1) An ERP includes ________.
A) accounting information for financial statements
B) human resources information
C) information about production and distribution of products
D) all of these
2) A general journal provides a ________.
A) list of accounts and their debit or credit balances after the temporary accounts have been
closed
B) chronological record of transactions
C) list of financial statement line items and their debit or credit balances that is prepared before
recording adjusting entries
D) record of increases and decreases to each account
3) A general ledger provides a ________.
A) list of accounts and their debit or credit balances after the temporary accounts have been
closed
B) chronological record of transactions
C) list of financial statement line items and their debit or credit balances that is prepared before
recording adjusting entries
D) record of increases and decreases to each account
4) An unadjusted trial balance provides a ________.
A) list of accounts and their debit or credit balances after the temporary accounts have been
closed
B) chronological record of transactions
C) list of financial statement line items and their debit or credit balances that is prepared before
recording adjusting entries
D) record of increases and decreases to each account
5) An adjusted trial balance provides ________.
A) a list of accounts and their debit or credit balances after the temporary accounts have been
closed
B) a chronological record of transactions
C) a list of financial statement line items and their debit or credit balances that is prepared before
recording adjusting entries
D) none of these
6) A postclosing trial balance provides a ________.
A) list of accounts and their debit or credit balances after the temporary accounts have been
closed
B) chronological record of all transactions
C) list of financial statement line items and their debit or credit balances that is prepared before
recording adjusting entries
D) record of increases and decreases to each account
7) An auditor for Krupts, Inc. wants to know what caused Cash to increase by $1,000 on January
3, 2011. The best place to look in the accounting system is the ________.
A) adjusted trial balance
B) postclosing trial balance
C) journal
D) unadjusted trial balance
8) Subsidiary ledgers are ________.
A) the ledgers prepared by the subsidiaries and consolidated with the parent company
B) used instead of general ledgers
C) detailed records that support the balances in the general ledger
D) the unadjusted trial balance
9) The enterprise-wide resource planning system represents a single integrated information
system in which all of the company’s information is recorded.
10) The enterprise-wide resource planning system is the subsidiary ledger system of the
enterprise’s over-all general ledger system.
11) The general ledger accounting system described in the appendix is no longer used.
12) Transactions are posted from the journal to the trial balance.
13) Describe an enterprise-wide resource planning system.
Learning Objective B-2
1) Which of the following steps comes first?
A) Prepare the financial statements
B) Prepare adjusting journal entries
C) Post the journal entries to the general ledger
D) Close the temporary accounts
2) Which of the following steps comes first?
A) Prepare the financial statements
B) Prepare adjusting journal entries
C) Post the closing entries to the general ledger
D) Close the temporary accounts
3) Which of the following steps comes first?
A) Prepare the financial statements
B) Close the revenue accounts
C) Post the closing entries to the general ledger
D) Close the Dividend account
4) The following is a partial list of the steps in the accounting cycle.
1. Record the transactions in the journal
2. Prepare a postclosing trial balance
3. Record the adjusting entries and post them to the ledger
4. Prepare an unadjusted trial balance
5. Post the journal entries to the ledger
In what order do the above activities usually take place?
A) 4 1 3 5 2
B) 1 5 2 4 3
C) 1 5 4 3 2
D) 3 5 1 4 2
5) Which account has a normal debit balance?
A) Accumulated depreciation
B) Depreciation expense
C) Accounts payable
D) Common stock
6) Which account has a normal debit balance?
A) Accumulated depreciation
B) Accounts payable
C) Dividends
D) Unearned revenues
7) Which account has a normal credit balance?
A) Unearned revenue
B) Depreciation expense
C) Accounts receivable
D) Dividends
8) Which account has a normal credit balance?
A) Accounts receivable
B) Depreciation expense
C) Prepaid rent
D) Unearned revenue
9) Which of the following items are increased with debit entries?
A) Assets and liabilities
B) Assets and revenues
C) Assets and expenses
D) Assets and shareholders’ equity
10) Which of the following items is decreased with a debit entry?
