BUS 591 FINANCIAL ACCOUNTING AND ANALYSIS
QUIZ (9 HOURS)
Question 1 A company usually determines the amount of supplies used during a period by:
a) taking the difference between the balance of the Supplies account and the cost of supplies on hand.
b) taking the difference between the supplies purchased and the supplies paid for during the period.
c) summing the amount of supplies purchased during the period.
d) adding the supplies on hand to the balance of the Supplies account.
Question 2 Is the purchase of equipment treated as an expense at the time of purchase? Why or why not?
a) Yes, the actual life of the asset is not known, thus there is no acceptable way to allocate the cost.
b) No, the cost needs to be allocated to the years of expected use.
c) Yes, the matching principle requires that the cost be expensed in the period of purchase.
d) No, GAAP requires that 10% of the cost be expensed each year. This minimizes attempts to mislead financial statement users.
Question 3 Green Realty Company received a check for $24,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full $24,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31:
a) debit Cash, $24,000; credit Rental Revenue, $24,000.
b) debit Unearned Rent, $24,000; credit Rental Revenue, $24,000.
c) debit Rental Revenue, $4,000; credit Unearned Rent, $4,000.
d) debit Unearned Rent, $4,000; credit Rental Revenue, $4,000
Question 4 The Harris Company purchased a computer for $3,000 on December 1. It is estimated that annual depreciation on the computer will be $600. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:
a) debit Office Equipment, $3,000; credit Accumulated Depreciation, $3,000.
b) debit Depreciation Expense, $2,400; credit Accumulated Depreciation, $2,400.
c) debit Depreciation Expense, $50; credit Accumulated Depreciation, $50.
d) debit Depreciation Expense, $600; credit Accumulated Depreciation, $600.
Question 5 A “T” account is
a) used for accounts that have both a debit and credit balance.
b) a special account used instead of a trial balance.
c) a special account used instead of a journal.
d) a way of depicting the basic form of an account.
Question 6 During January 2012, Carey Services Inc. paid a cash dividends of $2,000. This transaction
ia) ncreases expenses by $2,000.
b) reduces net income by $2,000.
c) increases stockholders' equity by $2,000.
d) reduces stockholders' equity by $2,000.
Question 7 On October 1, 2012, Metz Industries had an Accounts Payable balance of $60,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2012, the Accounts Payable balance is
a) $80,000 credit
b) $30,000 credit
c) $20,000 credit
d) $60,000 debit
Question 8 If an individual asset is increased, then
a) none of these is possible.
b) there could be an equal decrease in another asset.
c) there could be an equal decrease in stockholders' equity.
d) there could be an equal decrease in a specific liability.
Question 9 Payments of expenses that will benefit more than one accounting period are identified as
b) prepaid expenses.
Question 10 On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?
a) No, the financial position of the company has been changed; however, the dollar amount of the transaction is not yet known.
b) Yes, failure to record the event would cause the financial statements to be misleading.
c) No, hiring an employee is an important event; however, it is not an economic event that should be recorded.
d) Yes, the company is now obligated to pay the employee, thus that event must be recorded.