1.

The income statement and balance sheet columns of Beer and Nuts Company’s worksheet
reflect the following totals:

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.
Totals $75,000 $51,000 $60,000 $84,000

The net income (or loss) for the period is

a. $51,000 income.
b. $24,000 income.
c. $24,000 loss.
d. not determinable.

2. The income statement and balance sheet columns of Beer and Nuts Company’s
worksheet reflect the following totals:

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.
Totals $75,000 $48,000 $60,000 $87,000

To enter the net income (or loss) for the period into the above worksheet requires an entry
to the
a. income statement debit column and the balance sheet credit column.
b. income statement credit column and the balance sheet debit column.
c. income statement debit column and the income statement credit column.
d. balance sheet debit column and the balance sheet credit column.

3.The income statement for the month of June, 2016 of Snap Shot, Inc. contains the following
information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

The entry to close the revenue account includes a

a. debit to Income Summary for $2,000.
b. credit to Income Summary for $2,000.
c. debit to Income Summary for $7,300.
d. credit to Income Summary for $7,300.
4. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

The entry to close the expense accounts includes a

a. debit to Income Summary for $2,000.
b. credit to Rent Expense for $1,300.
c. credit to Income Summary for $5,300.
d. debit to Salaries and Wages Expense for $3,000.
5. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. a debit balance of $7,300.
b. a debit balance of $2,000.
c. a credit balance of $2,000.
d. a credit balance of $7,300.

6. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

The entry to close Income Summary to Owner’s, Capital includes

 a. a debit to Revenues for $7,300.
b. credits to Expenses totalling $5,300.
c. a credit to Income Summary for $2,000
d. a credit to Owner’s Capital for $2,000.

7. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

At June 1, 2016, Snap Shot reported owner’s equity of $36,000. The company had no
owner drawings during June. At June 30, 2016, the company will report owner’s equity of
a. $30,700.
b. $36,000.
c. $38,000.
d. $43,300.

8. The income statement for the year 2016 of Bugati Co. contains the following information:
Revenues $73,000
Expenses:
Salaries and Wages Expense $43,000
Rent Expense 12,000
Advertising Expense 11,000
Supplies Expense 6,000
Utilities Expense 3,500
Insurance Expense 4,000
Total expenses 79,500
Net income (loss) $ (6,500)

The entry to close the revenue account includes a

a. debit to Income Summary for $6,500.
b. credit to Income Summary for $6,500.
c. debit to Revenues for $73,000.
d. credit to Revenues for $73,000.
9.The following information is for Central Avenue Real Estate:
Central Avenue Real Estate
Balance Sheet
December 31, 2016

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 80,000 Total Liabilities 170,000
Land Held for Investment 75,000
Land 120,000
Building $110,000
Less Accumulated Owner’s Capital 380,000
Depreciation (20,000) 90,000
Trademark 70,000 Total Liabilities and
Total Assets $550,000 Owner’s Equity $550,000

The total dollar amount of assets to be classified as current assets is

a. $115,000.
b. $195,000.
c. $200,000.
d. $270,000.

10.The following information is for Central Avenue Real Estate:

Central Avenue Real Estate
Balance Sheet
December 31, 2016

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 80,000 Total Liabilities 170,000
Land Held for Investment 75,000
Land 120,000
Building $110,000
Less Accumulated Owner’s Capital 380,000
Depreciation (20,000) 90,000
Trademark 70,000 Total Liabilities and
Total Assets $550,000 Owner’s Equity $550,000

The total dollar amount of assets to be classified as property, plant, and equipment is
a. $210,000.
b. $230,000.
c. $285,000.
d. $315,000.
11.The following information is for Central Avenue Real Estate:
Central Avenue Real Estate
Balance Sheet
December 31, 2016

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 80,000 Total Liabilities 170,000
Land Held for Investment 75,000
Land 120,000
Building $110,000
Less Accumulated Owner’s Capital 380,000
Depreciation (20,000) 90,000
Trademark 70,000 Total Liabilities and
Total Assets $550,000 Owner’s Equity $550,000

The total dollar amount of assets to be classified as investments is

a. $0.
b. $80,000.
c. $75,000.
d. $175,000.

