Test Bank For Intermediate Accounting 19e Earl K Stice James D Stice

Test Bank For Intermediate Accounting 19e Earl K Stice James D Stice

Chapter 2—A Review of the Accounting Cycle

MULTIPLE CHOICE

1.In an accrual accounting system,

a.	all accounts have normal debit balances.
b.	a debit entry is recorded on the left-hand side of an account.
c.	liabilities, owner’s capital, and dividends all have normal credit balances.
d.	revenues are recorded only when cash is received.

ANS: B PTS: 1 DIF: Easy OBJ: LO 2

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

2.A common business transaction that would not affect the amount of owners’ equity is

a.	signing a note payable to purchase equipment.
b.	payment of property taxes.
c.	billing of customers for services rendered.
d.	payment of dividends.

ANS: A PTS: 1 DIF: Medium OBJ: LO 2

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

3.Failure to record the expired amount of prepaid rent expense would not

a.	understate expense.
b.	overstate net income.
c.	overstate owners’ equity.
d.	understate liabilities.

ANS: D PTS: 1 DIF: Medium OBJ: LO 3

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

4.On June 30, a company paid $3,600 for insurance premiums for the current year and debited the amount to Prepaid Insurance. At December 31, the bookkeeper forgot to record the amount expired. The omission has the following effect on the financial statements prepared December 31:

a.	overstates owners’ equity.
b.	overstates assets.
c.	understates net income.
d.	overstates both owners’ equity and assets.

ANS: D PTS: 1 DIF: Medium OBJ: LO 3

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

5.A chart of accounts is a

a.	subsidiary ledger.
b.	listing of all account titles.
c.	general ledger.
d.	general journal.

ANS: B PTS: 1 DIF: Easy OBJ: LO 2

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

6.Which of the following criteria must be met before an event should be recorded for accounting purposes?

a.	The event must be an arm’s-length transaction.
b.	The event must be repeatable in a future period.
c.	The event must be measurable in financial terms.
d.	The event must be disclosed in the reported footnotes.

ANS: C PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Reflective Thinking

7.Adjusting entries normally involve

a.	real accounts only.
b.	nominal accounts only.
c.	real and nominal accounts.
d.	liability accounts only.

ANS: C PTS: 1 DIF: Easy OBJ: LO 3

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

8.Which of the following is an item that is reportable in the financial records of an enterprise?

a.	The value of goodwill earned through business operations
b.	The value of human resources
c.	Changes in personnel
d.	Changes in inventory costing methods

ANS: D PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

9.The balance in a deferred revenue account represents an amount that is

     Earned                  Collected

a.	YesYes
b.	YesNo
c.	No Yes
d.	No No

ANS: C PTS: 1 DIF: Easy OBJ: LO 3

TOP:AICPA FN-MeasurementMSC:AACSB Analytic

10.The debit and credit analysis of a transaction normally takes place when the

a.	entry is posted to a subsidiary ledger.
b.	entry is recorded in a journal.
c.	trial balance is prepared.
d.	financial statements are prepared.

ANS: B PTS: 1 DIF: Easy OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Reflective Thinking