Ch.2 Quiz

Instructions
Please read the questions carefully.

This assessment is worth 100 points.

  1. The consumption of supplies within a business is an example of an external event.   (2 points)

      
      

  2. Owners' equity can be expressed as assets minus liabilities.   (2 points)

      
      

  3. Debits increase asset accounts and decrease liability accounts.   (2 points)

      
      

  4. The normal balance in an asset account is a credit.   (2 points)

      
      

  5. The general ledger includes all permanent and temporary accounts used by a company.   (2 points)

      
      

  6. The adjusted trial balance contains only permanent accounts.   (2 points)

      
      

  7. The adjusted trial balance reflects the effects of both external and internal transactions.   (2 points)

      
      

  8. An economic event is any event that affects the financial position of the company either directly or indirectly.   (2 points)

      
      

  9. Trial balances can be prepared immediately after transactions are journalized.   (2 points)

      
      

  10. Under perpetual inventory systems, the balance in the inventory account is reduced when products are sold.   (2 points)

      
      

  11. Under periodic inventory systems, no entries are made to a cost of goods sold account.   (2 points)

      
      

  12. Adjusting journal entries are required to comply with the realization and matching principles.   (2 points)

      
      

  13. Prepayments are transactions in which a cash transaction precedes expense or revenue recognition.   (2 points)

      
      

  14. Accruals occur when the cash flow precedes either revenue or expense recognition.   (2 points)

      
      

  15. The income statement summarizes the operating activity of a firm at a particular point in time.   (2 points)

      
      

  16. The balance sheet can be considered a change or flow statement.   (2 points)

      
      

  17. The statement of cash flows summarizes transactions that caused cash and cash equivalents to change during a reporting period.   (2 points)

      
      

  18. The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts.   (2 points)

      
      

  19. The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account.   (2 points)

      
      

  20. The post-closing trial balance represents the final step of the accounting processing cycle and contains the opening balances for accounts in the subsequent year.   (2 points)

      
      

  21. An example of an external event would not include:   (2 points)

    a.  
    b.  
    c.  
    d.  

  22. The accounting equation can be stated as:   (2 points)

    a.  
    b.  
    c.  
    d.  

  23. Debit and credit rules are:   (2 points)

    a.  
    b.  
    c.  
    d.  

  24. Temporary accounts would not include:   (2 points)

    a.  
    b.  
    c.  
    d.  

  25. An individual invested $15,000 in ABC corporation and received capital stock in exchange. ABC's journal entry to record this transaction would include a:   (2 points)

    a.  
    b.  
    c.  
    d.  

  26. A future economic benefit owned or controlled by an entity is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  27. Adjusting entries are primarily needed for:   (2 points)

    a.  
    b.  
    c.  
    d.  

  28. Prepayments occur when:   (2 points)

    a.  
    b.  
    c.  
    d.  

  29. Rickety Aircraft sold a birchcraft four-seater for $180,000, receiving a $30,000 down payment and a 12% note for the balance. The journal entry to record this sale would include a:   (2 points)

    a.  
    b.  
    c.  
    d.  

  30. Resources owned or controlled by an entity are called:   (2 points)

    a.  
    b.  
    c.  
    d.  

  31. The purpose of closing entries is to transfer:   (2 points)

    a.  
    b.  
    c.  
    d.  

  32. Special journals are used to record:   (2 points)

    a.  
    b.  
    c.  
    d.  

  33. A trial balance will detect an error caused by posting a debit:   (2 points)

    a.  
    b.  
    c.  
    d.  

  34. Financial statements are prepared:   (2 points)

    a.  
    b.  
    c.  
    d.  

  35. Cost of goods sold is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  36. Fox Run Leasing received $6,000 for 12 months rent in advance. How should Fox Run record this transaction?   (2 points)

    a.  
    b.  
    c.  
    d.  

  37. Devie Hardware Company, uses a perpetual inventory system. How should Devie record the sale of merchandise costing $620 for $960 on account?   (2 points)

    a.  
    b.  
    c.  
    d.  

  38. Splice Bonding Company purchased merchandise inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Splice record the purchase?   (2 points)

    a.  
    b.  
    c.  
    d.  

  39. Bland Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2000 and charged the $4,200 premium to insurance expense. At its December 31, 2000 year-end, Bland Foods would record which of the following adjusting entries?   (2 points)

    a.  
    b.  
    c.  
    d.  

  40. The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totalling $32,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?   (2 points)

    a.  
    b.  
    c.  
    d.  

  41. On December 31, 1999, Typical Fashions had balances in its accounts receivable and allowance for uncollectible accounts of $48,400 and $940, respectively. During 2000 Typical Fashions wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31, 2000. Bad debt expense for 2000 would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  42. Marquinn Manufacturing Company reported accrual basis net income of $36,000 for the third quarter. Inventory increased $8,000, accounts payable decreased $4,000, and accounts receivable decreased $3,000. Net income under the cash basis would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  43. Quigley's Marina reported cash basis net income of $42,000 for 2000. Over the year accrued liabilities increased $5,000, accounts receivable increased $2,000, and inventory decreased $4,000. Net income under the accrual basis would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  44. Millie's Auto Detailers maintains its records on the cash basis. During 2000, Millie's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Millie's accrual basis net income would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  45. Spat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Spat's collected $42,000 in tailoring fees, and paid $14,000 in expenses. Depreciation expense totaled $2,000. Accounts receivable increased $1,500, supplies increased $4,000, and accrued liabilities increased $2,500. Spat's accrual basis net income would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  46. Mazy Marts had a balance of $4,200 in its allowance for uncollectible accounts on December 31, 1999. During 2000 the company wrote off $3,100 in uncollectible accounts. Mazy wishes to have a balance of $3,900 in its allowance for uncollectible accounts at December, 31, 2000. Bad debt expense for 2000 would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  47. The Cloger Company sales for 2000 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2000 balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2000, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000. Net cash flows from these activities were   (2 points)

    a.  
    b.  
    c.  
    d.  

  48. In its first year of operations Best Corp. had income before tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best's net income for the year?   (2 points)

    a.  
    b.  
    c.  
    d.  

  49. Eve's Embers opened business on January 1, 2000, and paid for two insurance policies effective that date. The liability policy was $36,000 for eighteen-months, and the hazard and contents policy was $12,000 for a two-year term. What was the balance in Eve's prepaid insurance as of December 31, 2000?   (2 points)

    a.  
    b.  
    c.  
    d.  

  50. On November 1, 2000, Grinch Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What should be the balance of interest payable for the loan as of December 31, 2000?   (2 points)

    a.  
    b.  
    c.  
    d.  



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