1. After preparing the work sheet, adjusting entries must be recorded in the __________ and then posted to the ______________.
general journal; general ledger
trial balance; financial statements
general journal; financial statements
none of the answers listed
2. Financial statements prepared during the fiscal year for periods of less than twelve months are called
temporary statements.
internal statements.
interim statements.
nominal statements.
external statements.
3. Which of the following statements is true?
Adjusting entries contain only balance sheet accounts.
Adjusting entries contains only income statement accounts.
Adjusting entries contains an income statement account and a balance sheet account.
none of the answers listed.
4. The entry to close Income Summary, assuming a net loss, would involve a
credit to cash.
debit to net income.
credit to Income Summary.
credit to capital.
5. The adjusting entry to record depreciation of equipment is
debit Accumulated Depreciation; credit Depreciation Expense.
debit Depreciation Expense; credit Accumulated Depreciation.
debit Equipment; credit Accumulated Depreciation.
debit Depreciation Expense; credit Depreciation Payable.
debit Accumulated Depreciation; credit Equipment.
6. Which of the following refers to the cost of an asset minus its accumulated depreciation?
Opportunity value
Future value
Real-time value
Nominal value
Book value
7. Which of the following are all temporary accounts?
Liabilities, revenue, and expenses
Revenue, liabilities, and the owner's Drawing
Assets, liabilities, and owner's Drawing
Revenue, expenses, and the Owner's Drawing
Liabilities and assets
8. The first step in the closing process is to close the _____________ account(s) into the ___________ account(s).
revenue, net income
income summary, revenue
expense, net income
revenue, income summary
9. If the Income Statement Debit and Credit columns on a work sheet are not equal after adding the respective columns,
an error has been made.
the company generated a net income.
the company incurred a net loss.
the liabilities must exceed the assets.
the company either generated a net income or incurred a net loss.
10. The second step in the closing process is to close the _____________ account(s) into the ___________ account(s).
expense, income summary
income summary, expense
expense, net income
revenue, income summary
11. The type of account and normal balance of Accumulated Depreciation are
contra asset, debit.
asset, credit.
asset, debit.
liability, credit.
contra asset, credit.
12. Which of the following terms refers to the cost of an equipment allocated as an expense over its estimated useful life?
Sunk cost
Depreciation
Adjustments
Book value
Mixed cost
13. ___________ are prepared during the fiscal year and cover a period of time less than twelve months.
Fiscal statements
Annual statements
Interim statements
Closing statements
14. The Income Statement credit column of the work sheet would include which of the following account(s)?
assets, drawing, expenses
expenses
accumulated depreciation, liabilities, capital, revenue
revenue
15. The last step in the closing procedure closes
the Income Summary account.
the Capital account.
the Drawing account.
the expense accounts.
all liability accounts.
16. Which of the following errors occur when an accountant does not record the entry to adjust accrued wages?
Understatement of Accounts payable in the balance sheet.
Overstatement of operating expense in the income statement.
Understatement of Wages Expense account in the income statement.
Overstatement of total liabilities in the balance sheet.
Understatement of total assets in the balance sheet.
17. The _______________ requires that revenue is recorded when it is received in cash and expenses are recorded when they are paid in cash.
accrual basis of accounting
cash basis of accounting
hybrid basis of accounting
GAAP basis of accounting
18. The most efficient sources for closing entry information are the
general ledger and general journal.
general journal and work sheet.
general ledger and work sheet.
work sheet and financial statements.
balance sheet and income statement.
19. When using the work sheet to prepare closing entries, which of the following statement is correct?
You should use all balances listed in the balance sheet columns.
You should use all balances listed in the balance sheet columns and the income statement columns.
You should use all balances listed in the income statement columns.
None of the answers listed
20. The Income Summary account would be reported on which financial statement?
Income Statement
Balance Sheet
Statement of Owner's Equity
None. The Income Summary account is not reported on a financial statement.
21. The post-closing trial balance will include
Accumulated Depreciation.
Depreciation Expense.
Drawing.
Rent Expense.
Income from Services.
22. The adjusting entry to record the amount of prepaid insurance used or expired would involve a
debit to Prepaid Insurance.
credit to Cash.
credit to Insurance Payable.
debit to Insurance Expense.
23. If revenues are larger than expenses, the resulting net income would be recorded
on the credit side of the income statement columns of the work sheet.
on the debit side of the balance sheet columns of the work sheet.
on the debit side of the income statement columns of the work sheet.
none of the answers listed.
24. Burnet Co. has a $4,050 balance in Prepaid Insurance that represents the premium paid in advance for a nine-month liability insurance policy. Assuming that 5 months of premium is still remaining, the adjusting entry would be recorded as:
Insurance Expense $1,800
Prepaid Insurance $1,800
Insurance Expense $2,250
Prepaid Insurance $2,250
Insurance Expense $1,800
Cash $1,800
Insurance Expense $2,250
Cash $2,250
25. The entry to record expired insurance is omitted. This error causes
assets to be overstated.
expenses to be overstated.
liabilities to be overstated.
liabilities to be understated.
an increase in liabilities on the balance sheet.