Question 1

Studies have found that companies that make adjusting entries:

Accepted Answer

A)   generally report "higher quality" earnings.
B)   make themselves immune to fraud by doing so.
C)   never violate generally accepted accounting principles.
D)   generally do so with the intent of misleading investors.E) A) and D)
F) All of the above

Question 2

On December 31, a decision is made to accrue an expense and report a current liability. How many accounts will be included in this journal entry?

Accepted Answer

A)   None.
B)   One.
C)   Two.
D)   Three.E) C) and D)
F) B) and D)

Question 3

The closing process includes a transfer of the Dividends Declared account balance to the Retained Earnings account.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding the trial balance is correct?

Accepted Answer

A)   Trial balances are prepared after the financial statements to verify that the numbers are accurate.
B)   The primary purpose of the adjusted trial balance is to see whether revenues are greater than expenses.
C)   A trial balance is a check that the accounting records are still in balance after posting all entries to the accounts.
D)   The trial balance debit column total is the amount to be shown as Total Assets on the Balance Sheet.E) A) and D)
F) A) and C)

Question 5

Which of the following statements is not true?

Accepted Answer

A)   When net income is positive, revenue is greater than expenses.
B)   When net income is negative, retained earnings decreases, all other things equal.
C)   When net income is positive, stockholders' equity increases, all other things equal.
D)   When net income is negative there can be no dividends declared.E) B) and D)
F) A) and D)

Question 6

What is the amount of Total Assets to be reported on the Balance Sheet at December 31, 2010?

Accepted Answer

A)   $26,950
B)   $27,100
C)   $27,350
D)   $29,550E) All of the above
F) A) and B)

Question 7

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following errors cause net income to be overstated?

Accepted Answer

A)   Collection of accounts receivable is not recorded.
B)   Depreciation expense is not recorded.
C)   Revenue that has been earned but not yet collected has not been recorded.
D)   Unearned revenue that is now earned has not been recorded.E) B) and C)
F) A) and B)

Question 9

A company pays its workforce on Fridays for a five day workweek. The payroll for a week is $100,000. If the accounting year-end falls on a Tuesday, the adjusting journal entry to record this will include a

Accepted Answer

A)   debit to Salaries Expense $100,000.
B)   debit to Salaries Expense $40,000.
C)   credit to Salaries Payable $60,000.
D)   credit to Salaries Payable $100,000E) B) and C)
F) A) and D)

Question 10

Which of the following statements regarding the adjusted financial results is not true?

Accepted Answer

A)   Without adjustments, the financial statements present an incomplete and misleading picture of the company.
B)   Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance.
C)   Adjustments help the financial statements to present the best picture of whether the company's activities were profitable for the period.
D)   Adjustments help the financial statements to present the economic resources the company owns and owes at the end of the period.E) All of the above
F) B) and C)

Question 11

A company has an asset account, Prepaid Insurance, with a balance of $3,750 at the beginning of the month. The company used $980 of insurance during the month. Which of the following statements is true?

Accepted Answer

A)   The company should credit Insurance Expenses for $980 and debit Prepaid Insurance for $980.
B)   Retained earnings and stockholders' equity should decrease because of this transaction.
C)   The company should credit Accrued Liabilities for $980 and debit Insurance Expenses for $980.
D)   Retained earnings and stockholders' equity should be unchanged by this transaction.E) All of the above
F) B) and C)

Question 12

The sales revenue account has a credit balance of $367,200 at year end. After clo sing entries are made, the account will:

Accepted Answer

A)   have a debit balance of $367,200.
B)   have a zero balance.
C)   still have a credit balance of $367,200.
D)   be removed entirely from the general ledger.E) A) and D)
F) B) and D)

Question 13

The Treasury Bank Corporation had retained earnings at the end of December 31, 2010 of $450,000. During 2011, the company had net income of $170,000 and declared dividends of $20,000. Retained earnings on the balance sheet as of December 31, 2011 will be:

Accepted Answer

A)   $430,000.
B)   $600,000.
C)   $620,000.
D)   $640,000.E) C) and D)
F) B) and C)

Question 14

Which of the following statements is true?

