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    Please show calculations as you work on your worksheet.

    1. Owners of business firms are the only people who need accounting
    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
    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
    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
    c. usually found as a separate classification in the income
    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