Description
Financial & Managerial Accounting 13th Edition Carl Warren James M Reeve Jonathan Duchac-Test Bank
Sample Questions
Instant Download With Answers
FinMan_Chapter_02_Analyzing_Transactions
- Accounts are records of increases and decreases in individual financial statement items.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose
ACCT.ACBSP.APC.02 – GAAP
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A chart of accounts is a listing of accounts that make up the journal.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose
ACCT.ACBSP.APC.02 – GAAP
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The chart of accounts should be the same for each business.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.03 – Business Forms
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accounts payable are accounts that you expect will be paid to you.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Consuming goods and services in the process of generating revenues results in expenses.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Prepaid expenses are an example of an expense.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The Unearned Revenues account is an example of a liability.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The Dividends account is an expense.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accounts in the ledger are usually maintained in alphabetical order.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Depending on the account title, the right side of the account is referred to as the credit side.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- To determine the balance in an account, always subtract credits from debits.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- An account in its simplest form has three parts to it: a title, an increase side, and a decrease side.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The T account got its name because it resembles the letter “T.”
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The right hand side of a T account is known as a debit and the left hand side is known as a credit.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Debiting the cash account will increase the account.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A credit to the cash account will increase the account.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The cash account will always be debited.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The recording of cash receipts to the cash account will be done by debiting the account.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The recording of cash payments from the cash account is done by entering the amount as a credit.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the amounts together.
- True
- False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Liabilities are debts owed by the business entity.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.03 – Business Forms
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The accounts payable account is listed in the chart of accounts as an asset.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A dividends account represents the amount of earnings paid to the stockholders.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.03 – Business Forms
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Revenues are equal to the difference between cash receipts and cash payments.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Expenses result from using up assets or consuming services in the process of generating revenues.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Stockholders’ equity will be reduced by the amount in the dividends account.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.03 – Business Forms
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When an owner invests assets in the business, the retained earnings account increases due to revenue being earned.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When an account receivable is collected in cash, the total assets of the business increase.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When an account payable is paid with cash, the stockholders’ equity in the business decreases.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-01 – LO: 02-01
FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The normal balance of a stockholders’ equity account is a debit.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- For a month’s transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When a business receives a bill from the utility company, no entry should be made until the invoice is paid.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A debit is abbreviated as and a credit is abbreviated as Cr.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- For a month’s transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Dividends decrease stockholders’ equity and are listed on the income statement as a deduction from revenue.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The normal balance of revenue accounts is a credit.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The normal balance of the dividends account is a debit.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The normal balance of an expense account is a credit.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Expense accounts are increased by credits.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Revenue accounts are increased by credits.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Liability accounts are increased by debits.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Journalizing transactions using the double-entry bookkeeping system will eliminate fraud.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Transactions are listed in the journal chronologically.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Journalizing is the process of entering amounts in the ledger.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The process of recording a transaction in the journal is called journalizing.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Transactions are initially entered into a record called a journal.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The double-entry accounting system records each transaction twice.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The increase side of an account is also the side of the normal balance.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Journal entries include both debit and credit accounts for each transaction.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A transaction that is recorded in the journal is called a journal entry.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Assets are increased with debits and decreased with credits.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Liabilities are increased with debits and decreased with credits.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Debits will increase unearned revenues and revenues.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- All stockholders’ equity accounts record increases to the accounts with credits.
- True
- False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Journalizing always eliminates fraudulent activity.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Journal entries can have more than two accounts as long as the debits equal the credits.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Normal account balances are on the increase side of the accounts.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-02 – LO: 02-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The process of transferring the data from the journal to the ledger accounts is called posting.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The post reference notation used in the ledger is the account number.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The post reference notation used in the journal is the page number.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The process of transferring the debits and credits from the journal entries to the accounts is known as posting.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Postings made to standard account forms show a new balance after each entry.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-03 – LO: 02-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A group of related accounts that make up a complete unit is called a trial balance.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A trial balance determines the accuracy of the numbers.
- True
- False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Even when a trial balance is in balance, there may be errors in the individual accounts.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal.
- True
- False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal.
- True
- False
ANSWER: False
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The erroneous arrangement of digits, such as writing $45 as $54, is called a slide.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.02-04 – LO: 02-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
FinMan_Chapter_04_Completing_the_Accounting_Cycle
- You have just accepted your first job out of college, which requires you to evaluate loan requests at Eastwood National Bank. The first loan request you receive is from Richard Enterprises.Richard Tracy, the CEO, is requesting $105,000 and brings you the following trial balance (or statement of accounts) for the first year of operations ended December 31.
