Achievement Test 2: Chapters 3 and 4 Name _________________________
Financial Accounting, 9e Instructor ______________________
Section # _______ Date _________
Part
I
II
III
IV
V
Total
Points
39
12
24
8
17
100
Score
PART I — MULTIPLE CHOICE (39 points)
Instructions: Designate the best answer for each of the following questions.
____ 1. The Accumulated Depreciation account is a(n)
a. contra asset account.
b. liability account.
c. asset account.
d. operating expense account.
____ 2. A post-closing trial balance contains
a. real and nominal accounts.
b. permanent and temporary accounts.
c. balance sheet or permanent accounts.
d. balance sheet and revenue accounts.
____ 3. Which of the following is false with regard to a worksheet?
a. Before the adjusting entries are recorded in the general journal, they are recorded
in the adjustments columns of the worksheet.
b. A worksheet is a required step in the accounting cycle.
c. When a worksheet is used, the preparation of financial statements is still required.
d. If a credit is needed to balance the income statement columns on the worksheet, a
debit will be needed to balance the balance sheet columns
____ 4. On January 1, Boswell borrowed $20,000 at 6% interest for 1 year. Boswell accrues
interest on the note monthly. If no adjusting entry is made at the end of January, what
will be the impact on the financial statements for January?
a. Revenues will be overstated by $100
b. Expenses will be understated by $1,200
c. Liabilities will be understated by $2,000
d. Net Income will be overstated by $100
____ 5. What is the purpose of a post-closing trial balance?
a. Prove that all income statement accounts have been properly posted.
b. Prove the equality of income statement account balances.
c. Prove the equality of all account balances.
d. Prove the equality of permanent account balances.
Test Bank for Financial Accounting, Ninth Edition
AT2- 2
____ 6. The average time that is required to go from “cash to cash” in producing revenues is
referred to as the
a. business cycle.
b. operating cycle.
c. fiscal year cycle.
d. accounting cycle.
____ 7. On February 2, Jerry’s Printing Service received a payment of $9,000 for contracted
printing work that will be completed over the next 3 months. As of the end of February,
the company had completed 1/3 of the work. The adjusting journal entry at the end of
February for unearned revenue will include
a. a debit to Unearned Service Revenue for $9,000
b. a credit to Unearned Service Revenue for $6,000
c. a credit to Service Revenue for $3,000
d. a debit to Cash for $3,000
____ 8. On February 1, Andrews Company purchased printing supplies of $2,500. A month
end inventory shows that the company has supplies of $600 on hand. The adjusting
entry for this prepaid expense will include
a. a debit to Supplies for $600 and a credit to Supplies Expense for $600
b. a debit to Supplies Expense and a credit to Cash for $1,900
c. a debit to Supplies Expense and a credit to Supplies for $1,900
d. a debit to Supplies and a credit to Cash for $600
___ 9. Hillman Company purchased printing equipment at a cost of $24,000. The monthly
depreciation on the equipment is $400. As of December 31, 2015, the balance in
Accumulated Depreciation is $9,600. The book value of the equipment reported on the
December 31, 2015 balance sheet will be
a. $24,000
b. $23,600
c. $14,400
d. $9,600
____ 10. Malone Co. recorded a payment of cash on account to a creditor by debiting Accounts
Receivable and crediting Cash. The correcting entry is
a. debit Accounts Payable and credit Cash.
b. debit Cash and credit Accounts Receivable.
c. debit Accounts Payable and credit Accounts Receivable.
d. Some other correcting entry is necessary.
____ 11. On October 1, 2015, Greer Company signed a $20,000 six-month note payable that
bears interest at a rate of 6%. Since no interest has been previously accrued on this
note, the total interest to be accrued on this note at December 31, 2015, is
a. $100.
b. $300.
c. $600.
d. $1,200.
Achievement Test 2
AT2- 3
____ 12. Which of the following is false?
a. Current assets are listed in the order of magnitude.
b. Obligations expected to be paid after one year are classified as long-term
liabilities.
c. Intangible assets are non-current resources that do not have physical substance.
d. Property, plant, and equipment are tangible resources of a relatively permanent
nature that are used in the business and not intended for sale.
____ 13. Omission of a prepaid expense adjusting entry will have the following effects:
Total Assets Total Expenses Total Stockholders’ Equity
a. No Effect Understated Overstated
b. Overstated Understated Overstated
c. Overstated No Effect Overstated
d. Overstated No Effect No Effect
PART II — WORKSHEET COMPLETION (12 points)
Instructions: Complete the partial worksheet presented below, inserting additional labels as
needed.