Accepted Answer

A)   Retained earnings is a permanent account, while income statement accounts are temporary.
B)   Retained earnings and income statement accounts are all temporary accounts.
C)   Retained earnings and income statement accounts are all permanent accounts.
D)   Retained earnings is a temporary account, while income statement accounts are permanent accounts.E) B) and D)
F) A) and B)

Question 15

Which of the following statements about an adjusted trial balance is true?

Accepted Answer

A)   Debits should equal credits both before and after adjustments are made.
B)   Debits will equal credits after adjustments are made but not necessarily before.
C)   Debits will equal credits before adjustments are made but not necessarily after.
D)   Debits do not have to equal credits in the trial balance but they will in the income statement.E) C) and D)
F) B) and C)

Question 16

What is the amount of insurance expense that would be reported on the income statement for the year ended December 31, 2011?

Accepted Answer

A)   $4,000
B)   $18,000
C)   $6,000
D)   $2,000E) None of the above
F) A) and C)

Question 17

Corporate income taxes cannot be calculated until all other adjustments are made.

Accepted Answer

A) True 
 B)False

Question 18

What is the amount of Retained Earnings on the Balance Sheet at December 31, 2010?

Accepted Answer

A)   $100
B)   $2,300
C)   $3,900
D)   $1,700E) B) and C)
F) A) and B)

Question 19

After adjusting journal entries are prepared and posted, but before closing journal entries are prepared and posted, the balance in retained earnings is equal to

Accepted Answer

A)   zero.
B)   the difference between total assets and total liabilities.
C)   the amount that is to be reported in the current year's balance sheet.
D)   the amount that was reported on the previous year's balance sheet.E) A) and D)
F) A) and C)

Question 20

An example of an accrued expense is

Accepted Answer

A)   Interest accrued on a note receivable
B)   Interest accrued on a note payable
C)   Unearned revenue
D)   Accounts receivableE) B) and C)
F) All of the above

Exam 4: Adjustments, Financial Statements, and Financial Results

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

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Corporate income taxes cannot be calculated until all other adjustments are made.

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Studies have found that companies that make adjusting entries:

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A company pays its workforce on Fridays for a five day workweek. The payroll for a week is $100,000. If the accounting year-end falls on a Tuesday, the adjusting journal entry to record this will include a

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Which of the following statements is not true?

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Which of the following statements regarding the adjusted financial results is not true?

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Which of the following statements is true?

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On December 31, a decision is made to accrue an expense and report a current liability. How many accounts will be included in this journal entry?

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The closing process includes a transfer of the Dividends Declared account balance to the Retained Earnings account.

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An example of an accrued expense is

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What is the amount of Total Assets to be reported on the Balance Sheet at December 31, 2010?

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Which of the following errors cause net income to be overstated?

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The Treasury Bank Corporation had retained earnings at the end of December 31, 2010 of $450,000. During 2011, the company had net income of $170,000 and declared dividends of $20,000. Retained earnings on the balance sheet as of December 31, 2011 will be:

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A company has an asset account, Prepaid Insurance, with a balance of $3,750 at the beginning of the month. The company used $980 of insurance during the month. Which of the following statements is true?

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Which of the following statements about an adjusted trial balance is true?

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After adjusting journal entries are prepared and posted, but before closing journal entries are prepared and posted, the balance in retained earnings is equal to

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What is the amount of insurance expense that would be reported on the income statement for the year ended December 31, 2011?

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The sales revenue account has a credit balance of $367,200 at year end. After clo sing entries are made, the account will:

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What is the amount of Retained Earnings on the Balance Sheet at December 31, 2010?

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Which of the following statements regarding the trial balance is correct?

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