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200) The Retained Earnings account had a beginning credit balance of $26,000. During the
period, the business had a net loss $12,000, and the company paid dividends of $8,000. The
ending balance in the Retained Earnings account is:
A) $6,000.
B) $30,000.
C) $22,000.
D) $14,000.
201) In the first three years of operations, Lindsey Corporation reported net income(loss) of
$(150,000), $100,000, and $250,000. At the end of the third year, Lindsey Corporation has a
balance of $120,000 in its Retained Earnings account. What is the total amount of dividends
Lindsey Corporation paid over the three years?
A) $130,000.
B) $120,000.
C) $80,000.
D) $380,000.
202) For the first three years of operations, the company reports net income of $1,000, $2,000,
and $3,000, and pays dividends of $500, $1,000, and $1,000. What is the balance of retained
earnings at the end of the third year?
A) $2,000.
B) $2,500.
C) $3,500.
D) $6,000.
203) The closing entry for expenses includes:
A) A debit to Dividends and a credit to all expense accounts.
B) A debit to Retained Earnings and a credit to all expense accounts.
C) A debit to Revenues and a credit to Retained Earnings.
D) A debit to Revenues and a credit to all expense accounts.
204) Which of the following is a possible closing entry?
A) Debit Cash, credit Service Revenue.
B) Debit Cash, credit Retained Earnings.
C) Debit Service Revenue, credit Retained Earnings.
D) Debit Dividends, credit Retained Earnings.
205) Frosty Inc. has the following balances on December 31 prior to closing entries:
Revenues
$
35,000
Retained Earnings, Jan. 1
10,000
Cash
7,000
Expenses
23,000
Accounts Payable
4,000
Dividends
1,000
Supplies
18,000
Based upon the balances above, what net adjustment would be made to Retained Earnings due to
closing entries?
A) Increase of $11,000.
B) Increase of $13,000.
C) Increase of $12,000.
D) Increase of $14,000.
206) A list of all accounts and their balances after posting closing entries is referred to as:
A) A trial balance.
B) An adjusted trial balance.
C) A post-closing trial balance.
D) An accounting trial balance.
207) A post-closing trial balance:
A) Is a list of all accounts and their balances after adjusting entries.
B) Is a list of all accounts and their balances before adjusting entries.
C) Is a list of all accounts and their balances after closing entries.
D) Is a trial balance adjusted for cash-basis accounting.
208) Which one of the following accounts would NOT have a balance after closing entries?
A) Deferred Revenue.
B) Supplies.
C) Prepaid Rent.
D) Dividends.
209) Which of the following accounts is(are) listed in a post-closing trial balance?
A) Prepaid Rent.
B) Accounts Payable.
C) Salaries Expense.
D) Two of these three accounts would be included in a post-closing trial balance.
85
210) Which of the following statements is true regarding the post-closing trial balance?
A) The post-closing trial balance will be distributed to investors and other stakeholders along
with the financial statements.
B) The post-closing trial balance is a report prepared before the adjustments and the financial
statements to prove that debits equal credits.
C) The post-closing trial balance is an internal report prepared as the last step in the accounting
cycle.
D) The post-closing trial balance proves that all entries have been made correctly and accurately
during the accounting period.
86
Match each term associated with accrual-basis and cash-basis accounting with its most
appropriate description.
A) A company pays cash for supplies in May and uses those supplies in June. The expense is
recorded in June.
B) A company receives cash from customers in May and performs services in June. The revenue
is recorded in May.
C) A company pays cash for supplies in May and uses those supplies in June. The expense is
recorded in May.
D) Formal concept which states that sales of products or services are recorded in the period they
are provided to customers.
E) Informal concept in accounting which states that expenses are recorded in the same period as
the revenues they help to generate.
F) A company receives cash from customers in May and performs services in June. The revenue
is recorded in June.
211) Cash-basis expense
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
212) Accrual-basis expense
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
213) Cause-and-effect
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
87
214) Accrual-basis revenue
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
215) Revenue recognition principle
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
216) Cash basis revenue
Difficulty: 2 Medium
Topic: Accrual-Basis Accounting; Accrual-Basis Compared with Cash-Basis Accounting
Learning Objective: 03-01 Understand when revenues and expenses are recorded.; 03-02
Distinguish between accrual-basis and cash-basis accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
88
Match each type of adjusting entry with its definition.
A) Record a revenue in the current period that will be collected in cash in a future period.
B) Record an expense in the current period that will be paid in cash in a future period.
C) Receive cash in the current period that will be recorded as a revenue in a future period.
D) Pay cash (or have an obligation to pay cash) in the current period that will be recorded as an
expense in a future period.
217) Deferred revenue
Difficulty: 2 Medium
Topic: Adjusting Entries - Prepaid Expenses; Adjusting Entries - Deferred Revenues; Adjusting
Entries - Accrued Expenses; Adjusting Entries - Accrued Revenues
Learning Objective: 03-03 Demonstrate the purposes and recording of adjusting entries.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
218) Accrued expenses
Difficulty: 2 Medium
Topic: Adjusting Entries - Prepaid Expenses; Adjusting Entries - Deferred Revenues; Adjusting
Entries - Accrued Expenses; Adjusting Entries - Accrued Revenues
Learning Objective: 03-03 Demonstrate the purposes and recording of adjusting entries.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
219) Accrued revenue
Difficulty: 2 Medium
Topic: Adjusting Entries - Prepaid Expenses; Adjusting Entries - Deferred Revenues; Adjusting
Entries - Accrued Expenses; Adjusting Entries - Accrued Revenues
Learning Objective: 03-03 Demonstrate the purposes and recording of adjusting entries.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
220) Prepaid expenses
Difficulty: 2 Medium
Topic: Adjusting Entries - Prepaid Expenses; Adjusting Entries - Deferred Revenues; Adjusting
Entries - Accrued Expenses; Adjusting Entries - Accrued Revenues
Learning Objective: 03-03 Demonstrate the purposes and recording of adjusting entries.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
89
Match each term related to financial statements with its description.
A) A list of accounts showing total assets equal total liabilities plus total stockholders' equity.
B) The distinction between current and long-term activities.
C) A list of all accounts and their balances after adjusting entries have been prepared.
D) A list of accounts showing total revenues minus total expenses equal net income.
E) A statement showing the change in the balance of common stock and retained earnings for the
period.
221) Statement of stockholders' equity
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Financial Statements - Income Statement; Financial Statements-
Statement of Stockholders Equity; Financial Statements - Balance Sheet
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-05
Prepare financial statements using the adjusted trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
222) Adjusted trial balance
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Financial Statements - Income Statement; Financial Statements-
Statement of Stockholders Equity; Financial Statements - Balance Sheet
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-05
Prepare financial statements using the adjusted trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
223) Classified
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Financial Statements - Income Statement; Financial Statements-
Statement of Stockholders Equity; Financial Statements - Balance Sheet
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-05
Prepare financial statements using the adjusted trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
90
224) Balance sheet
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Financial Statements - Income Statement; Financial Statements-
Statement of Stockholders Equity; Financial Statements - Balance Sheet
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-05
Prepare financial statements using the adjusted trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
225) Income statement
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Financial Statements - Income Statement; Financial Statements-
Statement of Stockholders Equity; Financial Statements - Balance Sheet
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-05
Prepare financial statements using the adjusted trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
91
Match each term related to closing entries with its description.
A) Revenues, expenses, and dividends.
B) List of permanent accounts and their balances.
C) List of permanent and temporary accounts and their balances.
D) Assets, liabilities, and stockholders' equity.
E) Transfer of temporary balances to retained earnings.
226) Temporary accounts
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Closing Entries; Post-Closing Trial Balance
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-06
Demonstrate the purposes and recording of closing entries.; 03-07 Post closing entries and
prepare a post-closing trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
227) Post-closing trial balance
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Closing Entries; Post-Closing Trial Balance
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-06
Demonstrate the purposes and recording of closing entries.; 03-07 Post closing entries and
prepare a post-closing trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
228) Closing entries
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Closing Entries; Post-Closing Trial Balance
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-06
Demonstrate the purposes and recording of closing entries.; 03-07 Post closing entries and
prepare a post-closing trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
229) Adjusted trial balance
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Closing Entries; Post-Closing Trial Balance
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-06
Demonstrate the purposes and recording of closing entries.; 03-07 Post closing entries and
prepare a post-closing trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
92
230) Permanent accounts
Difficulty: 2 Medium
Topic: Adjusted Trial Balance; Closing Entries; Post-Closing Trial Balance
Learning Objective: 03-04 Post adjusting entries and prepare an adjusted trial balance.; 03-06
Demonstrate the purposes and recording of closing entries.; 03-07 Post closing entries and
prepare a post-closing trial balance.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
231) For each transaction below, calculate the amount of revenue to be recognized in the current
period using accrual-basis accounting:
(a) Performed $24,000 of services during the month and received full cash payment from
customers at the time of service.
(b) Performed $9,000 of services during the month and billed customers. Customers are expected
to pay next month.
(c) Received $12,000 cash from customers for services to be provided next month.
93
232) For each transaction below, calculate the amount of expense to be recognized in the current
period using accrual-basis accounting:
(a) Paid $3,500 on account for supplies purchased last period. All supplies were used last month.
(b) Paid $5,000 cash for advertising in the current period.
(c) Employees worked in the current period but will not be paid until the following period,
$4,500.
233) A company receives $2,500 cash from customers for services to be provided next month.
Record the cash receipt using (a) accrual-basis accounting and (b) cash-basis accounting.
234) A company performs $2,800 of services during the month and bills customers. The
customers are expected to pay next month. Record the customer billing using (a) accrual-basis
accounting and (b) cash-basis accounting.
235) A company performs $4,200 of services during the month and receives full cash payment
from customers at the time of service. Record the cash receipt using (a) accrual-basis accounting
and (b) cash-basis accounting.
236) A company pays $1,700 cash to employees for work performed during the month. Record
the payment using (a) accrual-basis accounting and (b) cash-basis accounting.
237) A company receives a $700 utility bill for the current month but does not plan to pay the
bill until early next month. Record the receipt of the utility bill using (a) accrual-basis accounting
and (b) cash-basis accounting.
238) A company pays $1,200 on account for supplies purchased last month. All supplies were
used last month. Record the payment using (a) accrual-basis accounting and (b) cash-basis
accounting.
239) A company maintains its records using cash-basis accounting. During the year, the
company received cash from customers, $34,000, and paid cash for salaries, $24,000. At the
beginning of the year, customers owe the company $3,000. By the end of the year, customers
owe $5,000. At the beginning of the year, the company owes salaries of $4,000. At the end of the
year, the company owes salaries of $5,000. Determine cash-basis net income and accrual-basis
net income for the year.
240) The following data are taken from the cash-basis accounting records of Myerson Company
for the year ended December 31, 2021:
Selected Data as of December 31, 2021
Customers billed in 2021 for services provided
$400,000
Cash collections in 2021 for accounts billed in 2020
20,000
Cash collections in 2021 for accounts billed in 2021
300,000
Cash paid for supplies purchased in 2021
12,000
Supplies remaining at the end of 2021
2,000
Cash paid for salaries in 2021
10,000
Cash paid for annual rent on March 1, 2021
18,000
Calculate the amount of revenues and expenses for 2021 under cash-basis accounting.
241) The following data are taken from the cash-basis accounting records of Myerson Company
for the year ended December 31, 2021:
Selected Data as of December 31, 2021
Customers billed in 2021 for services provided
$400,000
Cash collections in 2021 for accounts billed in 2020
20,000
Cash collections in 2021 for accounts billed in 2021
300,000
Cash paid for supplies purchased in 2021
12,000
Supplies remaining at the end of 2021
2,000
Cash paid for salaries in 2021
10,000
Cash paid for annual rent on March 1, 2021
18,000
Calculate the amount of revenues and expenses for 2021 under accrual-basis accounting.
242) At the beginning of the period, a company reports a balance in office supplies of $500.
During the period, the company purchases an additional $3,500 of office supplies for cash. By
the end of the period, only $700 of office supplies remains. Record the period-end adjusting
entry.
243) Suppose a company rents office space for one year, paying $12,000 ($1,000/month) in
advance on September 1. Record the adjusting entry on December 31.
244) A company purchases one year of flood insurance in advance on May 1, paying $24,000
($2,000/month). Record the adjusting entry on December 31.
245) A company purchases new equipment for $24,000 cash on August 1, 2021. At the time of
purchase, the equipment is expected to be used in operations for four years (48 months) and have
no resale or scrap value at the end of the four years. The company depreciates the equipment
evenly over the 48 months ($500/month). Record the adjusting entry for depreciation on
December 31, 2021.
246) Suppose a customer rents a vehicle for four months from Rent-A-Car on October 1, paying
$4,000 ($1,000/month). Record Rent-A-Car's adjusting entry on December 31.
247) A company pays its employees $5,600 every two weeks ($400/day). The current two-week
pay period ends on December 26, 2021, and employees are paid $5,600. The next two-week pay
period ends on January 9, 2022, and employees will be paid $5,600. Record the adjusting entry
on December 31, 2021.
248) A company borrows $20,000 with 8% interest on October 1, 2021. This amount plus
interest is due on September 30, 2022. Record the adjusting entry on December 31, 2021.
249) A company lends $30,000 with 10% interest on May 1, 2021. This amount plus interest is
due on April 30, 2022. Record the adjusting entry on December 31, 2021.