MILTON SERVICES AGENCY
Partial Worksheet
For the Month Ended September 30, 2015
——————————————————————————————————————————
Adjusted Income Balance
Trial Balance Statement Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
——————————————————————————————————————————
Cash 4,500
Accounts Receivable 3,000
Supplies 3,075
Prepaid Insurance 2,000
Prepaid Rent 500
Equipment 35,000
Accum. Depreciation—Equipment 6,000
Notes Payable 14,000
Accounts Payable 12,000
Unearned Service Revenue 2,000
Common Stock 9,825
Dividends 2,000
Service Revenue 18,000
Interest Expense 400
Salaries and Wages Expense 8,000
Supplies Expense 1,500
Rent Expense 2,000
Insurance Expense 1,200
Salaries and Wages Payable 1,300
Interest Payable 50
Totals 63,175 63,175
Test Bank for Financial Accounting, Ninth Edition
AT2- 4
PART III—ADJUSTING ENTRIES (24 points)
The ledger accounts given below, with an identification number for each, are used by Riley
Company. Instructions: Prepare appropriate adjusting entries for the year ended
December 31, 2015, by placing the appropriate identification number(s) in the debit and credit
columns provided and the dollar amount in the adjoining column. Item 0 is given as an example.
1. Notes Receivable 10. Unearned Service Revenue
2. Accounts Receivable 11. Notes Payable
3. Interest Receivable 12. Interest Revenue
4. Supplies 13. Service Revenue
5. Prepaid Insurance 14. Depreciation Expense
6. Equipment 15. Salaries and Wages Expense
7. Accumulated Depreciation—Equipment 16. Interest Expense
8. Salaries and Wages Payable 17. Supplies Expense
9. Interest Payable 18. Insurance Expense
——————————————————————————————————————————
Account(s) Account(s) Dollar
Entry Information Debited Credited Amount
——————————————————————————————————————————
0. Interest of $500 is accrued on a note 3 12 $500
receivable at December 31, 2015.
——————————————————————————————————————————
1. Riley has three employees who each earn $120 $
per day. At December 31, four days’ salaries
have been earned but not paid.
——————————————————————————————————————————
2. A customer paid Riley $16,000 on December 1, $
2015, for services to be rendered from December 1
through January 31, 2016. The receipt was credited
to a liability account. Half of the services were
rendered in December.
——————————————————————————————————————————
3. Riley purchased equipment costing $48,000 on $
January 1, 2014. Monthly depreciation is $400.
——————————————————————————————————————————
4. Riley provided services to a customer in 2015 at a $
fee of $500. This fee has not yet been received or billed.
——————————————————————————————————————————
5. Riley started the year with no supplies on hand. $
They purchased $6,000 in supplies during the year
and have $1,500 on hand at December 31. Supplies
were debited to an asset account when purchased.
——————————————————————————————————————————
6. Riley paid $15,000 for a three-year insurance policy $
on July 1, 2015, debiting an asset account at that time.
——————————————————————————————————————————
7. Riley borrowed $30,000 by signing a three-month, $
6% interest, note payable on November 1, 2015.
——————————————————————————————————————————
8. Riley purchased short-term investments on November 1, $
2015. Interest of $300 per month has been earned but
not received prior to December 31.
——————————————————————————————————————————
Achievement Test 2
AT2- 5
PART IV—CLOSING ENTRIES (12 points)
Remington Company had the following income statement at December 31, 2015:
Remington Company
Income Statement
For the Year Ended Dec. 31, 2015
Service Revenue $10,900
Expenses:
Supplies Expense $3,300
Maintenance and Repairs Expense 2,000
Utilities Expense 800
Total expenses 6,100
Net income $ 4,800
No dividends were paid during the year.
Prepare the closing entries at December 31, 2015.
PART V—BALANCE SHEET CLASSIFICATIONS (13 points)
Instructions: Match the account titles given below with the appropriate balance sheet classifi-
cation. An individual classification may be used more than once, or not at all. An account may
also not appear in the balance sheet.
Classifications
A. Current Assets E. Current Liabilities
B. Long-term Investments F. Long-term Liabilities
C. Property, Plant, and Equipment G. Stockholders’ Equity
D. Intangible Assets H. Not separately presented on the balance sheet
Account Titles
____ 1. Common Stock ____ 8. Service Revenue
____ 2. Unearned Rent Revenue ____ 9. Prepaid Insurance
____ 3. Supplies ____ 10. Copyrights
____ 4. Accounts Payable ____ 11. Accounts Receivable
____ 5. Trademarks ____ 12. Dividends
____ 6. Salaries and Wages Payable ____ 13. Accumulated Depreciation
____ 7. Equipment
Test Bank for Financial Accounting, Ninth Edition
AT2- 6
Solutions — Achievement Test 2: Chapters 3 and 4
Achievement Test 2
AT2- 7
PART IV—CLOSING ENTRIES (12 points)