Which of the following accounts do you think might need to be adjusted before an accurate set of financial statements could be prepared?
Richard Enterprises
Statement of Accounts
December 31
Cash $2,050
Billings Due from Others 15,070
Office Supplies 7,470
Trucks 36,370
Equipment 8,090
Amounts Owed to Others $2,850
Investment in Business 33,500
Service Revenues 73,650
Wages Expense 30,050
Rent Expense 7,330
Insurance Expense 2,400
Utilities Expense 700
Miscellaneous Expenses 470 _______
$110,000 $110,000
ANSWER: The following adjustments might be necessary before an accurate set of financial
statements can be prepared:
∙ No office supplies expense is shown. The office supplies account should be
adjusted for the supplies used during the year.
∙ No depreciation expense is shown for the trucks or equipment accounts. An
adjusting entry should be prepared for depreciation expense on each of these
assets.
∙ An inquiry should be made as to whether any accrued expenses, such as
wages or utilities, exist at the end of the year.
∙ An inquiry should be made as to whether any prepaid expenses, such as rent
or insurance, exist at the end of the year.
∙ An inquiry should be made as to whether any unearned revenue exists at the
end of the year.
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Cross-referencing is useful in assuring that the debits and credits are in balance.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- After analyzing transactions, the next step would be to post the transactions in the ledger.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
FNMN.WARD.16.04-04 – LO: 04-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- What is the major difference between the unadjusted trial balance and the adjusted trial balance?
- The adjusted trial balance will show the net income (loss) as an additional account.
- Unlike the adjusted trial balance, the unadjusted trial balance will continue with the end-of-period processing even if it is not in balance.
- The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
- The adjusted trial balance will be used to record the adjustments for the period.
ANSWER: c
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Once the adjusting entries are posted, the adjusted trial balance is prepared to
- verify that the debits and credits are in balance
- verify that the net income correctly flows into the retained earnings statement from the income statement
- verify that the net income (loss) is correct for the period
- verify the correct flow of accounts into the financial statements
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- You evaluate loan requests as part of your job at Eastwood National Bank.One loan request you received is from Surfer Dude Supplies, a small company.Richard Tracy, the CEO, is requesting $105,000 and brings you a trial balance (or statement of accounts) for his first year of operations ended December 31.
While you are willing to work with Richard, how would you explain to him that a complete set of financial statements from his accountant would be more useful for evaluating the loan request?
ANSWER: A set of financial statements provides useful information concerning the
economic condition of a company. For example, the balance sheet describes the
financial condition of the company as of a given date and is useful in assessing
the company’s financial soundness and liquidity. The income statement describes
the results of operations for a period and indicates the profitability of the
company. The statement of stockholders’ equity describes the changes in the
stockholders’ interest in the company for a period. Each of these statements is
useful in evaluating whether to extend credit to the company.
DIFFICULTY: Moderate
Bloom’s: Understanding
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- You have just accepted your first job out of college, which requires you to evaluate loan requests at Eastwood National Bank. The first loan request you receive is from Richard Enterprises.Richard Tracy, the CEO, is requesting $105,000 and brings you the following trial balance (or statement of accounts) for the first year of operations ended December 31.
What three accounts do you think should be retitled for greater clarity?
Richard Enterprises
Statement of Accounts
December 31
Cash $2,050
Billings Due from Others 15,070
Office Supplies 7,470
Trucks 36,370
Equipment 8,090
Amounts Owed to Others $2,850
Investment in Business 33,500
Service Revenues 73,650
Wages Expense 30,050
Rent Expense 7,330
Insurance Expense 2,400
Utilities Expenses 700
Miscellaneous Expenses 470
Totals $110,000 $110,000
ANSWER: The following items should be retitled for greater clarity:
Billings Due from Others—Accounts Receivable
Amounts Owed to Others—Accounts Payable
Investment in Business—Common Stock
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet).Indicate whether each balance should be extended to (a) an Income Statement column or (b) a Balance Sheet column.
- Retained Earnings
- Common Stock
- Depreciation Expense
- Accumulated Depreciation
- Fees Earned
- Unearned Fees
- Supplies
- Supplies Expense
ANSWER: 1. Balance Sheet column
- Balance Sheet column
- Income Statement column
- Balance Sheet column
- Income Statement column
- Balance Sheet column
- Balance Sheet column
- Income Statement column
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-01-ADM – LO: 04-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
FNMN.WARD.16.04-APP – LO: 04-APP
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- There is really no benefit in preparing financial statements in any particular order.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The usual presentation of the retained earnings statement is (1) Beginning balance, (2) Net income or loss, (3) Dividends, (4) Stockholders’ contributions, (5) Ending balance.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Prepaid Insurance is an example of a current asset.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Land is an example of a plant asset.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The amount of the net income for a period appears on both the income statement and the balance sheet for that period.
- True
- False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accrued taxes payable are generally reported on the balance sheet as a current liability.
- True
- False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Office Equipment is an example of a current asset account.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Common stock and dividends are reported in the stockholders’ equity section of the balance sheet.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.
- True
- False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accrued expenses are ordinarily listed on the balance sheet as current assets.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
- True
- False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- When preparing the retained earnings statement, the beginning retained earnings balance can always be found
- in the Income Statement columns of the work sheet
- in the statement of cash flows
- in the general ledger
- in the Balance Sheet columns of the work sheet
ANSWER: c
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Accumulated Depreciation appears on the
- balance sheet in the current assets section
- balance sheet in the property, plant, and equipment section
- balance sheet in the long-term liabilities section
- income statement as an operating expense
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Notes receivable due in 390 days appear on the
- balance sheet in the current assets section
- balance sheet in the noncurrent assets section
- balance sheet in the current liabilities section
- income statement as an expense
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Unearned Fees appear on the
- balance sheet in the current assets section
- balance sheet as a current liability
- balance sheet in the shareholders’ equity section
- income statement as revenue
ANSWER: b
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Which one of the fixed asset accounts listed below will not have a related contra asset account?
- Office Equipment
- Land
- Delivery Equipment
- Building
ANSWER: b
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Prepaid insurance is reported on the balance sheet as a
- current asset
- fixed asset
- current liability
- long-term liability
ANSWER: a
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The income statement is prepared from
- the adjusted trial balance
- the Income Statement columns of the end-of-period spreadsheet
- either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet
- both the adjusted trial balance and the Income Statement columns of the end-of-period spreadsheet
ANSWER: c
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The first item appearing on the retained earnings statement is
- net income
- the ending balance of retained earnings
- dividends
- the beginning balance of retained earnings
ANSWER: d
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.10 – Internal Control
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The retained earnings statement should be prepared
- before the income statement and after the balance sheet
- before the income statement and balance sheet
- after the income statement and balance sheet
- after the income statement and before the balance sheet
ANSWER: d
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The income statement should be prepared
- before the retained earnings statement and balance sheet
- after the retained earnings statement and before the balance sheet
- after the retained earnings statement and balance sheet
- after the balance sheet and before the retained earnings statement
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Use the adjusted trial balance for Stockton Company below to answer the questions that follow.
Stockton Company
Adjusted Trial Balance
December 31
Cash 7,530
Accounts Receivable 2,100
Prepaid Expenses 700
Equipment 13,700
Accumulated Depreciation 1,100
Accounts Payable 1,900
Notes Payable 4,300
Common Stock 1,000
Retained Earnings 12,940
Dividends 790
Fees Earned 9,250
Wages Expense 2,500
Rent Expense 1,960
Utilities Expense 775
Depreciation Expense 250
Miscellaneous Expense 185
Totals 30,490 30,490
- Determine the net income (loss) for the period.
- net income $9,250
- net loss $790
- net loss $5,670
- net income $3,580
ANSWER: d
RATIONALE: Net income = Fees earned – (Wages expense + Rent expense + Utilities expense
+ Depreciation expense + Miscellaneous expense) = $ 9,250 – ($2,500 + $1,960
+ $775 + $250 + $185) = $3,580
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Determine the retained earnings ending balance.
- $12,150
- $15,730
- $6,480
- $21,400
ANSWER: b
RATIONALE: Ending balance of retained earnings = Beginning balance of retained earnings +
Net income – Dividends = $12,940 + $3,580 – $790 = $15,730
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Determine the total assets.
- $25,130
- $16,830
- $22,930
- $24,030
ANSWER: c
RATIONALE: Total assets = Cash + Accounts receivable + Prepaid expenses + (Equipment –
Accumulated depreciation) = $7,530 + $2,100 + $700 + ($13,700 – $1,100)
= $22,930
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Determine the current assets.
- $23,030
- $10,330
- $21,930
- $8,630
ANSWER: b
RATIONALE: Current assets = Cash + Accounts receivable + Prepaid expenses = $7,530 +
$2,100 + $700 = $10,330
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Determine the total liabilities for the period.
- $1,900
- $6,200
- $4,300
- $20,240
ANSWER: b
RATIONALE: Total liabilities = Accounts payable + Notes payable = $1,900 + $4,300 = $6,200
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The balance sheet should be prepared
- before the income statement and the retained earnings statement
- before the income statement and after the retained earnings statement
- after the income statement and the retained earnings statement
- after the income statement and before the retained earnings statement
ANSWER: c
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The retained earnings statement begins with the beginning balance followed by
- adding net income less dividends
- adding net income plus investments
- adding investments less dividends
- adding investments plus net income less dividends
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The income statement will present
- revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last
- revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last
- revenues less expenses (ordered in alphabetical order)
- revenues less expenses (order is not important)
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The classified balance sheet will show which asset subsections?
- current assets and other equity
- current assets and property, plant, and equipment
- current liabilities and short-term assets
- other revenues and property, plant and equipment
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The classified balance sheet will show which liability subsections?
- current liabilities and long-term liabilities
- current liabilities and other liabilities
- other liabilities and long-term liabilities
- present liabilities and tomorrow’s liabilities
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Debts listed as current liabilities are those that
- will be paid in less than one year
- are due to be paid in 5 to 10 years
- are due to be paid in more than one year
- are owed to the stockholders and will never be paid
ANSWER: a
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Stockholders’ equity is
- added to assets and the two are equal to liabilities
- added to liabilities and the two are equal to assets
- subtracted from liabilities and the net amount is equal to assets
- equal to the total of assets and liabilities
ANSWER: b
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The end-of-period spreadsheet (work sheet) for the current year for Jamal Company shows Balance Sheet columns with a debit total of $630,430 and a credit total of $614,210.This is before the amount for net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet, what is the amount of net income or net loss?
ANSWER: Net income of $16,220
DIFFICULTY: Easy
Bloom’s: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The end-of-period spreadsheet (work sheet) for the current year for Jamal Company shows Balance Sheet columns with a debit total of $614,210 and a credit total of $630,430. This is before the amount for net income or net loss has been included. In preparing the income statement from the work sheet, what is the amount of net income or net loss?
ANSWER: Net loss of $16,220
DIFFICULTY: Easy
Bloom’s: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- On January 1, Hannah’s Pool Service Company had a retained earnings balance of $252,000.During the year Hannah’s stockholders bought an additional $32,000 in common stock and received dividends of $52,200.For the year ended December 31 Hannah’s Pool Service Company reported a net income of $73,200.Prepare a retained earnings statement for the year ended December 31.
ANSWER: Hannah’s Pool Service Company
Retained Earnings Statement
For the Year Ended December 31
Retained earnings, January 1 $252,000
Net income $73,200
Less dividends 52,200
Increase in retained earnings 21,000
Retained earnings, December 31 $273,000
DIFFICULTY: Moderate
Bloom’s: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- The following accounts appear in an adjusted trial balance of Blaine Auto Service Company.Indicate whether each account would be reported in the (a) current assets, (b) property, plant, and equipment, (c) current liabilities, (d) long-term liabilities, or (e) stockholders’ equity section of the December 31 balance sheet of Blaine Auto Service Company.
- Retained Earnings
- Accumulated Depreciation
- Unearned Revenues
- Mortgage Payable
- Equipment
- Notes Payable (due in two years)
- Cash
- Accounts Receivable
ANSWER: 1. (e) Stockholders’ equity
- (b) Property, plant, and equipment
- (c) Current liabilities
- (d) Long-term liabilities
- (b) Property, plant, and equipment
- (d) Long-term liabilities
- (a) Current assets
- (a) Current assets
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
- Describe a classified balance sheet.
ANSWER: A classified balance sheet shows subsections for assets, such as current assets
and property, plant, and equipment.It also shows subsections for liabilities, such
as current liabilities and long-term liabilities. It also includes the stockholders’
equity section.
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.04-02 – LO: 04-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
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