
companies filing reports with them to follow generally accepted
accounting principles.
a. True b. False

4. The purchase of office equipment on credit increases total assets
and total liabilities.
a. True b. False

5. A debit to an account always indicates an increase in that account.
a. True b. False

6. If a revenue account is credited, the revenue account is increased.
a. True b. False

7. Under the double-entry system, revenues must always equal expenses.
a. True b. False

8. Each transaction must be analyzed in terms of its effect on the
accounts before it can be recorded in a journal.
a. True b. False

9. A trial balance does not prove that all transactions have been
recorded or that the ledger is correct.
a. True b. False

10. A company's calendar year and fiscal year are always the same.
a. True b. False

11. Unearned revenue is a prepayment that requires an adjusting entry
when services are performed.
a. True b. False

12. If a work sheet is used, financial statements can be prepared before
adjusting entries are journalized.
a. True b. False

13. Closing entries are unnecessary if the business plans to continue
operating in the future and issue financial statements each year.
a. True b. False

14. Retained Earnings is a part of stockholders' equity.
a. True b. False

15. Current assets are customarily the first items listed on a
classified balance sheet.
a. True b. False

16. Generally accepted accounting principles are rules and practices
that provide a general guide for financial reporting.
a. True b. False

17. A company should change its accounting methods if a new method will
increase reported income for the period.
a. True b. False

18. The revenue recognition principle dictates that revenue should be
recognized in the accounting period in which cash is received.
a. True b. False

19. GAAP stands for

a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.

20. The common characteristic possessed by all assets is

a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.

21. Liabilities of a company would not include

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

22. Collection of a $400 Accounts Receivable

a. increases an asset $400; decreases an asset $400.
b. increases an asset $400; decreases a liability $400.
c. decreases a liability $400; increases stockholders' equity $400.
d. decreases an asset $400; decreases a liability $400.

23. If expenses are paid in cash, then

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

24. A balance sheet shows

a. revenues, liabilities, and stockholders' equity.
b. expenses, dividends, and stockholders' equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders' equity.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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

a. $500 credit balance.
b. $900 debit balance.
c. $400 debit balance.
d. $400 credit balance.

30. Management could determine the amounts due from customers by
examining which ledger account?

a. Service Revenue
b. Accounts Payable
c. Accounts Receivable
d. Supplies

31. 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.

32. A dress 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 dress shop follows GAAP 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

33. 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.

34. Accumulated Depreciation is

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

35. Jill Ryan has performed $600 of CPA services for a client but
has not billed the client as of the end of the accounting period.
What adjusting entry must Jill make?

a. Debit Cash and credit Unearned Service Revenue
b. Debit Accounts Receivable and credit Unearned Service Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Service Revenue and credit Service Revenue

36. 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.

37. The Income Summary account

a. is a permanent account.
b. appears on the balance sheet.
c. appears on the income statement.
d. is a temporary account.

38. An error has occurred in the closing entry process if

a. revenue and expense accounts have zero balances.
b. the Retained Earnings account is credited for the amount of net
income.
c. the Dividends account is closed to the Retained Earnings account.
d. the balance sheet accounts have zero balances.

39. The balance in the Income Summary account before it is closed will
be equal to

a. the net income or loss on the income statement.
b. the beginning balance in the Retained Earnings account.
c. the ending balance in the Retained Earnings account.
d. zero.

40. 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.

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Solution Summary

This question involves the fundamentals of accounting