REVIEW 2

Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. Which one does not decrease retained earnings?
a. Net income
b. Appropriation
c. dividend
d. net loss
2. Which of the following is considered to be unearned revenue?
a. Concert tickets sold for tonights performance.
b. Concert tickets sold yesterday on credit.
c. Concert tickets that were not sold for the current performance.
d. Concert tickets sold for next months performance.
3. An accrued expense can be described as an amount
a. paid and matched with earnings for the current period.
b. paid and not matched with earnings for the current period.
c. not paid and not matched with earnings for the current period.
d. not paid and matched with earnings for the current period.
4. Jack and Jill share income and losses in a 2:1 ratio after allowing for salaries to Jack of 24,000 and 30,000 to Jill.
Net income for the partnership is 66,000. Income should be divided as follows:
a. Jack, 24,000; Jill, 30,000
b. Jack, 24,000; Jill, 34,000
c. Jack, 30,000; Jill, 36,000
d. Jack, 32,000; Jill, 34,000
5. Which one is not a liability account ?
a. Cash Dividends payable
b. property dividends payable
c. Scrip dividends payable
d. Stock dividends payable
6. The adjusting entry to record the depreciation of equipment for the fiscal period is
a. debit Depreciation Expense; credit Equipment
b. debit Depreciation Expense; credit Accumulated Depreciation
c. debit Accumulated Depreciation; credit Depreciation Expense
d. debit Equipment; credit Depreciation Expense
7. The journal entry to issue 1,000,000 shares of 5 par common stock for 7.00 per share on January 2nd would be:
a. Jan 2 Cash
7,000,000
Common Stock
5,000,000
Paid-In Capital in Excess of Par - C/S
2,000,000
b. Jan 2 Cash
5,000,000
Common Stock
5,000,000
c. Jan 2 Cash
5,000,000
Paid-In Capital in Excess of Par - C/S
2,000,000
Common Stock
7,000,000
d. Jan 2 Cash
1,000,000
Common Stock
1,000.000
8. When the perpetual inventory system is used, the inventory sold is shown on the income statement as

a. cost of merchandise sold

b. purchases
c. purchases returns and allowances
d. net purchases
9. The inventory system employing accounting records that continuously disclose the amount of inventory is called
a. retail
b. periodic
c. physical
d. perpetual
10. When purchases of merchandise are made for cash, the transaction may be recorded with the following entry
a. debit Cash; credit Merchandise Inventory
b. debit Merchandise Inventory; credit Cash
c. debit Merchandise Inventory; credit Cash Discounts
d. debit Merchandise Inventory; credit Purchases
11. The balance in a deferred revenue account represents an amount that is
Earned

Collected

a. Yes
Yes
b. Yes
No
c. No
Yes
d. No
No
12. Tom Barnes contributed equipment, inventory, and 44,000 cash to the partnership. The equipment had a book
value of 35,000 and market value of 28,000. The inventory has a book value of 25,000, but only had a market
value of 12,000. due to obsolescence. The partnership also assumed a 15,000 note payable owed by Tom that was
originally used to purchase the equipment.
What amount should Toms capital account be recorded?
a. 104,000
b. 89,000
c. 69,000
d. 84,000
13. All adjusting entries always involve
a. only income statement accounts.
b. only balance sheet accounts.
c. the cash account.
d. at least one income statement account and one balance sheet account.
14. Goods in transit which are f.o.b. destination should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.
15. The Snow Corporation issues 10,000 shares of 50 par value preferred stock for cash at 60 per share. The entry to
record the transaction will consist of a debit to Cash for 600,000 and a credit or credits to
a. Preferred Stock for 600,000.
b. Preferred stock for 500,000 and Paid-in Capital in Excess of Par ValuePreferred Stock
for 100,000.
c. Preferred Stock for 500,000 and Retained Earnings for 100,000.
d. Paid-in Capital from Preferred Stock for 600,000.

16. Using accrual accounting, revenue is recorded and reported only

a. when cash is received without regard to when the services are rendered
b. when the services are rendered without regard to when cash is received
c. when cash is received at the time services are rendered
d. if cash is received after the services are rendered
17. The supplies account has a balance of $1,000 at the beginning of the year and was debited during the year for
$2,800, representing the total of supplies purchased during the year. If $750 of supplies are on hand at the end of
the year, the supplies expense to be reported on the income statement for the year is
a. $750
b. $3,550
c. $3,800
d. $3,050
The following is the adjusted trial balance for Steely Company.
Steely Company
Adjusted Trial Balance
For the Year ended December 31, 2008
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Bob Steely, Capital
Bob Steely, Withdrawals
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
Totals

6,130
2,300
750
13,400
1,200
1,700
5,000
12,000
870
6,600
1,450
900
475
150
75
26,500

26,500

18. Determine the net income (loss) for the period.

a. Net Income 26,500
b. Net Loss 870
c. Net Loss 3,550
d. Net Income 3,550
19. The column of the income statement show the debits are equal to $56,899 and credits are $60,333. What do this
information mean to the accountant?
a. Net income of $3,434
b. Net loss of $3,434
c. the accounts are out of balance
d. None are correct.
20. The adjusting entry for rent earned that is currently recorded in the unearned rent account is

21.

22.

23.

24.

