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On the statement of retained earnings:


A) dividends declared increase net income and are added to calculate the end-of-year balance of retained earnings.
B) dividends declared are subtracted to calculate the end-of-year balance of retained earnings.
C) dividends declared are not used to calculate the end-of-year balance of retained earnings.
D) dividends declared are never reported.

E) All of the above
F) None of the above

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If the total amount that should have been debited to insurance expense is mistakenly debited to prepaid insurance, what will be the effect on the financial statements for the year?


A) Revenues will be overstated.
B) Assets will be overstated.
C) Stockholders' equity will be understated.
D) Expenses will be overstated.

E) All of the above
F) C) and D)

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Permanent accounts:


A) are not permitted under GAAP.
B) have their balances zeroed-out at the end of each accounting year.
C) do not have their year-end balance carried into the next year.
D) are Balance Sheet accounts.

E) None of the above
F) A) and C)

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The carrying value of an asset is an approximation of the asset's market value.

A) True
B) False

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After posting the closing entries, all the revenue accounts and all the expense accounts are zero and the Retained Earnings account has been debited for $4,000. This implies that the company had a net income of $4,000.

A) True
B) False

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Income statement accounts are closed at what stage of the accounting process?


A) At the time that adjustments are made.
B) After adjustments are made and before the income statement is prepared.
C) After the income statement and the statement of retained earnings are prepared, but before the balance sheet is prepared.
D) As the last journal entries at the end of each accounting year.

E) C) and D)
F) B) and C)

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The first financial statement prepared after the adjusted trial balance is:


A) the balance sheet.
B) the income statement.
C) the statement of cash flows.
D) the statement of retained earnings.

E) B) and C)
F) All of the above

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Which of the following is a true statement about the nature of equipment?


A) While equipment is an asset, its use (depreciation) is an expense.
B) While equipment is an asset, its use (depreciation) is a liability.
C) While equipment is an asset, its use (depreciation) affects contributed capital.
D) Equipment and its use (depreciation) are both liabilities.

E) A) and D)
F) B) and D)

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The asset account Office Supplies has a balance of $800 at the beginning of the year. The amount on hand at the end of the year is $500. The company has calculated the Office Supplies Expense for the year to be $3,500. Based on this information, what amount of office supplies was purchased during the year?


A) $0
B) $4,000
C) $3,200
D) $3,000

E) A) and B)
F) A) and C)

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Which of the following accounts would be classified as a current liability?


A) Dividends declared.
B) Unearned revenue.
C) Wages expense.
D) Accounts receivable

E) None of the above
F) A) and D)

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Accrual adjustments link:


A) assets and revenues moving in the same direction or liabilities and expenses moving in the same direction.
B) assets and expenses moving in the same direction or liabilities and revenues moving in the same direction.
C) assets and revenues moving in the opposite direction or liabilities and expenses moving in the opposite direction.
D) assets and expenses moving in the opposite direction or liabilities and revenues moving in the opposite

E) A) and B)
F) A) and D)

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A contra account is added to the account it offsets.

A) True
B) False

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Two types of closing journal entries are posted to retained earnings at year-end. These are entries to:


A) transfer revenues and expenses to retained earnings.
B) transfer assets and liabilities to retained earnings.
C) transfer net income (or loss) and dividends declared to retained earnings.
D) close permanent and temporary accounts.

E) B) and D)
F) A) and D)

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The December 31, 2010, adjusted trial balance of a company, where all accounts have normal balances is: The December 31, 2010, adjusted trial balance of a company, where all accounts have normal balances is: Given this information, after all closing entries are made, the balance in the retained earnings account is: A) $2,000 B) $4,000 C) $0 D) $1,500 Given this information, after all closing entries are made, the balance in the retained earnings account is:


A) $2,000
B) $4,000
C) $0
D) $1,500

E) B) and D)
F) B) and C)

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A company forgot to make an adjusting entry to record incurred wages that were unpaid at the end of the period. This would understate Total Liabilities and overstate Retained Earnings on the Balance Sheet.

A) True
B) False

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Which of the following trial balances are used as a source for preparing the income statement?


A) Unadjusted trial balance.
B) Pre-adjusted trial balance.
C) Adjusted trial balance.
D) Post-closing trial balance.

E) B) and C)
F) A) and B)

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Which of the following statements regarding the presentation of a trial balance is correct?


A) The adjusted trial balance shows the end-of-year balance for Retained Earnings.
B) An adjusted trial balance presents account balances in the same level of detail as in the presentation of the financial statements.
C) The order of accounts is assets, liabilities, stockholders' equity, dividends, revenues and expenses.
D) The adjusted trial balance provides a check on the accuracy of the postings for the period.

E) None of the above
F) A) and B)

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On December 31, 2010, the balance in retained earnings is $20,000. On December 31, 2011, the balance in retained earnings is $19,100. During 2011, dividends of $4,000 were declared and paid. What is the amount of net income for 2011?


A) $4,900
B) $3,100
C) $900
D) $(900)

E) A) and C)
F) C) and D)

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