A) Liabilities
B) Dividends
C) Expenses
D) Assets
11) Which of the following items are increased with credit entries?
A) Assets and liabilities
B) Liabilities and revenues
C) Assets and expenses
D) Assets and owners’ equity
12) Which of the following accounts is increased with a debit entry?
A) Accounts receivable
B) Accounts payable
C) Revenues
D) Common stock
13) Which of the following accounts is increased with a debit entry?
A) Accounts payable
B) Inventory
C) Rent expense
D) Accounts receivable
14) Which of the following accounts are increased with credit entries?
A) Common stock
B) Accounts payable
C) Revenues
D) All of these.
15) Which of the following accounts is decreased with a credit entry?
A) Common stock
B) Accounts payable
C) Accumulated depreciation
D) Inventory
16) Stockit, Inc. issued $2,000 of common stock on February 1, 2011. The journal entry to
record this transaction would include ________.
A) a credit to Common stock of $2,000
B) a debit to Cash of $2,000
C) a credit to Notes payable of $2,000
D) more than one of these
17) B. Row, Inc. borrows $2,000 from a bank on January 1, 2011 and agrees to pay it back two
years later with 7% interest. On January 1, 2011, the journal entry to record this transaction
would include ________.
A) a debit to Notes payable of $2,000
B) a debit to Cash of $2,000
C) a credit to Notes payable of $2,140
D) more than one of these
18) On January 1, B. Row, Inc. purchases $20,000 of equipment by paying $18,000 in cash and
issuing a $2,000, 6%, two-year note. The journal entry to record this purchase would include a
________.
A) debit to Equipment of $18,000
B) debit to Cash of $18,000
C) credit to Notes payable of $2,000
D) credit to Notes payable of $2,120
19) The journal entry to record the purchase of merchandise on account would include a
________.
A) credit to Accounts receivable
B) credit to Cash
C) credit to Accounts payable
D) debit to Cost of goods sold
20) The journal entry to record the sale of merchandise on account would include a ________.
A) credit to Accounts receivable
B) credit to Cash
C) debit to Accounts payable
D) debit to Cost of goods sold
21) On May 28, B-Z, Inc. received an order from a customer for $300 of services. On June 3, B-
Z received an advance payment of $300 for the services. On July 1, B-Z performed all of the
services for the customer. Which of the following statements is true?
A) The May 28 journal entry would include a credit to Revenues of $300.
B) The June 3 journal entry would include a credit to Revenues of $300.
C) The July 1 journal entry would include a debit to Cash of $300.
D) The July 1 journal entry would include a debit to Unearned revenues of $300.
22) On May 28, B-Z, Inc. received an order from a customer for $300 of services. On June 3, B-
Z received an advance payment of $300 for the services. On July 1, B-Z performed all of the
service for the customer. The journal entry to record the revenue earned would be recorded on
________.
A) May 28 and would include a credit to Revenue of $300
B) June 3 and would include a credit to Revenue of $300
C) July 1 and would include a credit to Revenue of $300
D) June 3 and July 1 and each entry would include a credit to Revenue of $150
23) Clean Sweep, Inc performed $300 in services and collected $200 at the time of service. The
journal entry to record this transaction would include a ________.
A) credit to Revenue of $200
B) debit to Cash of $300
C) credit to Accounts receivable of $300
D) debit to Accounts receivable of $100
24) On May 3, Doe, Inc. performed $2,000 of services for a client on account. On May 27, Doe,
Inc. received $500 of the amount owed. The remaining balance will be collected on June 2. The
May 3 journal entry will include ________.
A) a credit to Revenue of $2,000
B) a debit to Cash of $2,000
C) a credit to Accounts receivable of $2,000
D) no entry since no cash was collected
25) On May 3, Doe, Inc. performed $2,000 of services for a client on account. On May 27, Doe,
Inc. received $500 of the amount owed. The remaining balance will be collected on June 2. The
May 27 journal entry will include a ________.
