Basic Accounting and Introduction in Accounting Reviewer PDF

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FAR REVIEWER

During the end-of-period processing which of the following best describes the logical order of this process. - Preparation of adjustments, adjusted trial balance, financial statements Accumulated Depreciation appears on the - balance sheet in the property, plant and equipment section Notes Receivable due in 345 days appear on the - balance sheet in the current assets section Unearned Fees appear on the - balance sheet as a current liability Which one of the fixed asset accounts listed below will not have a related contra asset account? – Land Prepaid insurance is reported on the balance sheet as a - current asset The income statement is prepared from the - either the adjusted trial balance or the income statement columns of the work sheet The Statement of Owner’s Equity should be prepared - after the income statement and before the balance sheet The income statement should be prepared - before the statement of owner’s equity and balance sheet The Balance Sheet should be prepared - after the income statement and the statement of owner’s equity When preparing the Statement of Owner’s Equity the beginning balance should be followed by ____ to arrive and the ending balance of owner’s equity. - investments plus net income (loss) less withdrawals The following is the adjusted trial balance for Steely Company. Determine the net income (loss) for the period. - Net Income 3,550 Determine the owner’s equity ending balance for the period. - $14,680 Determine total assets. - $21,380 Determine the current assets. - $9,180 Determine the total liabilities for the period. - $6,700 The Income Statement will include the following accounts - Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous Expense listed last The classified Balance Sheet will subsection the assets section as follows - Current Assets and Property, Plant, and Equipment

The classified Balance Sheet will divide its Liabilities Section as the following subsections Current Liabilities and Long-Term Liabilities Long-term liabilities are those liabilities that - are due to be paid in more than one year The owner’s equity is - added to liabilities and the two are equal to assets Balance sheet accounts - are called real accounts The proper sequence for the steps in the accounting cycle is a follows - analyze and record transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger. The matching concept determines that expenses related to revenue be reported at the same time the revenue is reported Using accrual accounting, revenue is recorded and reported only - when the services are rendered without regard to when cash is received Using accrual accounting, expenses are recorded and reported only - when they are incurred, whether or not cash is paid The primary difference between deferred and accrued expenses is that deferred expenses have - not been incurred and accrued expenses have been incurred Prior to the adjusting process, accrued revenue has - been earned and not recorded as revenue Deferred expenses have - not yet been recorded as expenses Deferred revenue is revenue that is - not earned but the cash has been received Adjusting entries are - needed to bring accounts up to date and match revenue and expense Adjusting entries affect at least one - income statement account and one balance sheet account Generally accepted accounting principles requires that companies use the ____ of accounting. - accrual basis Which of the following supports the accrual basis of accounting? - revenue recognition and matching concepts The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting - records revenues and expenses when they are incurred. By matching revenues and expenses in the same period in which they incur - net income or loss will be properly reported on the income statement

Prepaid expenses are eventually expected to - become expenses when their future economic value expires. Which of the following is considered to be unearned revenue? - Concert tickets sold for next month’s performance. Which of the following is considered to be an accrued expense? - A computer technician has installed the latest software updates, but you have not received their invoice for payment. The entry to adjust for the cost of supplies used during the accounting period is - Supplies Expense, debit; Supplies, credit The adjusting entry to record the depreciation of equipment for the fiscal period is - debit Depreciation Expense; credit Accumulated Depreciation The entry to adjust the accounts for wages accrued at the end of the accounting period is Wages Expense, debit; Wages Payable, credit The adjusting entry for rent earned that is currently recorded in the unearned rent account is Unearned Rent, debit; Rent Revenue, credit The balance in the prepaid insurance account before adjustment at the end of the year is P10,000. If the additional data for the adjusting entry is (1) "the amount of insurance expired during the year is P8,500," as compared to additional data stating (2) "the amount of unexpired insurance applicable to a future period is P1,500," for the adjusting entry: the accounts and amounts would be the same for both (1) and (2) The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed - carrying amount As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called - depreciation The supplies account has a balance of P1,000 at the beginning of the year and was debited during the year for P2,800, representing the total of supplies purchased during the year. If P750 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is - P3,050 A company purchases a one-year insurance policy on June 1 for P840. The adjusting entry on December 31 is - debit Insurance Expense, P490, and credit Prepaid Insurance, P 490. If the prepaid rent account before adjustment at the end of the month has a debit balance of P1,600, representing a payment made on the first day of the month, and if the monthly rent was P800, the amount of prepaid rent that would appear on the balance sheet at the end of the month, after adjustment, is - P800 Depreciation Expense and Accumulated Depreciation are classified, respectively, as expense, contra asset

Which of the following is an example of a prepaid expense? – Supplies The unexpired insurance at the end of the fiscal period represents - a deferred expense Accrued revenues would appear on the balance sheet as – assets Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n) – assets Fees receivable would appear on the balance sheet as a(n) - assets Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n) – liabilities Accrued expenses are ordinarily reported on the balance sheet as – liabilities The general term employed to indicate a delay of the recognition of an expense already paid or of a revenue already received is – deferral Which of the following pairs of accounts could not appear in the same adjusting entry? Interest Income and Interest Expense The unearned rent account has a balance of P40,000. If P3,000 of the P40,000 is unearned at the end of the accounting period, the amount of the adjusting entry is – 37,000 The following adjusting journal entry was found on page 4 of the journal. Select the best explanation for the entry. Unearned Revenue 4,500 Fees earned 4,500 ???????????????? - Record fees earned at the end of the month Supplies Expense 360 Supplies ???????????????? - Adjust supplies inventory to actual

360

Wages Expense 2,555 Wages Payable 2,555 ???????????????? - Record wages expense incurred and to be paid next month What affect will this adjustment have on the accounting records? Unearned Revenue 4,500 Fees earned 4,500 - Increase net income, Increase revenues reported for the period, Decrease liabilities

Supplies Expense Supplies - Decrease net income

678 678

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true? - Net income will be overstated for the current year. At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? - Salary Expense for the year was understated. What is the purpose of the adjusted trial balance? - to verify that the debits and credits balance What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance? - The Adjusted Trial Balance includes the postings of the adjustments for the period in the balance of the accounts. When preparing the statement of owner's equity, the beginning capital balance can always be found - in the general ledger Round-tripping is when - a selling company lends money to a customer company to be used to purchase goods from the selling company. On which financial statement will Income Summary be shown? - No financial statement Which is the following that is not true about closing entries? - All real accounts are closed at the end of the period. The income summary account is also called - the clearing account After posting the second closing entry to the income summary account, the balance will be equal to - the net income or (loss) for the period. Which of the following account groups are all considered nominal accounts? - Drawing Account, Fees Earned, Rent Expense There are four closing entries. The first one is to close ____, the second one is to close ____, the third one is to close ____, and the last one is to close ____. - Revenues, expenses, income summary, drawing account All of the closing entries will adjust ____ to update that account. - the capital account Closing entries are dated in the journal as of - the last day of the accounting period, although they are actually journalized after the end of the accounting period Which of the accounts below would be closed by posting a debit to the account? - Fees Earned

Which of the following accounts should be closed to Income Summary at the end of the fiscal year? - Supplies Expense Which of the following accounts will be closed to the Capital account at the end of the fiscal year? - Income Summary Which of the following accounts ordinarily appears in the post-closing trial balance? Unearned Rent The post-closing trial balance differs from the adjusted trial balance in that it - does not include income statement accounts The following accounts were taken from the Adjusted Trial Balance columns of the work sheet: Accumulated Depreciation Fees Earned Depreciation Expense Insurance Expense Prepaid Insurance Supplies Supplies Expenses

P 2,000 15,000 1,000 500 4,500 1,200 3,500

Net income for the period is - P10,000 John purchased a one-year liability insurance policy on January 1st of this year for P3,600 and recorded it as a prepaid expense. From the selections of a. through d., select the value that would be utilized in the closing entry for insurance expense and prepaid insurance during the closing process at the end of the first fiscal period on January 31st. - P300. The following are steps in the accounting cycle. Of the following, which would be prepared last? - An adjusted trial balance is prepared. A fiscal year - ordinarily begins on the first day of a month and ends on the last day of the following twelfth month The worksheet - is used to summarize account balances and adjustments for the financial statements The work sheet at the end of September has P4,000 in the Balance Sheet credit column for Accumulated Depreciation. The work sheet at the end of October has P4,750 in the Balance Sheet credit column for Accumulated Depreciation. What was the amount of the depreciation expense adjustment for the month of October? – 750 After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns are P25,250 and P21,825, respectively. What is the amount of net income or net loss for the period? - P3,425 net income

After all of the account balances have been extended to the Income Statement columns of the work sheet, the totals of the debit and credit columns are P87,500 and P98,300, respectively. What is the amount of the net income or net loss for the period? - P10,800 net income In an accrual accounting system - a debit entry is recorded on the left-hand side of an account. A chart of accounts is - a listing of all account titles A trial balance is useful because it indicates that - total debits equal total credits. Which of the following would typically be considered a source document? - Invoice received from seller. A routine collection on a customer's account was recorded and posted as a debit to Cash and a credit to Sales Revenue. The journal entry to correct this error would be - a debit to Sales Revenue and a credit to Accounts Receivable. An accrued expense can be described as an amount - not paid and matched with earnings for the current period. Which of the following errors will be detected when a trial balance is properly prepared? None of the above The premium on a two-year insurance policy expiring on June 30, 2010, was paid in total on July 1, 2008. The original payment was debited to the insurance expense account. The appropriate journal entry has been recorded on December 31, 2008. The balance in the prepaid asset account on December 31, 2008, should be - the same as it would have been if the original payment had been initially debited to an asset account. If an inventory account is understated at year end, the effect will be to - overstate the cost of goods sold. The last step in the accounting cycle is to - prepare a post-closing trial balance. Which of the following is not presented in an income statement? -drawing On March 1, 2007, Forest Co. borrowed cash and signed a 36-month, interest-bearing note on which both the principal and interest are payable on February 28, 2010. At December 31, 2009, the liability for accrued interest should be - 34 months' interest. An example of an adjusting entry involving a deferred revenue is Unearned Rental Revenue ............ Rental Revenue ...................

xxx xxx

The allowance for doubtful accounts is an example of a(n) - contra account. For a given year, beginning and ending total liabilities were P8,400 and P10,000, respectively. At year-end, owners' equity was P26,000 and total assets were P2,000 larger than at the beginning of the year. If new capital stock issued exceeded dividends by P2,400, net income (loss) for the year was apparently - (P2,000).

