Question 1

A future economic benefit owned or controlled by an entity is:
A)A revenue.
B)An asset.
C)A liability.
D)A contra asset until used.

Accepted Answer

A future economic benefit is an asset because it is something that is expected to provide value to the entity in the future. Examples of future economic benefits include property, plant and equipment, investments, and accounts receivable. Revenue represents income earned by the entity from its operations, not a future economic benefit. A liability represents an obligation to transfer a future economic benefit to another party, not something owned or controlled by the entity. A contra asset is not an appropriate classification for a future economic benefit as it implies a reduction in the value of an existing asset, rather than a future benefit that has not yet been realized.

Question 2

On November 1, 2013, Tim's Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2013?
A)$112,500.
B)$225,000.
C)$450,000.
D)$1,350,000.

Accepted Answer

The answer of On November 1, 2013, Tim's Toys borrows...

Question 3

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2013, and charged the $4,200 premium to Insurance expense. At its December 31, 2013, year-end, Yummy Foods would record which of the following adjusting entries?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Yummy Foods purchased a two-year fire and...

Question 4

Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2013, with principal and interest due on October 31, 2014. The company's fiscal year ends June 30, 2013. What adjusting entry is necessary on June 30, 2013?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Mama's Pizza Shoppe borrowed $8,000 at 9%...

Question 5

Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year?
A)$1,600,000.
B)$1,800,000.
C)$2,200,000.
D)$2,400,000.

Accepted Answer

To find the cost of merchandise purchased during the year, we need to use the formula: 
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold 
Solving for Purchases: 
Purchases = Cost of Goods Sold - Beginning Inventory + Ending Inventory 
Purchases = $2,000,000 - $200,000 + $400,000 
Purchases = $2,200,000

Question 6

On September 15, 2013, Oliver's Mortuary received a $6,000, nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2013?
A) 
B) 
C) 
D)

Accepted Answer

The answer of On September 15, 2013, Oliver's Mortuary received...

Question 7

Which of the following accounts has a credit balance?
A)Salary expense.
B)Accrued income taxes payable.
C)Land.
D)Prepaid rent.

Accepted Answer

Accrued income taxes payable is a liability account and has a credit balance.

Question 8

In its first year of operations Best Corp. had income before tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best's net income for the year?
A)$290,000.
B)$294,000.
C)$300,000.
D)$306,000.

Accepted Answer

The answer of In its first year of operations Best...

Question 9

On September 1, 2013, Fortune Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to unearned subscriptions revenue. What is the required adjusting entry at December 31, 2013?
A) 
B) 
C) 
D)

Accepted Answer

At December 31, 2013, four months have passed since the subscriptions were sold (September to December). Therefore, there is $54 (4/12 x $81 x 600) of earned subscriptions revenue that must be recognized. The adjusting entry will be a debit to unearned subscriptions revenue for $54 and a credit to subscriptions revenue for $54. Choice B reflects this adjusting entry.

Question 10

The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:
A)Plus revenues, minus liabilities.
B)Plus accruals, minus deferrals.
C)Plus net income, minus dividends.
D)Plus assets, minus liabilities.

Accepted Answer

The balance in retained earnings at the end of the year is determined by adding the net income earned during the year and subtracting any dividends paid out to shareholders. Therefore, choice C, which states "Plus net income, minus dividends," is the correct choice. The other choices (A, B, and D) do not accurately reflect the calculation of retained earnings.

Question 11

In its first year of operations Acme Corp. had income before tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%. What is the balance in income tax payable at the end of the year?
A)$160,000 credit.
B)$150,000 credit.
C)$10,000 credit.
D)$10,000 debit.

Accepted Answer

The answer of In its first year of operations Acme...

Question 12

Permanent accounts would not include:
A)Interest expense.
B)Wages payable.
C)Prepaid rent.
D)Unearned revenues.

Accepted Answer

The answer of Permanent accounts would not include:
A)Interest expense.
B)Wages payable.
C)Prepaid...

Question 13

Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year?
A)$300,000.
B)$280,000.
C)$260,000.
D)$240,000.

Accepted Answer

The answer of Carolina Mills purchased $270,000 in supplies this...

Question 14

The adjusting entry required to record accrued expenses includes:
A)A credit to cash.
B)A debit to an asset.
C)A credit to an asset.
D)A credit to liability.

Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid. Therefore, they represent a liability for the company. To record an accrued expense, we need to debit the expense account and credit the corresponding liability account. Hence, the adjusting entry required to record accrued expenses includes a credit to liability.

Question 15

Eve's Apples opened business on January 1, 2013, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2013?
A)$9,000.
B)$18,000.
C)$30,000.
D)$48,000.

Accepted Answer

The liability policy covers 18 months, and by December 31, 2013, 12 months have gone by, so the remaining prepaid insurance for liability is (18-12)/18*36,000 = $12,000. 
The crop damage policy covers two years, so by December 31, 2013, only one year has gone by, so the remaining prepaid insurance for crop damage is (2-1)/2*12,000 = $6,000. 
Thus, the total balance in prepaid insurance is 12,000 + 6,000 = $18,000.

Question 16

When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account:
A)(S)he usually debits cash.
B)(S)he usually debits an expense account.
C)(S)he debits a liability account.
D)(S)he does none of the above.

Accepted Answer

When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account, it means that some portion of the prepaid rent has been consumed or used up during the period. This consumption should be recognized as an expense, and therefore, the tenant should debit an expense account. The credit entry will be made to the "Prepaid rent" account, which is a liability account.

Question 17

When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:
A)Accounts payable.
B)Supplies.
C)Cash.
D)Retained earnings.

Accepted Answer

If a business makes an end-of-period adjusting entry with a debit to supplies expense, it means that the business has used up some of its supplies during the period. The credit entry is made to the supplies account to reduce its balance to reflect the amount of supplies that are still on hand at the end of the period. This is done to ensure that the balance sheet accurately reflects the company's assets.

Question 18

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?
A) 
B) 
C) 
D)

Accepted Answer

The answer of The employees of Neat Clothes work Monday...

Question 19

Cost of goods sold is:
A)An asset account.
B)A revenue account.
C)An expense account.
D)A permanent equity account.

Accepted Answer

Cost of goods sold is an expense account, representing the cost of the goods or services that a company has sold during a particular period. It is deducted from the revenue to determine the gross profit of a business.

Question 20

Fink Insurance collected premiums of $18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from $6 million to $8 million dollars during the year. What is Fink's revenue from earned insurance premiums for the current year?
A)$10,000,000.
B)$16,000,000.
C)$18,000,000.
D)$20,000,000.

Accepted Answer

To determine the revenue from earned insurance premiums, we need to calculate the amount of premiums actually earned during the year. This can be done by subtracting the ending balance of the Unearned premiums account ($8 million) from the beginning balance ($6 million), giving us $2 million in premiums that were earned during the year. Adding this to the amount of premiums collected from customers ($18 million), we get a total of $20 million in earned insurance premiums. Therefore, the correct answer is (B) $16,000,000.

Quiz 2: Review of the Accounting Process

A future economic benefit owned or controlled by an entity is:

On November 1, 2013, Tim's Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2013?

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2013, and charged the $4,200 premium to Insurance expense. At its December 31, 2013, year-end, Yummy Foods would record which of the following adjusting entries?

Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2013, with principal and interest due on October 31, 2014. The company's fiscal year ends June 30, 2013. What adjusting entry is necessary on June 30, 2013?

Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year?

On September 15, 2013, Oliver's Mortuary received a $6,000, nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2013?

Which of the following accounts has a credit balance?

In its first year of operations Best Corp. had income before tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best's net income for the year?

On September 1, 2013, Fortune Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to unearned subscriptions revenue. What is the required adjusting entry at December 31, 2013?

The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:

In its first year of operations Acme Corp. had income before tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%. What is the balance in income tax payable at the end of the year?

Permanent accounts would not include:

Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year?

The adjusting entry required to record accrued expenses includes:

Eve's Apples opened business on January 1, 2013, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2013?

When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account:

When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:

Cost of goods sold is:

Fink Insurance collected premiums of $18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from $6 million to $8 million dollars during the year. What is Fink's revenue from earned insurance premiums for the current year?