Ian McCarthy works for Willow Tree Homes. His rate of pay is $16.00 per hour and he
is paid 1 1/2 times the regular rate for all hours worked in excess of 40 per week.
During the last week of March of the current year he worked 45 hours. Ian is single and
claims 2 withholding allowances on his W-4 form. His weekly wages are subject to the
following deductions:
a. Employee (Federal) income tax (use withholding table provided in text).
b. Social Security tax at 6.2%.
c. Medicare tax at 1.45%.
d. Health insurance premium, $60.
e. Credit union deposit, $140.
f. United Way contribution, $15.
Required:
To prove the equality of the debit and credit balances in the general ledger accounts
after the closing entries have been journalized and posted, prepare the
a. balance sheet.
b. income statement.
c. adjustments.
d. post-closing trial balance.
The accounts in the chart of accounts are arranged in
a. alphabetical order.
b. numerical order.
c. chronological order.
d. the order they are created.
The rules by which employers must deposit Social Security and Medicare taxes can be
found in the
a. Circular E–Employer’s Tax Guide.
b. Circle K Tax Guide.
c. Federal Reserve Bank Tax Guide.
d. state tax guide.
The journal entry to close expense accounts includes
a. debiting the expense accounts and crediting Income Summary.
b. debiting Income Summary and crediting the expense accounts.
c. debiting the expense accounts and crediting the owner’s capital account.
d. debiting the expense accounts and crediting the drawing account.
If cash is paid for office rent, the transaction includes
a. debiting Rent Expense and crediting Cash.
b. debiting Rent Expense and crediting Accounts Payable.
c. debiting Rent Expense and crediting Capital.
d. debiting Cash and crediting Rent Expense.
The owner’s equity in a business amounted to $56,000 at the beginning of the year and
$100,000 at the end of the year. The owner had made no additional investments and had
withdrawn $19,000 during the year. The net income for the year amounted to
a. $76,000.
b. $67,000.
c. $63,000.
d. $188,000.
Every entry in the journal should include all of the following EXCEPT
a. the title of each account affected.
b. the amounts.
c. a brief description.
d. the balance of the accounts affected.
Whenever the bank mails a credit memo to the depositor indicating the amount of
interest credited to the account, the transaction that would be entered in the accounting
records of the depositor would include
a. debiting Interest Earned and crediting Cash.
b. debiting Interest Expense and crediting Cash.
c. debiting Cash and crediting Interest Earned.
d. debiting Cash and crediting Interest Expense.
The trial balance and information for year-end adjustments for Vilardi Company are as
follows:
a. Supplies on hand at year-end amounted to $420.
b. The equipment costing $50,000 has an expected life of five years and no salvage
value. Vilardi uses straight-line depreciation.
c. A premium of $1,500 for a one-year insurance policy was paid on November 1.
d. Wages earned by employees but not paid by year-end amounted to $900.
Prepare the necessary year-end adjustments on a 10-column work sheet (identify each
adjustment by letter), and complete the work sheet.
The steps in the journalizing process include all of the following EXCEPT
a. enter the balance.
b. enter the debit.
c. enter the date.
d. enter the credit.
If a business records revenues when earned, regardless of whether cash has been
received, and records expenses when they are incurred, the accounting system is a(n)
a. accrual basis of accounting.
b. cash basis of accounting.
c. modified cash basis of accounting.
d. revenue basis of accounting.
To reconcile the bank statement, which of the following amounts would be added to the
bank statement balance?
a. service charge
b. outstanding checks
c. deposits in transit
d. amounts collected by the bank for the depositor’s account
A petty cash fund of $200 has $17 in cash, $180 in petty cash vouchers, and $3 in
miscellaneous receipts not included with the petty cash vouchers. The debit to the Cash
Short and Over would be
a. $183.
b. $180.
c. $17.
d. $0.
A multi-column form used to assemble, compute, and summarize data for all employees
at the end of the payroll period is a(n)
a. payroll register.
b. employee earnings record.
c. payroll ledger.
d. payroll check.
An amount of an employee’s gross pay which is exempt from federal income tax
withholding is a(n)
a. additional withholding allowance.
b. withholding allowance.
c. zero bracket amount.
d. special withholding allowance.
Revenues received during an accounting period increase owner’s equity.
Depreciable cost is the amount of depreciation expense recorded for each accounting
period.
The relationship between the three basic accounting elements:
____________________, ____________________, and ____________________, can
be expressed in the form of a simple equation known as the accounting equation.
By December 31 each year, employers must furnish each employee with a Wage and
Tax Statement.
Liability accounts normally have debit balances.