12.The following information is for Central Avenue Real Estate:

Central Avenue Real Estate
Balance Sheet
December 31, 2016

Cash $ 25,000 Accounts Payable $ 60,000

Prepaid Insurance 40,000 Salaries and Wages Payable 25,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 80,000 Total Liabilities 170,000
Land Held for Investment 75,000
Land 120,000
Building $110,000
Less Accumulated Owner’s Capital 380,000
Depreciation (20,000) 90,000
Trademark 70,000 Total Liabilities and
Total Assets $550,000 Owner’s Equity $550,000

The total dollar amount of liabilities to be classified as current liabilities is

a. $25,000.
b. $60,000.
c. $85,000.
d. $170,000.
13.The following information is for Qwik Auto Supplies:
Qwik Auto Supplies
Balance Sheet
December 31, 2016

Cash $ 45,000 Accounts Payable $ 140,000

Prepaid Insurance 80,000 Salaries and Wages Payable 60,000
Accounts Receivable 110,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 350,000
Land Held for Investment 185,000
Land 250,000
Building $200,000
Less Accumulated Owner’s Capital 750,000
Depreciation (50,000) 150,000
Trademark 140,000 Total Liabilities and
Total Assets $1,100,000 Owner’s Equity $1,100,000
The total dollar amount of assets to be classified as current assets is
a. $125,000.
b. $235,000.
c. $375,000.
d. $560,000.

14.The following information is for Qwik Auto Supplies:

Qwik Auto Supplies
Balance Sheet
December 31, 2016
Cash $ 45,000 Accounts Payable $ 140,000
Prepaid Insurance 80,000 Salaries and Wages Payable 60,000
Accounts Receivable 110,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 350,000
Land Held for Investment 185,000
Land 250,000
Building $200,000
Less Accumulated Owner’s Capital 750,000
Depreciation (50,000) 150,000
Trademark 140,000 Total Liabilities and
Total Assets $1,100,000 Owner’s Equity $1,100,000
The total dollar amount of assets to be classified as property, plant, and equipment is
a. $400,000.
b. $450,000.
c. $585,000.
d. $635,000.
15.The following information is for Qwik Auto Supplies:
Qwik Auto Supplies
Balance Sheet
December 31, 2016

Cash $ 45,000 Accounts Payable $ 140,000

Prepaid Insurance 80,000 Salaries and Wages Payable 60,000
Accounts Receivable 110,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 350,000
Land Held for Investment 185,000
Land 250,000
Building $200,000
Less Accumulated Owner’s Capital 750,000
Depreciation (50,000) 150,000
Trademark 140,000 Total Liabilities and
Total Assets $1,100,000 Owner’s Equity $1,100,000

The total dollar amount of assets to be classified as investments is

a. $0.
b. $585,000.
c. $185,000.
d. $725,000.

16.The following information is for Qwik Auto Supplies:

Qwik Auto Supplies
Balance Sheet
December 31, 2016

Cash $ 45,000 Accounts Payable $ 140,000

Prepaid Insurance 80,000 Salaries and Wages Payable 60,000
Accounts Receivable 110,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 350,000
Land Held for Investment 185,000
Land 250,000
Building $200,000
Less Accumulated Owner’s Capital 750,000
Depreciation (50,000) 150,000
Trademark 140,000 Total Liabilities and
Total Assets $1,100,000 Owner’s Equity $1,100,000

The total dollar amount of liabilities to be classified as current liabilities is

a. $60,000.
b. $140,000.
c. $200,000.
d. $350,000.
17.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

What is the company’s net income for the year ending December 31, 2016?
a. $14,000
b. $33,000
c. $44,000
d. $135,000

18.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200

What is the company’s net income for the year ending December 31, 2016?
a. $14,000
b. $33,000
c. $44,000
d. $135,000
19. Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

What is the balance that would be reported for owner’s equity at December 31, 2016?
a. $159,000
b. $148,000
c. $137,000
d. $104,000

20.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

What are total current assets at December 31, 2016?

a. $28,000
b. $35,200
c. $40,200
d. $46,200

21.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
 Depreciation expense 12,000
Equipment 210,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000

What is the book value of the equipment at December 31, 2016?

a. $172,000
b. $184,000
c. $210,000
d. $236,000

22.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

What are total current liabilities at December 31, 2016?

a. $19,000
b. $72,000
c. $91,000
d. $102,000
23.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

What are total long-term liabilities at December 31, 2016?

a. $0
b. $72,000
c. $91,000
d. $93,000

24.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Equipment 210,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
 What is total liabilities and owner’s equity at December 31, 2016?
a. $184,000
b. $228,000
c. $195,000
d. $239,000

25.The sub-classifications for assets on the company’s classified balance sheet would include all
of the following except
a. Current Assets.
b. Property, Plant, and Equipment.
c. Intangible Assets.
d. Long-term Assets.

26.The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

The current assets should be listed on Freight Service’s balance sheet in the following
order:
a. cash, accounts receivable, prepaid insurance, equipment.
b. cash, prepaid insurance, supplies, accounts receivable.
c. cash, accounts receivable, prepaid insurance, supplies.
d. equipment, supplies, prepaid insurance, accounts receivable, cash.
27.The following is selected information from Monty Corporation for the fiscal year ending October
31, 2016.
Cash received from customers $300,000
Revenue recognized 378,000
Cash paid for expenses 180,000
Cash paid for computers on November 1, 2015 that will be used
for 3 years (annual depreciation is $15,000) 45,000
Expenses incurred, including interest, but excluding any depreciation 230,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is Monty Corporation’s net income for the
year ending October 31, 2016?
a. $75,000.
b. $105,000.
c. $133,000.
d. $148,000.

28. Toole Company had the following transactions during 2016:

 Sales of $4,200 on account
 Collected $2,500 for services to be performed in 2017
 Paid $1,580 cash in salaries
 Purchased airline tickets for $350 in December for a trip to take place in 2017

What is Toole’s 2016 net income using accrual accounting?

a. $2,370.
b. $2,620.
c. $4,770.
d. $5,120.

29. Toole Company had the following transactions during 2016:

 Sales of $4,200 on account
 Collected $2,600 for services to be performed in 2017
 Paid $1,630 cash in salaries
 Purchased airline tickets for $450 in December for a trip to take place in 2017

What is Toole’s 2016 net income using cash basis accounting?

a. $520.
b. $970.
c. $4,720.
d. $5,170.
30.A law firm received $5,000 cash for legal services to be rendered in the future. The full amount
was credited to the liability account Unearned Service Revenue. If the legal services have
been rendered at the end of the accounting period and no adjusting entry is made, this
would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

31.Wallowa Company purchased supplies costing $6,000 and debited Supplies for the full
amount. At the end of the accounting period, a physical count of supplies revealed $1,800
still on hand. The appropriate adjusting journal entry to be made at the end of the period
would be
a. Debit Supplies Expense, $1,800; Credit Supplies, $1,800.
b. Debit Supplies, $4,200; Credit Supplies Expense, $4,200.
c. Debit Supplies Expense, $4,200; Credit Supplies, $4,200.
d. Debit Supplies, $1,800; Credit Supplies Expense, $1,800.

32.The balance in the supplies account on June 1 was $5,000, supplies purchased during June
were $3,000, and the supplies on hand at June 30 were $3,500. The amount to be used
for the appropriate adjusting entry is
a. $4,000.
b. $4,500.
c. $6,500.
d. $11,500.

33.Bichon Company purchased equipment for $6,720 on December 1. It is estimated that annual
depreciation on the equipment will be $1,680. If financial statements are to be prepared
on December 31, the company should make the following adjusting entry:
a. Debit Depreciation Expense, $1,680; Credit Accumulated Depreciation, $1,680.
b. Debit Depreciation Expense, $140; Credit Accumulated Depreciation, $140.
c. Debit Depreciation Expense, $5,040; Credit Accumulated Depreciation, $5,040.
d. Debit Equipment, $6,720; Credit Accumulated Depreciation, $7,200.
34. Mullins Real Estate received a check for $30,000 on July 1 which represents a 6 month
advance payment of rent on a building it rents to a client. Unearned Rent Revenue was
credited for the full $30,000. Financial statements will be prepared on July 31. Mullins Real
Estate should make the following adjusting entry on July 31:
a. Debit Unearned Rent Revenue, $5,000; Credit Rent Revenue, $5,000.
b. Debit Rent Revenue, $5,000; Credit Unearned Rent Revenue, $5,000.
c. Debit Unearned Rent Revenue, $30,000; Credit Rent Revenue, $30,000.
d. Debit Cash, $30,000; Credit Rent Revenue, $30,000.
35.At December 31, 2016, before any year-end adjustments, Obama Company’s Insurance
Expense account had a balance of $2,600 and its Prepaid Insurance account had a
balance of $7,600. It was determined that $3,200 of the Prepaid Insurance had expired.
The adjusted balance for Insurance Expense for the year would be
a. $2,600.
b. $4,400.
c. $3,200.
d. $5,800.

36.The income statement for the month of June, 2016 of Snap Shot, Inc. contains the following
information:
Revenues $7,300
Expenses:
Salries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

At June 1, 2016, Snap Shot reported owner’s equity of $36,000. The company had no
owner drawings during June. At June 30, 2016, the company will report owner’s equity of
a. $30,700.
b. $36,000.
c. $38,000.
d. $43,300.

37.The time period assumption is also referred to as the

a. calendar assumption.
b. cyclicity assumption.
c. periodicity assumption.
d. fiscal assumption.

38. Which of the following is in accordance with generally accepted accounting principles?
a. Accrual-basis accounting
b. Cash-basis accounting
c. Both accrual-basis and cash-basis accounting
d. Neither accrual-basis nor cash-basis accounting

39. The revenue recognition principle dictates that revenue should be recognized in the
accounting records
a. when cash is received.
b. when the performance obligation is satisfied.
c. at the end of the month.
d. in the period that income taxes are paid.
40.The expense recognition principle matches
a. customers with businesses.
b. expenses with revenues.
c. assets with liabilities.
d. creditors with businesses.

41. The revenue recognition principle dictates that revenue should be recognized in the
accounting records
a. when cash is received.
b. when the performance obligation is satisfied.
c. at the end of the month.
d. in the period that income taxes are paid.
42. The following items are taken from the financial statements of the Freight Service for
the year ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Equipment 210,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000

What is the book value of the equipment at December 31, 2016?

a. $172,000
b. $184,000
c. $210,000
d. $236,000
43. Which of the following is in accordance with generally accepted accounting principles?
a. Accrual-basis accounting
b. Cash-basis accounting
c. Both accrual-basis and cash-basis accounting
d. Neither accrual-basis nor cash-basis accounting
44. The balance in the supplies account on June 1 was $5,000, supplies purchased during
June were $3,000, and the supplies on hand at June 30 were $3,500. The amount to
be used for the appropriate adjusting entry is
a. $4,000.
b. $4,500.
c. $6,500.
d. $11,500.

45. Toole Company had the following transactions during 2016:

 Sales of $4,200 on account
 Collected $2,500 for services to be performed in 2017
 Paid $1,580 cash in salaries
 Purchased airline tickets for $350 in December for a trip to take place in 2017

What is Toole’s 2016 net income using accrual accounting?

a. $2,370.
b. $2,620.
c. $4,770.
d. $5,120.
46. The income statement for the year 2016 of Bugati Co. contains the following
information:
Revenues $73,000
Expenses:
Salaries and Wages Expense $43,000
Rent Expense 12,000
Advertising Expense 11,000
Supplies Expense 6,000
Utilities Expense 3,500
Insurance Expense 4,000
Total expenses 79,500
Net income (loss) $ (6,500)

The entry to close the revenue account includes a

a. debit to Income Summary for $6,500.
b. credit to Income Summary for $6,500.
c. debit to Revenues for $73,000.
d. credit to Revenues for $73,000.

47. A law firm received $5,000 cash for legal services to be rendered in the future. The
full amount was credited to the liability account Unearned Service Revenue. If the
legal services have been rendered at the end of the accounting period and no
adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.
48. The following is selected information from Monty Corporation for the fiscal year ending
October 31, 2016.
Cash received from customers $300,000
Revenue recognized 378,000
Cash paid for expenses 180,000
Cash paid for computers on November 1, 2015 that will be used
for 3 years (annual depreciation is $15,000) 45,000
Expenses incurred, including interest, but excluding any depreciation 230,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is Monty Corporation’s net income for the year
ending October 31, 2016?
a. $75,000.
b. $105,000.
c. $133,000.
d. $148,000.

49. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

The entry to close the revenue account includes a

a. debit to Income Summary for $2,000.
b. credit to Income Summary for $2,000.
c. debit to Income Summary for $7,300.
d. credit to Income Summary for $7,300.

50. Mullins Real Estate received a check for $30,000 on July 1 which represents a 6 month
advance payment of rent on a building it rents to a client. Unearned Rent Revenue
was credited for the full $30,000. Financial statements will be prepared on July 31.
Mullins Real Estate should make the following adjusting entry on July 31:
a. Debit Unearned Rent Revenue, $5,000; Credit Rent Revenue, $5,000.
b. Debit Rent Revenue, $5,000; Credit Unearned Rent Revenue, $5,000.
c. Debit Unearned Rent Revenue, $30,000; Credit Rent Revenue, $30,000.
d. Debit Cash, $30,000; Credit Rent Revenue, $30,000.
51. Wallowa Company purchased supplies costing $6,000 and debited Supplies for the
full amount. At the end of the accounting period, a physical count of supplies revealed
$1,800 still on hand. The appropriate adjusting journal entry to be made at the end of
the period would be
a. Debit Supplies Expense, $1,800; Credit Supplies, $1,800.
b. Debit Supplies, $4,200; Credit Supplies Expense, $4,200.
c. Debit Supplies Expense, $4,200; Credit Supplies, $4,200.
d. Debit Supplies, $1,800; Credit Supplies Expense, $1,800.

52. The following items are taken from the financial statements of the Freight Service for the year
ending December 31, 2016:
Accounts payable $ 19,000
Accounts receivable 13,000
Accumulated depreciation – equipment 26,000
Advertising expense 21,200
Cash 15,000
Owner’s capital (1/1/16) 104,000
Owner’s drawings 11,000
Depreciation expense 12,000
Insurance expense 3,800
Note payable, due 6/30/17 72,000
Prepaid insurance (12-month policy) 7,200
Rent expense 16,000
Salaries and wages expense 32,000
Service revenue 135,000
Supplies 5,000
Supplies expense 6,000
Equipment 210,000

The current assets should be listed on Freight Service’s balance sheet in the following order:
a. cash, accounts receivable, prepaid insurance, equipment.
b. cash, prepaid insurance, supplies, accounts receivable.
c. cash, accounts receivable, prepaid insurance, supplies.
d. equipment, supplies, prepaid insurance, accounts receivable, cash.

53. At December 31, 2016, before any year-end adjustments, Obama Company’s
Insurance Expense account had a balance of $2,600 and its Prepaid Insurance
account had a balance of $7,600. It was determined that $3,200 of the Prepaid
Insurance had expired. The adjusted balance for Insurance Expense for the year
would be
a. $2,600.
b. $4,400.
c. $3,200.
d. $5,800.
54. The income statement for the month of June, 2016 of Snap Shot, Inc. contains the
following information:
Revenues $7,300
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,300
Advertising Expense 700
Supplies Expense 200
Insurance Expense 100
Total expenses 5,300
Net income $2,000

After the revenue and expense accounts have been closed, the balance in Income Summary
will be
a. a debit balance of $7,300.
b. a debit balance of $2,000.
c. a credit balance of $2,000.
d. a credit balance of $7,300.
55. The sub-classifications for assets on the company’s classified balance sheet would
include all of the following except
a. Current Assets.
b. Property, Plant, and Equipment.
c. Intangible Assets.
d. Long-term Assets.

56. Which one of the following is not a justification for adjusting entries?
a. Adjusting entries are necessary to ensure that the revenue recognition principle is
followed.
b. Adjusting entries are necessary to ensure that the expense recognition principle is
followed.
c. Adjusting entries are necessary to enable financial statements to be in conformity
with GAAP.
d. Adjusting entries are necessary to bring the general ledger accounts in line with the
budget.

57. An adjusting entry

a. affects two balance sheet accounts.
b. affects two income statement accounts.
c. affects a balance sheet account and an income statement account.
d. is always a compound entry.

58. The preparation of adjusting entries is

a. straight forward because the accounts that need adjustment will be out of balance.
b. often an involved process requiring the skills of a professional.
c. only required for accounts that do not have a normal balance.
d. optional when financial statements are prepared.
59. Unearned revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.

60. An asset—expense relationship exists with

a. liability accounts.
b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.