Question 1

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

Since the ad has been submitted and published but not yet paid for, it is considered a liability. Therefore, the ad would increase liabilities. Additionally, the cost of the ad would be considered an expense for the advertiser, which would also increase expenses.

Question 2

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

An adjustment would be required to record the accrued interest expense for the month. This is because interest expense accrues over time as the loan is outstanding and must be recognized in the company's financial statements each period. Choices A and B are incorrect because the amount of interest paid or total interest to be paid would not be recorded until actual payment is made. Choice C is incorrect because the amount of principal payable at maturity is already known and would not change each month.

Question 3

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

Purchasing merchandise on account (or credit) increases the buyer's liabilities because they now owe money to the seller (creditor). It also increases the buyer's assets because they now have inventory or merchandise that they can sell to generate revenue. Therefore, choice B is the correct answer as it reflects an increase in both assets and liabilities.

Question 4

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 will increase the company's revenue, therefore increasing the return on investment (ROI) for February. It would not affect working capital or the acid-test ratio.

Question 5

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

The purpose of adjustments in accounting is to increase the accuracy of the financial statements by ensuring that all transactions account for and reported appropriately.

Question 6

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 7

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 8

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.Which of the following journal entries should the firm use to record the payment of interest on March 31, 2017?
A)

B)

C)

D)

Accepted Answer

The answer of Martin & Associates borrowed $15,000 on April...

Question 9

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 the newspaper's assets (due to the expected payment) and increase revenues (as it is considered as income earned).

Question 10

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 5 questions of transaction analysis are:
1) What's going on?
2) Which accounts are affected?
3) How are they affected?
4) Is this an accrual or deferral?
5) Does my analysis make sense? 
Option C, "Is this an accrual?" is not one of the 5 questions.

Question 11

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

Accrual accounting aims to match revenues and expenses to the period in which they are incurred, regardless of when cash transactions occur.

Question 12

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.Which of the following journal entries should the firm use to accrue interest at the end of each month?
A)

B)

C)

D)

Accepted Answer

Option C is the correct choice as it correctly accrues monthly interest by multiplying the principal amount by the monthly interest rate (8%/12) and recording it as an expense. The interest expense is then credited to the interest payable account. This is done at the end of each month to match the accrual accounting concept, which recognizes expenses when they are incurred, regardless of when they are paid. The other options either do not accrue interest correctly or do not match the accounting principle of accrual accounting.

Question 13

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.How much should be in the firm's interest payable account at December 31, 2016?
A) $900
B) $1,200
C) $0
D)$1,000

Accepted Answer

Interest for 9 months (April to December) is calculated as $15,000 * 8% * (9/12) = $900.

Question 14

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

The expanded accounting equation includes all components of a company's financial position. Assets must always equal the sum of liabilities and stockholders' equity, which includes paid-in capital, beginning retained earnings, and the components of the income statement (revenues, expenses, and dividends). Option A is incorrect because it does not include expenses and dividends. Option B is incorrect because it includes paid-in capital in the wrong place and does not account for dividends. Option D is incorrect because it does not include retained earnings or dividends.

Question 15

To accrue $3,200 of employee salaries for the last week of February, the employer's journal entry is:
A)

B)

C)

D)

Accepted Answer

The journal entry to accrue $3,200 of employee salaries for the last week of February would be:

Salaries Expense            $3,200
     Salaries Payable            $3,200

Option B is the correct journal entry which shows debiting the Salaries Expense account and crediting the Salaries Payable account.

Question 16

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)

B)

C)

D)

Accepted Answer

The answer of An engineering consultant provided $300 of services...

Question 17

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 18

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

The answer of A credit entry will:
A) increase an asset...

Question 19

Sage, Inc. has 20 employees who work Monday through Friday each week; each employee earns $200 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) $4,000
B) $2,000
C) $0
D)$12,000

Accepted Answer

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

Question 20

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...

Quiz 4: The Bookkeeping Process and Transaction Analysis

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

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:

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

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:

The effect of an adjustment is:

A debit entry will:

A debit entry will:

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.Which of the following journal entries should the firm use to record the payment of interest on March 31, 2017?

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

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

A journal entry recording an accrual:

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.Which of the following journal entries should the firm use to accrue interest at the end of each month?

Martin & Associates borrowed $15,000 on April 1, 2016 at 8% interest with both principal and interest due on March 31, 2017.How much should be in the firm's interest payable account at December 31, 2016?

An expanded version of the accounting equation could be:

To accrue $3,200 of employee salaries for the last week of February, the employer's journal entry is:

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:

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

A credit entry will:

Sage, Inc. has 20 employees who work Monday through Friday each week; each employee earns $200 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 credit entry will: