78) Which of the following journal entries is correct when a company has incurred an expense
for work performed but has not yet paid for theses wages to employees?
A)
Wages expense
xxx
Operating income
xxx
B)
Wages expense
xxx
Wages payable
xxx
C)
Wages payable
xxx
Cash
xxx
D)
Retained earnings
xxx
Wages expense
xxx
79) McNeil Company owed its employees for services performed and recorded a liability for the
wages owed the employees. Which of the following correctly describes the impact on the
financial statements when the employee wages are subsequently paid?
A) Operating expenses are increased.
B) Retained earnings decreases.
C) Operating income does not change.
D) Total assets remain the same.
80) Which of the following journal entries correctly records the receipt of a utility bill, which
will be paid for in later weeks?
A)
Utilities payable
xxx
Utilities expense
xxx
B)
Utilities expense
xxx
Utilities payable
xxx
C)
Utilities expense
xxx
Retained earnings
xxx
D)
Retained earnings
xxx
Utilities payable
xxx
81) Which of the following is not a proper application of the revenue recognition principle?
A) Recording the sale of merchandise on credit as sales revenue.
B) Recording rent received in advance as unearned rent revenue.
C) Recording interest revenue when cash is collected rather than when earned.
D) Reducing the unearned service revenue account for service revenue performed at the end of
the accounting period.
82) Which of the following is an example of revenue or expense to be recognized in the current
period’s income statement?
A) Cash received from a client before the service is provided.
B) Inventory purchased for sale to customers.
C) Wages owed to employees who worked during the period.
D) Cash collected from an account receivable.
83) Which of the following liability accounts is likely to be satisfied without a future cash
payment?
A) Wages payable.
B) Unearned subscriptions revenue.
C) Accounts payable.
D) Taxes payable.
84) A company receives a $50,000 cash deposit from a customer on October 15 but will not
deliver the goods until November 20. Which of the following statements is true?
A) Cash will be reported on the statement of cash flows for the month of November.
B) Revenue will be recorded and reported on the income statement for October.
C) A liability will be reported on the balance sheet at the end of October.
D) A prepaid asset will be reported on the balance sheet at the end of October.
85) A company purchased $20,000 of inventory during February and will pay for it during
March. Which of the following statements is false, assuming the inventory was sold during
March?
A) The company’s accounts payable will include the $20,000 on the February month-end balance
sheet.
B) The statement of cash flows will report an operating cash outflow of $20,000 during March.
C) The income statement will report cost of goods sold of $20,000 during February.
D) The company’s inventory will include the $20,000 on the February month-end balance sheet.
86) Which of the following correctly applies the revenue recognition principle?
A) Recognize revenue in December 2019 for products manufactured but not yet delivered to
customers.
B) Recognize cash received in advance from customers as revenue when the product is not yet
shipped.
C) Not recognize service revenue in 2019 until the cash is received in 2020.
D) Recognize revenue in December 2019 for products sold but not yet paid for in full.
87) Which of the following accounts normally have a credit balance?
A) Unearned revenue; Prepaid rent; Sales revenue.
B) Sales revenue; Expenses; Retained earnings.
C) Sales revenue; Cash; Unearned revenue.
D) Accounts payable; Retained earnings; Sales revenue.
88) During 2019, Sensa Corporation incurred operating expenses amounting to $100,000, of
which $75,000 was paid in cash; the balance will be paid during 2020. Which of the following is
correct for the 2019 year-end balance sheet?
A) Stockholders’ equity decreases $75,000 and assets decrease $75,000.
B) Assets decrease $100,000 and stockholders’ equity decreases $100,000.
C) Assets decrease $100,000, liabilities increase $25,000, and stockholders’ equity decreases
$100,000.
D) Stockholders’ equity decreases $100,000, assets decrease $75,000, and liabilities increase
$25,000.
89) Which of the following accounts normally have a debit balance?
A) Prepaid expenses, Wages payable, Dividends.
B) Cash, Utilities expense, Accounts receivable.
C) Retained earnings, Cost of goods sold, Wages expense.
D) Utilities expense, Prepaid expenses, Wages payable.
90) Which of the following statements is false?
A) Expense accounts have a debit balance.
B) Revenue accounts have a credit balance.
C) Gain accounts have a credit balance.
D) Loss accounts have a credit balance.
91) Which of the following statements is correct?
A) Expense accounts result in decreases in net income and stockholders’ equity and therefore
have credit balances.
B) Revenue accounts result in increases in net income and stockholders’ equity and therefore
have debit balances.
C) Loss accounts result in decreases in net income and stockholders’ equity and therefore have
debit balances.
D) Gain accounts result in increases in net income and stockholders’ equity and therefore have
debit balances.
92) Which of the following journal entries correctly records a transaction where services were
provided to a customer on account?
A)
Cash
xxx
Service revenue
xxx
B)
Unearned revenue
xxx
Service revenue
xxx
C)
Accounts receivable
xxx
Service revenue
xxx
D)
Service revenue
xxx
Accounts receivable
xxx
93) Which of the following is correct when land costing $20,000 is sold for $29,000? The land
was a component of property and equipment on the balance sheet.
A) Revenues are debited for $29,000.
B) Cost of goods sold is credited for $20,000.
C) Gain on sale of land is credited for $9,000.
D) Operating income increases $29,000.
94) Boone’s Cleaning Service performed cleaning services during December 2019, but had not
collected any cash from its customers as of December 31, 2019. What impact did performing
these services have on the accounting equation?
A) Performing the service increased assets and increased liabilities.
B) Performing the service increased assets and increased stockholders’ equity.
C) Performing the service increased assets and decreased stockholders’ equity.
D) Performing the service decreased liabilities and decreased stockholders’ equity.
95) On December 31, 2019, Avery Corporation paid $10,000 for next year’s insurance policy.
This transaction should be recorded as follows by Avery:
A)
Insurance expense
10,000
Insurance payable
10,000
B)
Prepaid insurance
10,000
Insurance payable
10,000
C)
Prepaid insurance
10,000
Cash
10,000
D)
Insurance expense
10,000
Cash
10,000
96) Mama June Pizza Company sold land costing $39,000 for $51,000 cash. Which of the
following statements concerning the land sale is correct?
A) The land account was credited for $51,000.
B) The revenue account was debited for $51,000.
C) Operating income increased $12,000.
D) Income before income taxes increased $51,000.
97) Which of the following statements is false when Mama June Pizza Company paid $47,000
cash on accounts owed to suppliers?
A) The cash account was credited for $47,000.
B) Accounts payable was debited for $47,000.
C) Supplies expense was increased by $47,000.
D) Operating income was not changed by the payment to the suppliers.
98) Which of the following journal entries is correct assuming that Mama June Pizza Company
received cash for interest earned on investments?
A)
Cash
xxx
Interest revenue
xxx
B)
Interest revenue
xxx
Cash
xxx
C)
Cash
xxx
Sales revenue
xxx
D)
Sales revenue
xxx
Cash
xxx
99) Mama June Pizza Company determined that dough, sauce, cheese and other ingredients
costing $8,700 were used to make pizzas during July. Which of the following statements is false
with respect to the use of the ingredients?
A) Cost of goods sold was debited for $8,700.
B) Operating expenses increased $8,700.
C) Operating income decreased $8,700.
D) The Supplies account was debited for $8,700.
100) Zeppelin Company received cash during January for services to be provided in February.
Which of the following statements does not accurately describe the impact on the financial
statements when Zeppelin provides the services during February?
A) Unearned revenue decreased and was debited.
B) Revenue increased and was credited.
C) Stockholders’ equity will increase.
D) Total assets will increase.
101) Which of the following describes the transaction resulting in a journal entry with a debit to
Wages Payable and a credit to Cash?
A) Wages expense has been incurred but is unpaid.
B) Cash was used to pay for wages that were previously recorded as an expense.
C) Cash was used to pay for wages that were not previously recorded as an expense.
D) Cash was used to prepay employee wages.
102) Which of the following statements is correct?
A) Recording revenue results in an increase in assets or a decrease in liabilities.
B) Recording revenue results in an increase in assets or a decrease in stockholders’ equity.
C) Recording expenses results in a decrease in assets or a decrease in liabilities.
D) Recording expenses results in an increase in assets or an increase in liabilities.
103) Which of the following statements is false?
A) The unearned revenue account has a credit balance.
B) The revenue account has a credit balance.
C) An expense account has a debit balance.
D) A prepaid expense account has a credit balance.
104) Which of the following accounts does not have a debit balance?
A) Prepaid expenses.
B) Insurance expense.
C) Unearned revenue.
D) Investments.
105) Which of the following accounts does not have a credit balance?
A) Gain on sale of land.
B) Interest revenue.
C) Unearned revenue.
D) Rent expense.
106) Which of the following transactions would not be reported as cash flow from operating
activities on a cash flow statement?
A) Cash collected from customers.
B) Cash paid to suppliers.
C) Cash paid for employee wages.
D) Cash paid for dividends to the company’s stockholders.
107) Which of the following transactions would be reported as cash flow from operating
activities on a cash flow statement?
A) Cash paid to purchase equipment.
B) Cash paid to acquire land.
C) Cash paid for dividends to the company’s stockholders.
D) Cash paid for wages.