ACC101 - Fundamental of Accounting Principles

Quiz Test 2:
Name of Student: Nguyen Gia Bao SE172137

1. A company's fiscal year must correspond with the calendar year.

TRUE OR FALSE

Answer:

2. The revenue recognition principle is the basis for making adjusting entries that pertain to
unearned and accrued revenues.
TRUE OR FALSE

Answer:

3. Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and
accrued items.
TRUE OR FALSE

Answer:

4. The cash basis of accounting is an accounting system in which revenues are reported when
cash is received and expenses are reported when cash is paid.
TRUE OR FALSE

Answer:

5. Recording expenses early overstates current-period income; recording expenses late

understates current period income.
TRUE OR FALSE

Answer:

6. The accrual basis of accounting reflects the principle that revenue is recorded when it is
earned, not when cash is received.
TRUE OR FALSE

Answer:

7. Accrued expenses reflect transactions where cash is paid before a related expense is
recognized.
TRUE OR FALSE

Answer:

8. A company's month-end adjusting entry for Insurance Expense is $1,000. If this entry is
not made then expenses are understated by $1,000 and net income is overstated by $1,000.
TRUE OR FALSE

Answer:
9. Ben and Jerry's had total assets of $149,501,000, net income of $6,242,000, and net sales
of $209,203,000. Its profit margin was 2.98%.
TRUE OR FALSE

Answer:

10. Depreciation expense for a period is the portion of a plant asset's cost that is allocated to
that period.
TRUE OR FALSE

Answer:

11. A company purchased $6,000 worth of supplies in August and recorded the purchase in
the Supplies account. On August 31, the fiscal year-end, the supplies count equaled $3,200.
The adjusting entry would include a $2,800 debit to Supplies.

TRUE OR FALSE

Answer:

12. A broad principle that requires identifying the activities of a business with specific time
periods such as months, quarters, or years is the:
A. Operating cycle of a business.
B. Time period principle.
C. Going-concern principle.
D. Matching principle.
E. Accrual basis of accounting.

Answer:

13. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three, or six-month periods.
B. That are prepared before any adjustments have been recorded.
C. That show the assets above the liabilities and the liabilities above the equity.
D. Where revenues are reported on the income statement when cash is received and expenses
are reported when cash is paid.
E. Where the adjustment process is used to assign revenues to the periods in which they are
earned and to match expenses with revenues
Answer:

14. The length of time covered by a set of periodic financial statements is referred to as the:
A. Fiscal cycle.
B. Natural business year.
C. Accounting period.
D. Business cycle.
E. Operating cycle.

Answer:
15. Adjusting entries:
A. Affect only income statement accounts.
B. Affect only balance sheet accounts.
C. Affect both income statement and balance sheet accounts.
D. Affect only cash flow statement accounts.
E. Affect only equity accounts.

Answer:

16. Closing the temporary accounts at the end of each accounting period:
A. Serves to transfer the effects of these accounts to the owner's capital account on the
balance sheet.
B. Prepares the withdrawals account for use in the next period.
C. Gives the revenue and expense accounts zero balances.
D. Causes owner's capital to reflect increases from revenues and decreases from expenses and
withdrawals.
E. All of these.

Answer:

17. Journal entries recorded at the end of each accounting period to prepare the revenue,
expense, and withdrawals accounts for the upcoming period and to update the owner's capital
account for the events of the period just finished are referred to as:
A. Adjusting entries.
B. Closing entries.
C. Final entries.
D. Work sheet entries.
E. Updating entries.

Answer:

18. The closing process is necessary in order to:

A. calculate net income or net loss for an accounting period.
B. ensure that all permanent accounts are closed to zero at the end of each accounting period.
C. ensure that the company complies with state laws.
D. ensure that net income or net loss and owner withdrawals for the period are closed into the
owner's capital account.
E. ensure that management is aware of how well the company is operating.

Answer:

19. Which of the following is the usual final step in the accounting cycle?
A. Journalizing transactions.
B. Preparing an adjusted trial balance.
C. Preparing a post-closing trial balance.
D. Preparing the financial statements.
E. Preparing a work sheet.

