A.

MCQ
1. Total liabilities on a balance sheet at the end of the year are 150000, retained
earnings at the end of the year are 80,000, net income for the year is 60,000,
common stock is 40,000, and additional paid in capital is 20,000. What amount of
total assets would be reported on the balance sheet at the end of the year?
a. 290,000
b. 270,000
c. 205,000
d. 15,000
2. The dual effects concept can be best described as follows:
a. When one records a transaction in the accounting system, at least two effects on
the basic accounting equation will result
b. When an exchange takes place between two parties, both parties must record
the transaction
c. When a transaction is recorded, both the balance sheet and the income
statement must be impacted
d. When a transaction is recorded, one account will always increase and one
account will always decrease
3. The Cash T-account has a beginning balance of 21,000. During the year, 100,000
was debited and 110,000 was credited to the account. What is the ending balance
of cash?
a. 11,000 debit balance
b. 11,000 credit balance
c. 31,000 credit balance
d. 31,000 debit balance
4. During 2016, CliffCo Inc. incurred operating expenses of 250,000, of which
150,000 was paid in cash; the balance will be paid in January 2017. Transaction
analysis of operating expenses for 2016 should reflect only the following:
a. Decrease stockholder's equity 150,000; decrease assets 15,0000
b. Decrease assets 250,000; decrease stockholder's equity 250,000
c. Decrease stockholder's equity 250,000; decrease assets 150,000; increase
liabilities 100,000
d. Decrease assets 250,000; increase liabilities 100,000; decrease stockholder's
equity 150,000
5. On October 1, 2017, the 12,000 premium on a one-year insurance policy for the
building was paid and recorded as Prepaid Insurance. On December 31, 2017 (end
of the accounting period), what adjusting entry is needed?

a. Interest Expense (+E) 2,000

Prepaid Insurance (-A) 2,000
b. Insurance Expense (+E) 3,000
Prepaid Insurance 3,000
c. Prepaid Insurance 3,000
Insurance Expense 3000
d. Prepaid Insurance 9,000
Insurance Expense 9,000
6. At the beginning of the current year, Donna Company had 1,000 of supplies on
hand. During the current year, the company purchased supplies amounting to
6,400 (paid for in cash and debited to Supplies). At the end of the current year, a
count of supplies reflected 2,000. The adjusting entry Donna Company would
record at the end of the current year to adjust the Supplies account would include
a
a. Debit to Supplies for 2,000
b. Credit to Supplies Expense for 5,400
c. Credit to Supplies for 5,400
d. Debit to Supplies Expense for 4,400
7. A company records a transaction in which six months' rent is paid in advance.
Which of the following journal entries record the transaction?
a.) prepaid rent- debit; cash- credit
b.) rent receivable- debit; cash-credit
c.) rent revenue- debit; cash-credit
d.) rent expense- debit; cash-credit
8. Receiving cash from a customer for settlement of an Account Receivable will
a.) decrease stockholders' equity
b.) increase net income
c.) increase total assets
d.) not affect total assets
9. Payment in advance from customers are classified as
A) An expense
B) A current asset
C) A revenue
D) A current liability
10. Which of the following statements is not true?
A) Expenses have normal debit balances.
B) Expenses decrease owner's equity.
C) Expenses are a negative factor in the computation of net income.
D) Expenses increase owner's equity.
11. Which of the following errors will NOT cause the debit and credit columns of
the trial balance to be unequal?
a.) a debit entry was recorded in the wrong account
b.) a debit was entered in an account as a credit
c.) the account balance was carried to the wrong column of the trial balance
d.) the balance of an account was incorrectly computed
12. The credit purchase of a delivery truck for $4,700 was posted to Delivery
Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect
would this error have on the trial balance?
A. The total of the Debit column of the trial balance will exceed the total of the
Credit column by $4,700.
B. The total of the Credit column of the trial balance will exceed the total of the
Debit column by $4,700.
C. The total of the Debit column of the trial balance will exceed the total of the
Credit column by $9,400.
D. The total of the Credit column of the trial balance will exceed the total of the
Debit column by $9,400.
13. A written promise to pay a definite sum of money on a specified future date is
a(n):
A. Unearned revenue.
B. Prepaid expense.
C. Credit account.
D. Note payable.
14. Martin Corporation purchased land in 2007 for $290,000. In 2015, it purchased
a nearly identical parcel of land for $460,000. In its 2015 balance sheet, Martin
valued these two parcels of land at a combined value of $920,000. By reporting the
land in this manner, Martin Corp. has violated the
a. historical cost principle
b. convergence
c. economic entity assumption
d. monetary unit assumption
15. The accounting equation for Quattro Enterprises is as follows:
Assets = Liabilities + Stockholders' Equity
$120,000 = $60,000+$60,000
If Quattro purchases office equipment on account for $25,000, the accounting
equation will change to
a. $120,000 = $60,000 + $60,000
b. $145,000 = $60,000 + $85,000
c. $145,000 = $72,500 + $72,500
d. $145,000 = $85,000 + $60,000
16. Barsuk Company began the year with stockholders' equity of $108,000. During
the year, Barsuk issued stock for $147,000, recorded expenses of $420,000, and
paid dividends of $28,000. If Barsuk's ending stockholders' equity was $290,000,
what was the company's revenue for the year?
a. $455,000.
b. $483,000.
c. $602,000.
d. $630,000.