A) credit to Revenue of $500
B) credit to Accounts receivable of $500
C) credit to Revenue of $2,000
D) credit to Accounts payable of $500
26) Proffitts, Inc. earned $5,500 in revenues of which $300 has not been collected. The journal
entry to record this transaction includes ________.
A) a debit to Cash of $5,200 and a credit to Revenues of $5,200
B) debits to Cash of $5,200 and Accounts receivable of $300 and a credit to Revenues of $5,500
C) a debit to Revenues of $5,200 and a credit to Cash of $5,200
D) a debit to Revenues of $5,500 and credits to Cash of $5,200 and Accounts receivable of $300
27) Revs, Inc. collected $5,000 from a customer on May 15 for services to be performed in June.
The May 15 journal entry to record this transaction is a debit to ________.
A) Cash of $5,000 and a credit to Revenues of $5,000
B) Cash of $5,000 and a credit to Accounts receivable of $5,000
C) Unearned revenue of $5,000 and a credit to Cash of $5,000
D) Cash of $5,000 and a credit to Unearned revenue of $5,000
28) Twisted Pretzel, Inc. purchased $800 of supplies on account on May 28. The supplies will be
used in June. The May 28 journal entry to record this purchase is a debit to ________.
A) Supplies expense of $800 and a credit to Cash of $800
B) Supplies of $800 and a credit to Cash of $800
C) Supplies expense of $800 and a credit to Accounts payable of $800
D) Supplies of $800 and a credit to Accounts payable of $800
29) Journals, Inc. purchased $800 of supplies on account on May 3. On May 28, it paid $500 of
the amount it owed for supplies. The May 28 journal entry to record the payment is a debit to
________.
A) Supplies expense of $500 and a credit to Cash of $500
B) Accounts payable of $500 and a credit to Cash of $500
C) Supplies expense of $500 and a credit to Accounts payable of $500
D) Supplies of $500 and a credit to Accounts payable of $500
30) Nadir, Inc. collected $800 of its accounts receivable in May for services performed in April.
The journal entry to record this transaction in May is a debit to ________.
A) Cash of $800 and a credit to Accounts receivable of $800
B) Cash of $800 and a credit to Revenue of $800
C) Accounts receivable of $800 and a credit to Revenue of $800
D) Accounts receivable of $800 and a credit to Cash of $800
31) Minx, Inc. sold $1,000 of goods that cost $600 to a customer on account. The journal entry
to record this transaction includes ________.
A) a debit to Accounts receivable of $400 and credit to Sales of $400
B) debits to Accounts receivable of $1,000 and Cost of goods sold of $600 and credits to
Revenue of $1,000 and Inventory of $600
C) a debit to Accounts receivable of $1,000 and a credit to Inventory of $1,000
D) a debit to Accounts receivable of $1,000 and a credit to Cost of goods sold of $1,000
32) Transactions are first recorded in the general ledger and then posted to the journal.
33) Transactions are first recorded in the journal and then posted to the general ledger.
34) Assets are decreased with debit entries.
35) Assets are decreased with credit entries.
36) Liabilities are increased with debit entries.
37) Liabilities are increased with credit entries.
38) Expenses are increased with debit entries.
39) Revenues are increased with credit entries.
40) Unearned revenue is increased with credit entries.
41) Unearned revenue is increased with debit entries.
42) On May 1, 2011, Tim’s Ware sold merchandise for $1,000. Twenty percent was paid in cash
and the rest was sold on account. The merchandise originally cost Tim’s Ware $600. No
references are needed.
a. Record the sale.
Date
Transaction
Debit
Credit
b. Record the cost of the sale.
Date
Transaction
Debit
Credit
43) On June 30, 2011, Team Shirt purchased $500 of supplies for cash. Record this transaction.
No references are needed.
Date
Transaction
Debit
Credit
Date
Transaction
Debit
Credit
Date
Transaction
Debit
Credit
Date
Transaction
Debit
Credit
44) On June 8, 2011, T’s, Inc. sold merchandise for $3,000 on account. The merchandise
originally cost T’s, Inc. $2,000. Record (a) the sale and (b) the cost of the sale in the T-accounts
below.
(a) 3,000
2,000(b)
45) Given the information in the T-accounts, explain the transaction or event that resulted in each
journal entry (a) through (f) below:
Cash Notes Payable Common Stock
(a) 50,000
(b) 30,000
(e) 60,000
40,000 (c)
20,000 (f)
30,000(b)
50,000 (a)
Accounts receivable
(d) 10,000
60,000(e)
Computer
(c)40,000
Service revenue
100,000(d)
Salary Expense
(f) 20,000
(a)
Issued $50,000 of stock
(b)
Borrowed $30,000
(c)
Purchased a $40,000 computer
(d)
Provided $100,000 of services on account
(e)
Collected $60,000 of accounts receivable
Paid $20,000 of salaries
46) Using the information in the T-accounts below, prepare an unadjusted trial balance for T-
Ball, Inc.:
Cash Notes Payable Common Stock
(a) 50,000
(b) 30,000
(e) 60,000
40,000 (c)
20,000 (f)
30,000(b)
50,000 (a)
Accounts receivable
(d) 10,000
60,000(e)
Computer
(c)40,000
Service revenue
100,000(d)
Salary Expense
(f) 20,000
T-Ball, Inc.
Unadjusted Trial Balance
December 31, 2011
Debit
Credit
Totals
47) Use the following code to identify the normal balance of each of the accounts listed below:
DR: debit
CR: credit
1. Cash
2. Common stock
3. Supplies
4. Supplies expense
5. Accounts receivable
6. Sales
7. Unearned revenue
8. Equipment
9. Accumulated depreciation
10. Depreciation expense
48) Show the proper chronological order of the following steps in the accounting cycle by
writing 1. for the first step through 4. for the last step.
________ a. Prepare the financial statements
________ b. Record journal entries in the journal
________ c. Post the journal entries to the general ledger
________ d. Prepare a postclosing trial balance
49) Show the proper chronological order of the following steps in the accounting cycle by
writing 1. for the first step through 4. for the last step.
________ a. Prepare an unadjusted trial balance
________ b. Close the temporary accounts
________ c. Prepare an adjusted trial balance
________ d. Prepare and post adjusting journal entries
50) Show the proper chronological order of the following steps in the accounting cycle by
writing 1. for the first step through 8. for the last step.
________ a. Prepare the financial statements
________ b. Prepare an unadjusted trial balance
________ c. Record journal entries in the journal
________ d. Close the temporary accounts
________ e. Post the journal entries to the general ledger
________ f. Prepare an adjusted trial balance
________ g. Prepare a postclosing trial balance
________ h. Prepare and post adjusting journal entries
Learning Objective B-3
1) The adjusting entry to accrue interest owed on a note payable will include a ________.
A) credit to Interest revenue
B) credit to Interest receivable
C) credit to Interest expense
D) credit to Interest payable
2) The adjusting entry to record the prepaid rent used during the month will include a ________.
A) credit to Cash
B) debit to Prepaid rent
C) debit to Rent expense
D) credit to Accumulated depreciation
3) The adjusting entry to record depreciation on equipment will include a ________.
A) credit to Equipment
B) credit to Depreciation expense
C) credit to Accumulated depreciation
D) credit to Cash
4) On January 1, 2011, Truckin, Inc. purchased a $100,000 truck with an estimated useful life of
10 years and a $0 residual value. The adjusting entry to record depreciation on the truck for the
year ended December 31 will include a ________.
A) credit to Truck of $10,000
B) credit to Depreciation expense of $10,000
C) credit to Accumulated depreciation of $10,000
D) debit to Accumulated depreciation of $10,000
5) On November 1, 2011, Lucky Luke, Inc. borrowed $20,000 on a 3-month, 9% note. The
adjusting entry to record interest for the year ended December 31 would include a ________.
A) credit to Interest payable of $300
B) credit to Cash of $300
C) debit to Interest expense of $600
D) credit to Cash of $600
6) Soles for Souls, Inc. borrows $2,000 from a bank on February 1, 2011 and agrees to pay it
back two years later with 6% interest. On February 1, 2011, the entry recorded in the journal
would include a ________.
A) credit to Notes receivable of $2,000
B) credit to Cash of $2,000
C) debit to Interest expense of $120
D) credit to Notes payable of $2,000
7) In its first month of business, Anudu, Inc. purchased supplies for $5,000 on account. During
the month, Anudu, Inc. paid $1,000 of the amount owed for the supplies. On May 31, Anudu,
Inc. had only $2,000 of supplies left. The May 31 adjusting entry would include a ________.
A) debit to Supplies of $2,000
B) debit to Supplies expense of $2,000
C) credit to Supplies of $3,000
D) credit to Cash of $3,000
8) Chutes, Inc. had supplies of $600 on May 1. It purchased $800 of supplies on account on May
3. At May 31, $500 of supplies remained. The adjusting entry to record on May 31 is a debit to
________.
A) Supplies expense of $900 and a credit to Cash of $900
B) Supplies of $500 and a credit to Cash of $500
C) Supplies expense of $900 and a credit to Supplies of $900
D) Accounts payable of $500 and a credit to Supplies of $500
9) Ledgers, Inc. had prepaid insurance of $500 on May 1 of which $300 had expired as of May
31. The adjusting entry to record on May 31 is a debit to ________.
A) Insurance expense of $300 and a credit to Cash of $300
B) Prepaid insurance of $200 and a credit to Cash of $200
C) Insurance expense of $200 and a credit to Prepaid insurance of $200
D) Insurance expense of $300 and a credit to Prepaid insurance of $300
10) Lay-Z Floors, Inc.’s Unearned revenue balance on its December 31, 2011 unadjusted trial
balance was $3,000. As of December 31, 2011, Lay-Z Floors had earned $1,000 of the amounts
collected in advance. The adjusting entry to record is a debit to ________.
A) Unearned revenue of $1,000 and a credit to Revenue of $1,000
B) Cash of $1,000 and a credit to Revenue of $1,000
C) Accounts receivable of $2,000 and a credit to Revenue of $2,000
D) Revenue of $2,000 and a credit to Unearned revenue of $2,000
11) On November 1, 2011, Miracles, Inc. borrowed $30,000 on 12% note with both interest and
principal due on February 1, 2012. The adjusting entry to record interest for the year ended
December 31, 2011 is a debit to ________.
A) Interest expense of $300 and a credit to Cash of $300
B) Interest expense of $600 and a credit to Cash of $600
C) Interest expense of $300 and a credit to Interest payable of $300
D) Interest expense of $600 and a credit to Interest payable of $600
12) On October 1, Tim’s Ware accepted a $500 advance payment from a customer and recorded
a debit to Cash and a credit to Unearned revenue. On October 10, Tim’s Ware delivered the
merchandise to the customer, but made no additional journal entry. Before Tim’s Ware prepares
financial statements, the company must ________.
A) do nothing. The cash receipt was properly recorded when the advance payment was received
from the customer
B) prepare a closing entry to reduce the balance in Unearned revenue to zero
C) record another journal entry that debits Cash and credits Sales
D) prepare an adjusting entry that debits Unearned revenue and credits Sales
13) Which of the following will cause the adjusted trial balance to be out of balance?
A) Transactions were not posted from the journal to the ledger.
B) An adjusting entry to record $400 of prepaid insurance that had expired was recorded as a
debit to Prepaid insurance and a credit to Insurance expense.
C) The gain on the sale of a truck was not posted to the general ledger; however, the cash, truck
and accumulated depreciation accounts were properly posted.
D) An adjusting entry to record the amount of prepaid insurance that had expired was recorded
as a $100 debit to Insurance expense and a $100 credit to Prepaid insurance. However, the $100
amount of the adjusting entry was wrong because $300 of insurance had actually expired.