Answer:
 20. A classified balance sheet differs from an unclassified balance sheet in that
A. a unclassified balance sheet is never used by large companies.
B. a classified balance sheet normally includes only three subgroups.
C. a classified balance sheet presents information in a manner that makes it easier to calculate
a company's current ratio.
D. a classified balance sheet will include more accounts than an unclassified balance sheet for
the same company on the same date.
E. a classified balance sheet cannot be provided to outside parties.

Answer:

21. The Unadjusted Trial Balance columns of a company's work sheet show the balance in
the Office Supplies account as $750. The Adjustments columns show that $425 of these
supplies were used during the period. The amount shown as Office Supplies in the Balance
Sheet columns of the work sheet is:
A. $325 debit.
B. $325 credit.
C. $425 debit.
D. $750 debit.
E. $750 credit.

Answer:

22. A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance
columns of the work sheet. The Adjustments columns show expired insurance of $200. This
adjusting entry results in:
A. $200 decrease in net income.
B. $200 increase in net income.
C. $200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D. $200 of prepaid insurance.
E. An error in the financial statements.

Answer:

23. The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments
columns contain entries for the following:
1. Office supplies used during the period, $1,200.
2. Expiration of prepaid rent, $700.
3. Accrued salaries expense, $500.
4. Depreciation expense, $800.
5. Accrued service fees receivable, $400.
The Adjusted Trial Balance columns total is:
A. $80,400.
B. $84,000.
C. $85,700.
D. $85,900.
E. $87,600.

Answer:
24. At the beginning of 2009, a company's balance sheet reported the following balances:
Total Assets = $125,000; Total Liabilities = $75,000; and Owner's Capital = $50,000. During
2009, the company reported revenues of $46,000 and expenses of $30,000. In addition,
owner's withdrawals for the year totaled $20,000. Assuming no other changes to owner's
capital, the balance in the owner's capital account at the end of 2009 would be:
A. $66,000.
B. $86,000.
C. $(4,000).
D. $46,000.
E. cannot be determined from the information provided.

Answer:

25. After preparing and posting the closing entries to close revenues (and gains) and expenses
(and losses) into the income summary, the income summary account has a debit balance of
$33,000. The entry to close the income summary account will include:
A. a debit of $33,000 to owner withdrawals.
B. a credit of $33,000 to owner withdrawals.
C. a debit of $33,000 to income summary.
D. a debit of $33,000 to owner capital.
E. a credit of $33,000 to owner capital.

Answer:

26. The purpose of reversing entries is to:

A. simplify the recording of certain journal entries in the future.
B. correct an error made in a previous journal entry.
C. ensure that closing entries have been properly posted to the ledger accounts.
D. make certain that only permanent accounts are carried forward into the next accounting
period.
E. complete a required step in the accounting cycle.

Answer:

27. Reversing entries:

A. are necessary when journal entries have been incorrectly recorded.
B. are a required step in the accounting cycle.
C. will often result in abnormal account balances in some accounts.
D. are required only if the company uses accounting software to record journal entries.
E. must be made before preparing the post-closing trial balance.

Answer:

28. Reversing entries:

A. Are optional.
B. Are linked to accrued assets and liabilities that were created by adjusting entries at the end
of the previous accounting period.
C. Are used to simplify a company's recordkeeping.
D. Are dated the first day of the new accounting period.
E. All of these.

Answer:
29. Which of the following statements is true?
A. Owner's capital must be closed each accounting period.
B. A post-closing trial balance should include only permanent accounts.
C. Information on the work sheet can be used in place of preparing financial statements.
D. By using a work sheet to prepare adjusting entries you need not post these entries to the
ledger accounts.
E. Closing entries are only necessary if errors have been made.

Answer:

30. An error is indicated if the following account has a balance appearing on the post-closing
trial balance:
A. Office Equipment.
B. Accumulated Depreciation-Office Equipment.
C. Depreciation Expense-Office Equipment.
D. Ted Nash, Capital.
E. Salaries Payable.

Answer:

ANSWERS:
1 False 2 True 3 True 4 True 5 True 6 True 7 False
8 True 9 True 10 True 11 True 12 B 13 A 14 C
15 C 16 E 17 B 18 D 19 C 20 C 21 A
22 A 23 D 24 D 25 D 26 A 27 C 28 E
29 B 30 C