Chapter 1
Chapter 2
Chapter 3
BONUS Questions
BONUS Questions
100

List the four accounting assumptions/principles. 

1. Entity Assumption

2. Continuity (going-concern) Assumption

3. Historical Cost Principle

4. Stable Monetary Unit Assumption

100

To be useful, information must have which of the following fundamental qualitative characteristics?

  • A. Faithful representation and diversity
  • B. Timeliness and affordability
  • C. Relevance and faithful representation
  • D. Expediency and relevance
  • C. Relevance and faithful representation
100

Which financial statement reports assets, liabilities, and equity?

  • A. Balance sheet
  • B. Statement of retained earnings
  • C. Income statement
  • D. Statement of cash flows
  • A. Balance sheet
100

List all the temporary accounts. 

1. Revenue

2. Expenses

3. Dividends

100

Purchasing a laptop computer on account will

  • A. increase total liabilities.
  • B. increase total assets.
  • C. have no effect on stockholders' equity.
  • D. All of the listed choices are correct.
  • D. All of the listed choices are correct.
200

What is the accounting equation?

Assets = Liabilities + Equity

200

Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements were prepared using standard U.S. GAAP?

  • A. Entity assumption
  • B. Continuity assumption
  • C. Stable-monetary-unit assumption
  • D. Historical cost principle
  • B. Continuity assumption
200

The method of accounting that recognizes revenue when money is received and expenses when bills are paid is called:

  • Managerial Accounting
  • Accrual Basis
  •  Forensic Accounting
  • Cash Basis
  • Cash Basis
200

Which of the following transactions would be recorded if using the accrual basis of accounting but not if using the cash basis of accounting?

  • A. Purchasing inventory on account
  • B. Paying off loans
  • C. Borrowing money
  • D. Collecting customer payments
  • A. Purchasing inventory on account
200

Martex, a new company, completed these transactions.

  • 1. Stockholders invested $57,000 cash and inventory with a fair value of $25,000.
  • 2. Sales on account, $19,000.


  • What will Martex's total assets equal?
  • A. $57,000
  • B. $82,000
  • C. $101,000
  • D. $76,000
  • C. $101,000
300

List all the permanent accounts.

1. Assets

2. Liabilitilitites

3. Equity

300

A doctor purchases medical supplies of $640 and pays $290 cash with the remainder on account. The journal entry for this transaction would be which of the following?

  • A. Debit    Supplies                                   Credit    Accounts Receivable                        Credit    Cash


  • B. Debit    Supplies                                  Credit    Accounts Payable                         Credit    Cash


  • C. Debit    Supplies                                     Debit    Accounts Receivable                      Credit    Cash


  • D. Debit    Supplies                                     Debit    Accounts Payable
  • B. Debit    Supplies                                  Credit    Accounts Payable                         Credit    Cash
300

A company's balance of retained earnings on January 1 was $ 20 million. During the year, sales revenue was $ 75 million, while expenses totaled $ 40 million. The company declared and paid $ 10 million in cash dividends during the year. What was the balance of retained earnings at the end of the year?

  • A. $ 45 million
  • B. $ 145 million
  • C. $ 65 million
  • D. $ 55 million
  • A. $ 45 million
300

A firm's beginning Cash balance was $10,000. At the end of the period, the balance was $8,000. If total cash paid out during the period was $23,000, the amount of cash receipts was

  • A. $31,000.
  • B. $33,000.
  • C. $21,000.
  • D. $25,000.
  • C. $21,000.
300

Which of the following debit and credit rules is correct?

  • A. Increases in liabilities and stockholders' equity are debited.
  • B. Increases in liabilities and stockholders' equity are credited.
  • C. Increases in assets and liabilities are debited.
  • D. Decreases in assets and liabilities are credited.
  • B. Increases in liabilities and stockholders' equity are credited.
400

A physician performs medical services for a patient on October 20; the total bill for the medical services was $200. The patient makes a co-pay of $20 on October 20, and the insurance company pays the remaining balance of $180 on November 19. On what date(s) will the physician record the revenue for those medical services provided on October 20? (Assume the accrual basis of accounting is used.)

  • A. $200 of revenue on November 19
  • B. $20 of revenue on October 20 and $180 of revenue on November 19
  • C. $200 of revenue on October 20
  • D. $180 of revenue on October 20 and the remaining $20 on November 19
  • C. $200 of revenue on October 20
400

On January 1 of the current year, Jasmine Company paid $1,500 in rent to cover six months (January- June). Jasmine recorded this transaction as follows:


  • Jan       1          Prepaid Rent   1,500                                      Cash                1,500
  • Jasmine adjusts the accounts at the end of each month. Based on these facts, the adjusting entry at the end of January should include
  • A. a debit to Prepaid Rent for $ 250.
  • B. a credit to Prepaid Rent for $ 250.
  • C. a debit to Prepaid Rent for $ 1250.
  • D. a credit to Prepaid Rent for $ 1250.
  • B. a credit to Prepaid Rent for $ 250.
400

Which of the following accounts would not be included in the closing entries?

  • A. Retained Earnings
  • B. Accumulated Depreciation
  • C. Depreciation Expense
  • D. Service Revenue
  • B. Accumulated Depreciation
400

What is the journal entry for closing the books if:

1. Revenue exceeds expenses

2. Expenses exceed revenue 

Write on board

400

If the credit to record the payment of an account payable is not posted,

  • A. cash will be overstated.
  • B. liabilities will be understated.
  • C. cash will be understated.
  • D. expenses will be understated.
  • A. cash will be overstated.

DR CASH

CR A/P

500

If the credit to record the purchase of supplies on account is not posted,

  • A. expenses will be overstated.
  • B. liabilities will be understated.
  • C. stockholders' equity will be understated.
  • D. assets will be understated.
  • B. liabilities will be understated.

DR Supplies

CR A/P


500

What data flows from the statement of retained earnings to the balance sheet?

  • A. Cash
  • B. Net income
  • C. Assets
  • D. Ending retained earnings
  • D. Ending retained earnings
500

For 2018, Broadview Company had revenues in excess of expenses. Which statement describes Broadview's closing entries at the end of 2018? (Assume there is only one closing entry for both revenue and expenses.)

  • A. Revenues will be credited, expenses will be debited, and retained earnings will be debited.
  • B. Revenues will be debited, expenses will be credited, and retained earnings will be debited.
  • C. Revenues will be credited, expenses will be debited, and retained earnings will be credited.
  • D. Revenues will be debited, expenses will be credited, and retained earnings will be credited.
  • D. Revenues will be debited, expenses will be credited, and retained earnings will be credited.
500

What is the Statement of Retained Earnings equation?

Beg RE

+ NI

- Div

______

End RE

500

What three normal accounts increase with debits (DR)?

1. Assets

2. Expenses

3. Dividends

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