Which of the following statements about the adjusted and post-closing trial balances is
correct?
A) The adjusted trial balance is prepared after the financial statements to verify that the
numbers are accurate.
B) The primary purpose of the post-closing trial balance is to see whether revenues are
greater than expenses.
C) The post-closing trial balance is a check that the accounting records are still in
balance after posting all closing entries to the accounts.
D) The post-closing trial balance debit column total is the amount to be shown as Total
Assets on the Balance Sheet.
A company has the following paid-in capital:
Use the information above to answer the following question. If the company pays a
$35,000 dividend, and the preferred stock is cumulative and two years’ dividends are in
arrears, what is the amount the common stockholders will receive?
A) $17,000
B) $23,000
C) $29,000
D) $35,000
The following data came from the financial statements of a company:
What is the company’s times interest earned ratio?
A) 130
B) 129
C) 122
D) 139
Which of the following statements about issued and outstanding stock is correct?
A) Outstanding stock includes all stock issued by a corporation.
B) Issued stock equals the sum of outstanding stock and treasury stock.
C) Issued stock is equal to authorized stock.
D) Outstanding stock includes stock in the hands of investors, as well as treasury stock
in the hands of the corporation.
Your company receives advance payment in October for services that are provided
during November. Which of the following statements is correct?
A) A liability is recorded in October; revenue will be recorded in November.
B) Revenue is recorded in October and an expense will be recorded in November.
C) An expense is recorded in October; revenue will be recorded in November.
D) Revenue and expenses are recorded in October.
Park & Company was recently formed with a $5,000 investment in the company by
stockholders in exchange for common stock. The company then borrowed $2,000 from
a local bank, purchased $1,000 of supplies on account, and also purchased $5,000 of
equipment by paying $2,000 in cash and signing a promissory note for the balance.
Based on these transactions, the company’s total assets are:
A) $7,000.
B) $9,000.
C) $10,000.
D) $11,000.
The Xu Corporation uses a periodic inventory system. The company has a beginning
inventory of 300 units at $5 each on January 1. Xu purchases 500 units at $4 each in
February and 200 units at $6 each in March. There were no additional purchases or
sales during the remainder of the year.
Use the information above to answer the following question. Xu sells 150 units during
the quarter. If Xu uses the weighted average method, what is its cost of goods sold?
A) $600
B) $705
C) $750
D) $900
A credit would make which of the following accounts decrease?
A) Common Stock
B) Inventory
C) Notes Payable
D) Retained Earnings
The Prepaid Insurance account has a normal balance of $3,750 at the beginning of the
month. The company used $980 of insurance coverage during the month. Which of the
following statements is correct?
A) The company should credit Insurance Expense for $980 and debit Prepaid Insurance
for $980.
B) Retained earnings will decrease and stockholders’ equity will increase.
C) The company should debit Insurance Expense for $980 and credit Prepaid Insurance
for $980.
D) Retained earnings and stockholders’ equity will both increase.
The following account balances are taken from the December 31, 2015, financial
statements of ABZ Advertising Company. The company uses accrual basis accounting.
The following activities occurred in 2016:
1> Performed advertising services on account, $55,000.
2> Received cash payments on account, $10,400.
3> Received deposits from customers for advertising services to be performed in 2017,
$2,500.
4> Made payments to suppliers on account, $5,000.
5> Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was
on account and unpaid as of the end of the year.
Use the information above to answer the following question. What is the amount of
revenue that will be reported on the income statement for the year ended December 31,
2016?
A) $57,500.
B) $39,000.
C) $55,000.
D) $50,000.
Which of the following is not a correct statement?
A) Expense accounts are closed with credits.
B) Revenue accounts are closed with debits.
C) The Dividends account is closed with a credit.
D) The Retained Earnings account is closed with a debit.
Cash and cash equivalents include assets that:
A) have stable long-term value.
B) are short-term, highly liquid, and purchased by the entity within three months of
maturity.
C) consistently grow in value over the long run.
D) are expected to be used up within a year.
An example of an account that could be included in an accrual adjustment for revenue
is:
A) Interest Receivable.
B) Interest Payable.
C) Unearned Revenue.
D) Cash.
Net income was $418,600 in the current year and $364,000 in the prior year. The
year-to-year percentage change in net income is closest to:
A) 15%.
B) 55%.
C) 87%.
D) 13%.
Which of the following statements regarding the expanded accounting equation is
correct?
A) Debits reduce expenses.
B) The total credits recorded in revenue accounts must equal the total debits recorded in
expense accounts.
C) Across all revenue accounts, the total value of all debits must equal the total value of
all credits.
D) Credits increase revenues.