Accounting 321 Practice Quiz 1 - Drexel



Accounting 321

Practice Quiz 1

Solutions

1. To compute interest expense for an adjusting entry, the formula is principal X rate X a fraction. The numerator and denominator of the fraction are:

Numerator Denomintor

( a. Length of time note has been outstanding 12 months

b. Length of note 12 months

c. Length of time until note matures Length of note

d. Length of time note has been outstanding Length of note

2. Adjusting entries are necessary to

1. obtain a proper matching of revenue and expense.

2. achieve an accurate statement of assets and equities.

3. adjust assets and liabilities to their fair market value.

a. 1

b. 2

c. 3

( d. 1 and 2

3. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?

a. To reduce the federal income tax liability

b. To aid management in cash-flow analysis

( c. To match the costs of production with revenues as earned

d. To adhere to the accounting constraint of conservatism

4. When an item of revenue or expense has been earned or incurred but not yet collected or paid, it is normally called a(n) ____________ revenue or expense.

a. prepaid

b. adjusted

c. estimated

( d. none of these

5. An adjusted trial balance

a. is prepared after the financial statements are completed.

( b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

c. is a required financial statement under generally accepted accounting principles.

d. cannot be used to prepare financial statements.

Selected amounts from Blues Clues Company's trial balance of 12/31/07 appear below:

1. Accounts Payable $ 160,000

2. Accounts Receivable 150,000

3. Accumulated Depreciation—Equipment 200,000

4. Allowance for Doubtful Accounts 20,000

5. Bonds Payable 500,000

6. Cash 150,000

7. Common Stock 60,000

8. Equipment 840,000

9. Insurance Expense 30,000

10. Interest Expense 10,000

11. Merchandise Inventory 300,000

12. Notes Payable (due 6/1/08) 200,000

13. Prepaid Rent 150,000

14. Retained Earnings 818,000

15. Salaries and Wages Expense 328,000

(All of the above accounts have their standard or normal debit or credit balance.)

Prepare adjusting journal entries at year end, December 31, 2007, based on the following supplemental information.

a. The annual depreciation rate on the equipment is 8%. Salvage value is estimated to be 5% of cost. (Straight-line method being used.)

Dep Exp: Equ 63,840

A/D: Equ 63,840

b. Interest accrued on the bonds payable is $15,000 as of 12/31/07. Interest accrued on the notes payable is $9,000 as of 12/31/07.

Int Exp: Bonds 15,000

Int Pbl: Bonds 15,000

Int Exp: N/P 9,000

Int Pbl: N/P 9,000

c. The rent payment of $150,000 covers the six months from November 30, 2007 through May 31, 2008.

Rent Exp: 25,000

Ppd Rent: 25,000

d. Salaries and wages of $22,000 were unpaid at 12/31/07,

Sal Exp: 22,000

Sal Pbl: 22,000

The adjusted trial balance of Jumpstart Financial Planners appears below. Using the information from the adjusted trial balance, you are to prepare for the month ending December 31:

1. an income statement.

2. a statement of retained earnings.

3. a balance sheet.

JUMPSTART FINANCIAL PLANNERS

Adjusted Trial Balance

December 31, 2007

Cash $ 4,400

Accounts Receivable 2,200

Office Supplies 1,800

Office Equipment 15,000

Accumulated Depreciation—Office Equipment $ 4,000

Accounts Payable 2,800

Unearned Revenue 4,000

Common Stock 10,000

Retained Earnings 4,400

Dividends 2,500

Sales Revenue 5,700

Sales Discounts………………………………………………………… 100

Cost of Goods Sold 2,500

Salary Expense…………………………………………………………. 1,000

Depreciation Expense 500

Rent Expense 900 ______

$30,900 $30,900

I/S fye 12/31 Stmt R/E fye 12/31 B/S 12/31

Rev: Sales Rev 5,700 Begin Bal 4,400 Assets:

Sales D/C 100 NI 700 Cash 4,400

Net Sales 5,600 Div 2,500 A/R 2,200

Exp: COGS 2,500 End Bal 2,600 Office Sup 1,800

Salary Exp 1,000 Office Equ 15,000

Dep Exp 500 A/D 4,000

Rent Exp 900 Book Value 11,000

Total Exp 4,900 Total Assets 19,400

Net Income 700 Liab and S/H:

Liabilities:

A/P 2,800

Unearned Rev 4,000

Total Liab 6,800

S/H:

C/S 10,000

R/E 2,600

Total S/H 12,600

Total L + S/H 19,400

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download