17. On January 1, 2015, Cat Power Company reported stockholders' equity of
$705,000. During the year, the company paid dividends of $30,000. At December
31, 2015, the amount of stockholders' equity was $825,000. What amount of net
income or net loss would the company report for 2015?
a. Net loss of $30,000
b. Net income of $90,000
c. Net income of $120,000
d. Net income of $150,000
18. Debit
a. Increase assets and decrease expenses, liabilities, revenue, and equity
b. Increase assets and expenses, and decrease liabilities, revenue, and equity
c. Increase liabilities, revenue, and equity, and decrease assets and expenses
d. Increase assets and equity, and decrease liabilities and revenue
19. Which is not a possible combination of a journal entry?
a. Increase in assets and increase in liability
b. Decrease in equity and increase in liability
c. Decrease in liability and decrease in asset
d. Increase in asset and decrease in equity
20. A company made no adjusting entry for accrued and unpaid employee wages of
$28,000 on December 31. This oversight would:
A. Understate net income by $28,000.
B. Overstate net income by $28,000.
C. Have no effect on net income.
D. Overstate assets by $28,000.
E. Understate assets by $28,000.
21. On April 1, 2009, a company paid the $1,350 premium on a three-year
insurance policy with benefits beginning on that date. What will be the insurance
expense on the annual income statement for the year ended December 31, 2009?
A. $1,350.
B. $450.
C. $1,012.50.
D. $337.50.
E. $37.50.
22. Unearned revenue is reported in the financial statements as:
A. A revenue on the balance sheet.
B. A liability on the balance sheet.
C. An unearned revenue on the income statement.
D. An asset on the balance sheet.
23. PPW Co. leased a portion of its store to another company for eight months
beginning on October 1, 2009, at a monthly rate of $800. This other company paid
the entire $6,400 cash on October 1, which PPW Co. recorded as unearned
revenue. The journal entry made by PPW Co. at year- end on December 31, 2009
would include:
A. A debit to Rent Earned for $2,400.
B. A credit to Unearned Rent for $2,400.
C. A debit to Cash for $6,400.
D. A credit to Rent Earned for $2,400.
E. A debit to Unearned Rent for $4,000.
24. A company pays each of its two office employees each Friday at the rate of
$100 per day for a five-day week that begins on Monday. If the monthly accounting
period ends on Tuesday and the employees worked on both Monday and Tuesday,
the month-end adjusting entry to record the salaries earned but unpaid is:
A. Debit Unpaid Salaries $600 and credit Salaries Payable $600.
B. Debit Salaries Expense $400 and credit Salaries Payable $400.
C. Debit Salaries Expense $600 and credit Salaries Payable $600.
D. Debit Salaries Payable $400 and credit Salaries Expense $400.
E. Debit Salaries Expense $400 and credit Cash $400.
25. On March 31, 2009, Phoenix, Inc. paid Melanie Publishing Company $15,480
for a 3-year subscription for five different magazines. The subscriptions started
immediately. What is the amount of revenue that should be recorded by Melanie
Publishing Company for each year of the subscription?
A. 2009, $15,480; 2010, $0; 2011, $0; 2010, $0.
B. 2009, $5,160; 2010, $5,160; 2011, $5,160.
C. 2009, $3,870; 2010, $5,160; 2011, $5,160; 2012, $1,290.
D. 2009, $0; 2010, $0; 2011, $0; 2012, $15,480.
26. A company made no adjusting entry for accrued and unpaid employee salaries
of $9,000 on December 31. Which of the following statements is true?
A. It will have no effect on income.
B. It will overstate assets and liabilities by $9,000
C. It will understate net income by $9,000.
D. It will understate assets by $9,000.
E. It will understate expenses and overstate net income by $9,000.
27. In the unadjusted trial balance of its worksheet for the year ended December
31, 2017, Knox Company reported Equipment of $120,000. They year-end
adjusting entries require an adjustment of $15,000 for depreciation expense for
the equipment. After the adjusted trial balance is completed, what amount should
be shown in the financial statement columns?
(a) A debit of $105,000 for Equipment in the balance sheet column.
(b) A credit of $15,000 for Depreciation Expense - Equipment in the income
statement column.