25.

a. Unearned Rent, debit; Rent Revenue, credit

b. Rent Revenue, debit; Unearned Rent, credit
c. Unearned Rent, debit; Prepaid Rent, credit
d. Rent Expense, debit; Unearned Rent, credit
A corporation purchases 10,000 shares of its own 10 par common stock for 25 per share, recording it at cost.
What will be the effect on total stockholders' equity?
a. increase, 100,000
b. increase, 250,000
c. decrease, 100,000
d. decrease, 250,000
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
Stan and Ollie are partners who share income in the ratio of 2:3 and have capital balances of 50,000 and 30,000
respectively. Ray is admitted to the partnership and is given a 40% interest by investing 20,000. What is Stan's
capital balance after admitting Ray?
a. 20,000
b. 25,000
c. 42,000
d. 18,000
A change in the ownership of a partnership results in the
a. consolidating of the partnership
b. liquidating of the partnership
c. realization of the partnership
d. dissolution of the partnership
Data for an adjusting entry described as "accrued wages, $2,020" means to debit
a. Wages Expense and credit Wages Payable
b. Wages Payable and credit Wages Expense
c. Accounts Receivable and credit Wages Expense
d. Drawing and credit Wages Payable

26. Who are entitled to dividends?

a. Issued shares
b. Issued and subscribed shares
c. Issued and outstanding shares
d. Outstanding & subscribed shares
27. Jimmy, Jerry and Johnny decide to liquidate their partnership. All assets are sold and the liabilities are paid.
Following these transactions, the capital balances and profit and loss percentages are as follows: Jimmy, 27,000
and 30%; Jerry, (12,000) and 40%; Johnny, 43,000 and 30%. Jerry is unable to contribute any assets to reduce the
deficit. How much cash will Jimmy receive as a results of the partnership liquidation?
a. 27,000
b. 21,000
c. 23,400
d. 15,000
28. Adjusting entries are
a. the same as correcting entries
b. needed to bring accounts up to date and match revenue and expense

29.

30.

31.

32.

33.

34.

35.

c. optional under generally accepted accounting principles

d. rarely needed in large companies
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
Sky Company purchased equipment on November 1, 2010, by giving its supplier a 12-month, 9 percent note with a
face value of 48,000. The December 31, 2010, adjusting entry is
a. debit Interest Expense and credit Cash, 720.
b. debit Interest Expense and credit Interest Payable, 720.
c. debit Interest Expense and credit Interest Payable, 1,080.
d. debit Interest Expense and credit Interest Payable, 4,320.
The balance sheet of Marilyn and Monroe was as follows immediately prior to the partnership's being liquidated:
cash, 20,000; other assets, 160,000; liabilities, 40,000; Marilyn capital, 60,000; Monroe capital, 80,000. The
other assets were sold for 139,000. Marilyn and Monroe share profits and losses in a 2:1 ratio. As a final cash
distribution from the liquidation, Marilyn will receive cash totaling
a. 46,000
b. 51,000
c. 60,000
d. 49,500
A company with 100,000 authorized shares of 4 par common stock issued 40,000 shares at 8. Subsequently, the
company declared a 2% stock dividend on a date when the market price was 11 a share. What is the amount
transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?
a. 3,200
b. 6,400
c. 4,800
d. 8,800
The difference between the balance of a fixed asset account and the related accumulated depreciation account is
termed
a. historical cost
b. contra asset
c. book value
d. market value
Karren received 12,000 from a tenant on December 1 for four months' rent of an office. This rent was for
December, January, February, and March. If Karren debited Cash and credited Unearned Rental Income for 12,000
on December 1, what necessary adjustment would be made on December 31?
a. Unearned Rental Income .............
3,000
Rental Income ....................
3,000
b. Rental Income ......................
3,000
Unearned Rental Income ...........
3,000
c. Unearned Rental Income .............
9,000
Rental Income ....................
9,000
d. Rental Income ......................
9,000
Unearned Rental Income ...........
9,000
Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for 15,000. The
seller paid transportation costs of 1,000 and issued a credit memorandum for 5,000 prior to payment. What is the
amount of the cash discount allowable?

a. 160
b. 150
c. 140
d. 100
36. 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
37. Stocks were sold for cash to 10,000 stockholders on march 1, 2004. The Board of

Directors declared a cash dividend of 10,000 on November 30 to stockholders on

record as of December 15,2004 payable on December 20. the accountant should
not prepared and entry on
March 1
Nov. 30
Dec. 15
Dec. 20

a.
b.
c.
d.
38. A chart of accounts is
a. a subsidiary ledger.
b. a listing of all account titles.
c. a general ledger.
d. a general journal.
39. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry
necessary at the end of the fiscal period ending on Thursday is
a. debit Salaries Payable, $16,000; credit Cash, $16,000
b. debit Salary Expense, $16,000; credit Drawing, $16,000
c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000
d. debit Drawing, $16,000; credit Cash, $16,000
40. Credit sales would normally be recorded in the
a. voucher register.
b. sales journal.
c. general journal.
d. cash receipts journal.

REVIEW 2
Answer Section
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.

B
D
D
D
D
B
A
A
D
B
C
C
D
A
B
B
D
D
A
A
D
A
C
D
A
D
B
B
D
B
A
D
C
A
D
B
C
B
C
B