The Supplies on Hand account balance at the beginning of the period was P6,600. Supplies totaling P12,825 were purchased during the period and debited to Supplies on Hand. A physical count shows P3,825 of Supplies on Hand at the end of the period. The proper journal entry at the end of the period - debits Supplies Expense and credits Supplies on Hand for P15,600. Danny Company paid P1,704 on June 1, 2010, for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2010, adjusting entry is - debit Prepaid Insurance and credit Insurance Expense, P1,207. On December 31 of the current year, Tony Company's bookkeeper made an entry debiting Supplies Expense and crediting Supplies on Hand for P12,600. The Supplies on Hand account had a P15,300 debit balance on January 1. The December 31 balance sheet showed Supplies on Hand of P11,400. Only one purchase of supplies was made during the month, on account. The entry for that purchase was - debit Supplies on Hand, P8,700 and credit Accounts Payable, P8,700. The following errors were made in preparing a trial balance: the P1,350 balance of Inventory was omitted; the P450 balance of Prepaid Insurance was listed as a credit; and the P300 balance of Salaries Expense was listed as Utilities Expense. The debit and credit totals of the trial balance would differ by - P2,250. Cristy Corporation's interest revenue for 2008 was P13,100. Accrued interest receivable on December 31, 2008, was P2,275 and P1,875 on December 31, 2007. The cash received for interest during 2008 was - P12,700. Victor Company sells magazine subscriptions for one- to three-year subscription periods. Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance, and this account had a balance of P9,600,000 at December 31, 2008, before year-end adjustment. Outstanding subscriptions at December 31, 2008, expire as follows: During 2009 .................. During 2010 .................. During 2011 ..................

P2,600,000 3,200,000 1,800,000

In its December 31, 2008, balance sheet, what amount should Victor report as the balance for magazine subscriptions collected in advance? - P7,600,000 L. Rhea received P12,000 from a tenant on December 1 for four months' rent of an office. This rent was for December, January, February, and March. If Rhea debited Cash and credited Unearned Rental Income for P12,000 on December 1, what necessary adjustment would be made on December 31? - Unearned Rental Income ............. Rental Income ....................

3,000 3,000

Fely Inc.'s fiscal year ended on November 30, 2008. The accounts had not been adjusted for the fiscal year ending November 30, 2008. The balance in the prepaid insurance account as of November 30, 2008, was P35,200 (before adjustment at Nov. 30, 2008) and consisted of the following policies:

Policy Number 279248 694421 800616

Date of Purchase 7/1/2008 12/1/2006 4/1/2007

Date of Expiration 6/30/2009 11/30/2008 3/31/2009

Balance in Account P14,400 9,600 11,200 P35,200

The adjusting entry required on November 30, 2008, would be Insurance Expense ................... Prepaid Insurance .................

24,000 24,000

Neneth Company paid P24,900 in insurance premiums during 2008. Neneth showed P3,600 in prepaid insurance on its December 31, 2008, balance sheet and P4,500 on December 31, 2007. The insurance expense on the income statement for 2008 was - P25,800. Fernando Company sublet a portion of its office space for ten years at an annual rental of P36,000, beginning on May 1. The tenant is required to pay one year's rent in advance, which Fernando recorded as a credit to Rental Income. Fernando reports on a calendar-year basis. The adjustment on December 31 of the first year should be Rental Income ....................... 12,000 Unearned Rental Income ............

12,000

Jojo Company collected P12,350 in interest during 2008. Jojo showed P1,850 in interest receivable on its December 31, 2008, balance sheet and P5,300 on December 31, 2007. The interest revenue on the income statement for 2008 was – 8,900 The following balances have been excerpted from Jun' balance sheets: Prepaid Insurance Interest Receivable Salaries Payable

December 31, 2008 P 6,000 3,700 61,500

December 31, 2007 P 7,500 14,500 53,000

Jun Company paid or collected during 2004 the following items: Insurance premiums paid Interest collected Salaries paid

P 41,500 123,500 481,000

The insurance expense on the income statement for 2008 was - P43,000. The interest revenue on the income statement for 2008 was - P112,700. Neneth Inc. reported an allowance for doubtful accounts of P30,000 (credit) at December 31, 2008, before performing an aging of accounts receivable. As a result of the aging, Neneth Inc. determined that an estimated P52,000 of the December 31, 2008, accounts receivable would prove uncollectible. The adjusting entry required at December 31...