(c) A debit of $120,000 for Equipment in the balance sheet column.
(d) A debit of $15,000 for Accumulated Depreciation - Equipment in the balance
sheet column.
28. Cash of $100 received at the time the service was performed was journalized
and posted as a debit to Cash $100 and a credit to Accounts Receivable $100.
Assuming the incorrect entry is not reversed, the correcting entry is:
(a) debit Service Revenue $100 and credit Accounts Receivable $100.
(b) debit Accounts Receivable $100 and credit Service Revenue $100.
(c) debit Cash $100 and credit Service Revenue $100.
(d) debit Accounts Receivable $100 and credit Cash $100.
29. The income statement for the month of June, 2008 of Delgado Enterprises
contains the following information:
Revenues $7,000
Expenses:
Wages Expense $2,000
Rent Expense 1,000
Supplies Expense 300
Advertising Expense 200
Insurance Expense 100
Total expenses 3,600
Net income $3,400
The entry to close the revenue account includes a
a. debit to Income Summary for $3,400.
b. credit to Income Summary for $3,400.
c. debit to Income Summary for $7,000.
d. credit to Income Summary for $7,000.
30. The interest coverage ratio is computed by dividing:
A) Operating income by annual interest expense.
B) Net income by annual interest expense.
C) Carrying value of bonds by cash interest payments.
D) Earnings per share by the prime interest rate.
31. Over the past year, the quick ratio for a firm increased while the current ratio
remained constant. Given this information, which one of the following must have
occurred? Assume all ratios have positive values.
A. current assets increased
B. current assets decreased
C. inventory increased
D. inventory decreased
E. accounts payable increased
32. Raw materials that physically become part of the product and can be traced to
specific units orbatches of product are called:
A) Raw materials sold.
B) Chargeable materials.
C) Goods in process.
D) Indirect materials.
E) Direct materials.
33. Which one of the following items is normally not a manufacturing cost?
A) Direct materials.
B) Factory overhead.
C) General and administrative expenses.
D) Direct labor.
E) Conversion cost.
34. A manufacturing company has a beginning finished goods inventory of $14,600,
raw materialpurchases of $18,000, cost of goods manufactured of $32,500, and an
ending finished goodsinventory of $17,800. The cost of goods sold for this company
is:
A) $21,200.
B) $29,300.
C) $32,500.
D) $47,100.
E) $27,600.
35. If fixed costs are $250,000, the unit selling price is $125, and the unit variable
costs are $73, what are the break-even sales in units (rounded to a whole number)?
a. 3,425 units
b. 2,381 units
c. 2,000 units
d. 4,808 units
36. If fixed costs are $1,200,000, the unit selling price is $240, and the unit
variable costs are $110, what is the amount ofsales in units (rounded to a whole
number) required to realize an operating income of $200,000?
a. 9,231 units
b. 12,000 units
c. 10,769 units
d. 5,833 unit
37. As production increases, variable costs per unit
a. stay the same
b. increase
c. decrease
d. either increase or decrease, depending on the fixed cost
38. The graph of a variable cost when plotted against its related activity base
appears as a
a. circle
b. rectangle
c. straight line
d. curved line
39. PVN Post received a 750 check from a customer for the-owing debt. The
transaction was incorrectly recorded as a debit to Cash 570 and a credit to Service
Revenue 570. The correcting entry is
A) Dr. Accounts Receivable, 750; credit Cash, 180 and Service Revenue, 570
B) Dr. Cash, 750 and Cr. Accounts Receivable, 750.
C) Dr. Cash, 180 and Service revenue, 570 ; Cr. Accounts receivable, 750$
D) Dr. Cash, 570; Cr. Accounts Receivable, 570.
40. The credit purchase of a delivery truck for $4,700 was posted to Delivery
Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect
would this error have on the trial balance?
A) The total of the Credit column of the trial balance will exceed the total of the
Debit column by $4,700
B) The total of the Credit column of the trial balance will exceed the total of the
Debit column by $9,400
C) The total of the Debit column of the trial balance will exceed the total of the
Credit column by $4,700
D) The total of the Debit column of the trial balance will exceed the total of the
Credit column by $9,400
B. Exercise
41. A company has a margin of safety of 25%, a contribution margin ratio of 30%,
and sales of $1,000,000.
(a) What is the break-even point in sales dollars?
(b) What is the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of
fixed costs is expected to change in the next year, how much additional operating
income can be earned by increasing sales by $110,000?
(d) Assume that through negotiation with the manufacturer the Super Sales
Company is able to reduce its contribution margin ratio to 25%. What is the
company's new break-even point in units and in sales dollars?
42. Given below are comparative balance sheets and an income statement for the
Dynamic Corporation:
All sales were made on account. Cash dividends declared during the year totaled
$66,550. Compute the following: