Question 1

A credit entry will:
A) increase an asset account.
B) increase a liability account.
C) decrease paid-in capital.
D) increase an expense account.

Accepted Answer

B

Question 2

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. Which of the following journal entries should the firm use to accrue interest at the end of each month?

A.
$\begin{array}{llcc}
  \text {Dr. Interest payable  }\
  \text { Cr. Cash } \
\end{array}$

B.
$\begin{array}{llcc}
  \text {Dr. Interest receivable  } \
 \text { Cr. Interest payable } \
\end{array}$

C.
$\begin{array}{llcc}
  \text {Dr. Interest expense  } \
  \text { Cr. Interest payable } \
\end{array}$

D.
$\begin{array}{llcc}
  \text { Dr. Interest payable  } \
  \text {  Cr. Interest expense} \
\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The firm should record interest expense as it accrues each month. The correct journal entry is to debit Interest Expense and credit Interest Payable.

Question 3

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:
A) decrease assets and decrease expenses.
B) increase liabilities and increase expenses.
C) decrease assets and increase revenue.
D) increase assets and decrease liabilities.

Accepted Answer

The advertiser owes money for the ad that was published this week but agreed to pay for it next week. Therefore, there is an increase in liabilities (amount owed to the newspaper) and an increase in expenses (cost of the advertisement).

Question 4

The effect of an adjustment is:
A) to correct an entry that was not in balance.
B) to increase the accuracy of the financial statements.
C) to record transactions not previously recorded.
D) to close the books.

Accepted Answer

An adjustment is made to increase the accuracy of the financial statements by recognizing revenue and expenses in the correct accounting period and ensuring that all accounts are properly valued and recorded. Choices A, C, and D do not accurately describe the purpose of an adjustment.

Question 5

The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to:
A) decrease ROI for February.
B) increase ROI for February.
C) decrease working capital at February 28.
D) decrease the acid-test ratio at February 28.

Accepted Answer

Accruing interest on a note receivable from a customer increases the company's revenue and therefore increases ROI. It does not impact working capital or the acid-test ratio.

Question 6

In the buyer's records, the purchase of merchandise on account would:
A) increase assets and increase expenses.
B) increase assets and increase liabilities.
C) increase liabilities and increase paid-in capital.
D) have no effect on total assets.

Accepted Answer

When merchandise is purchased on account (on credit), it increases the buyer's assets (inventory) and also creates a liability (accounts payable) for the amount owed to the supplier. Therefore, choice B - increase assets and increase liabilities - is the correct answer.

Question 7

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:
A) increase assets and increase revenues.
B) increase assets and decrease liabilities.
C) increase assets and increase expenses.
D) have no effect on total assets.

Accepted Answer

The newspaper ad would increase assets by the amount of the revenue to be received next week, and it would also increase revenues since it was already published and earned revenue during the current period.

Question 8

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. How much should be in the firm's interest payable account at December 31, 2013?
A) $300
B) $400
C) $0
D) $333

Accepted Answer

Interest for 9 months (April to December) is calculated as $5,000 * 8% * (9/12) = $300.

Question 9

Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:
A) amount of interest paid during the month.
B) amount of total interest to be paid when the note is paid off.
C) amount of principal payable at the maturity date of the note.
D) accrued interest expense for the month.

Accepted Answer

Since the loan is outstanding, Wisdom Co. will be accruing interest expense on the loan each month. Therefore, an adjustment will need to be made at the end of each month to record the accrued interest expense for that month. Choices A and B are also related to interest, but these amounts will be recorded as actual payments are made, not through an adjustment. Choice C is not relevant to monthly adjustments, as the principal amount does not change each month.

Question 10

Sage, Inc. has 20 employees who work Monday through Friday each week; each employee earns $100 per day and is paid every Friday. The end of the accounting period is on a Wednesday. How much wages expense should the firm accrue at the end of the period?
A) $2,000
B) $1,000
C) $0
D) $6,000

Accepted Answer

The answer of Sage, Inc. has 20 employees who work...

Question 11

In the seller's records, the sale of merchandise on account would:
A) increase assets and increase expenses.
B) increase assets and decrease liabilities.
C) increase assets and increase paid-in capital.
D) increase assets and decrease revenues.

Accepted Answer

The answer of In the seller's records, the sale of...

Question 12

Which of the following is not one of the 5 questions of transaction analysis?
A) What's going on?
B) Which accounts are affected?
C) Is this an accrual?
D) Does the balance sheet balance?
E) Does my analysis make sense?

Accepted Answer

The five questions of transaction analysis are: 1) What's going on?, 2) Which accounts are affected?, 3) What's the dollar amount?, 4) Is this a debit or credit?, and 5) Does my analysis make sense? "Is this an accrual?" is not one of the questions.

Question 13

A debit entry will:
A) decrease an asset account.
B) increase a liability account.
C) increase paid-in capital.
D) increase an expense account.

Accepted Answer

The answer of A debit entry will:
A) decrease an asset...

Question 14

An engineering consultant provided $300 of services to a client; the client paid $50 when the bill was submitted and will pay the balance within a week. The consultant will record this transaction by: 
A.
$\begin{array}{llcc}
  \text { Dr. Cash  } &50\
 \text {  Dr. Fees receivable} &250\
 \text {  Cr. Fees revenue} &&300\
\end{array}$

B.
$\begin{array}{llr}
\text { Dr. } & \text { Fees revenue } & 300 \
\text { Cr. } & \text { Fees receivable } && 250 \
\text { Cr. } & \text { Cash } && 50
\end{array}$

C.
$\begin{array}{ll}
\text { Dr. Cash } & 50 \
\text { Cr. Fees revenue } &&50
\end{array}$

D.
$\begin{array}{llr}
\text { Dr. } & \text { Cash } & 50 \
\text { Dr. } & \text { Fees revenue } & 250 \
\text { Cr. } & \text { Fees receivable } &&300
\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The correct journal entry is to debit Cash for $50, debit Fees Receivable for $250, and credit Fees Revenue for $300. This reflects the cash received, the amount still receivable, and the total revenue earned.

Question 15

A journal entry recording an accrual:
A) results in a better matching of revenues and expenses.
B) will involve a debit or credit to cash.
C) will affect balance sheet accounts only.
D) will most likely include a debit to a liability account.

Accepted Answer

The answer of A journal entry recording an accrual:
A) results...

Question 16

A credit entry will:
A) always decrease the account balance.
B) always increase the account balance.
C) increase the balance of a revenue account.
D) increase the balance of an expense account.

Accepted Answer

The answer of A credit entry will:
A) always decrease the...

Question 17

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. Which of the following journal entries should the firm use to record the payment of interest on March 31, 2014? 
A.
$\begin{array}{llcc}
  \text {Dr. Interest payable  }\
  \text { Cr. Cash } \
\end{array}$

B.
$\begin{array}{llcc}
  \text {Dr. Interest receivable  } \
 \text { Cr. Interest payable } \
\end{array}$

C.
$\begin{array}{llcc}
  \text {Dr. Interest expense  } \
  \text { Cr. Interest payable } \
\end{array}$

D.
$\begin{array}{llcc}
  \text { Dr. Interest payable  } \
  \text {  Cr. Interest expense} \
\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The interest payable is recorded as a liability, and when the payment is made, it is debited to reduce the liability and cash is credited to reflect the outflow of cash.

Question 18

To accrue $3,200 of employee salaries for the last week of February, the employer's journal entry is: 
A.
$\begin{array}{llcc}
  \text { Dr. Salaries expense } &3,200\
 \text {  Cr. Cash} &&3,200\
\end{array}$

B.
$\begin{array}{ccc}
\text { Dr. } & \text { Salaries expense } & 3,200 \
\text { Cr. } & \text { Salaries payable } && 3,200
\end{array}$

C.
$\begin{array}{llcc}
  \text {   Dr. Salaries payable } &3,200\
 \text { Cr. Cash } &&3,200\
\end{array}$

D.
$\begin{array}{ll}
\text { Dr. Salaries expense } & 3,200 \
\text { Cr. Fee revenue } && 3,200
\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The correct journal entry to accrue salaries is to debit Salaries Expense and credit Salaries Payable, reflecting the expense incurred and the liability to pay it.

Question 19

A debit entry will:
A) always decrease the account balance.
B) always increase the account balance.
C) increase the balance of a revenue account.
D) increase the balance of an expense account.

Accepted Answer

The answer of A debit entry will:
A) always decrease the...

Question 20

An expanded version of the accounting equation could be:
A) Assets + Revenues = Liabilities + Stockholders' Equity - Expenses
B) Assets - Liabilities = Paid-in Capital - Revenues - Expenses
C) Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends
D) Assets = Liabilities + Paid-in Capital - Revenues + Expenses

Accepted Answer

This expanded version of the accounting equation takes into account the beginning retained earnings and dividends, which are important factors in determining the overall equity of a company. Assets must equal the sum of liabilities, paid-in capital, beginning retained earnings, and any changes due to revenues, expenses, and dividends.

Quiz 4: The Bookkeeping Process and Transaction Analysis

A credit entry will:

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

The effect of an adjustment is:

The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to:

In the buyer's records, the purchase of merchandise on account would:

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. How much should be in the firm's interest payable account at December 31, 2013?

Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:

Sage, Inc. has 20 employees who work Monday through Friday each week; each employee earns $100 per day and is paid every Friday. The end of the accounting period is on a Wednesday. How much wages expense should the firm accrue at the end of the period?

In the seller's records, the sale of merchandise on account would:

Which of the following is not one of the 5 questions of transaction analysis?

A debit entry will:

A journal entry recording an accrual:

A credit entry will:

A debit entry will:

An expanded version of the accounting equation could be: