Download BUSA 101 – MR

BUSA 101 – MR. FARINA
Pre-quiz #1
Chapters 1 - 3
Name
Problem 1:
Instructions: Solve the following problems and record the answers in the Answers column. Circle
“over” or “under” when applicable.
Answers
1. If the prepaid insurance account has a debit balance of $5,200 at the end of
the year and the amount applicable to future periods is $2,800, the amount
for the appropriate adjusting entry is ...........................................................
$
2. If the supplies account has a debit balance of $8,500 at the end of the year
and the amount of supplies on hand is $3,000, the amount for the appropriate
$
adjusting entry is ..........................................................................................
3. The amount reported as an asset at the end of the year, based on the data in
Question 1, is ...............................................................................................
$
4. If the prepaid rent account has a balance of $12,000, representing a payment
of four months’ rent beginning on May 1, the rent expense for May is ......
$
5. The net income reported on the income statement is $20,000. However,
adjusting entries have not been made at the end of the period for supplies
expense of $4,000 and accrued wages of $2,000. Net income, as corrected,
is ...................................................................................................................
$
6-8. If the errors in Question 4 are not discovered and corrected, the effect on the
balance sheet will be as follows:
6. Total assets will be misstated (overstated or understated) by ......................
7. Total liabilities will be misstated (overstated or understated) by ................
8. Stockholders’ equity will be misstated (overstated or understated) by .......
9. If the balance in the supplies account on January 1 is $5,000, supplies
purchased during January were $8,000, and the supplies on hand at January
31 were $5,000, the amount of supplies expense that would appear on the
income statement for January is ..................................................................
$
$
$
$
2,400
For
Scoring
Problem 2: FILL-IN-THE-BLANK—PRINCIPLES AND TERMINOLOGY
Instructions:
Answer the following questions or complete the statements by writing the appropriate words or
amounts in the Answers column.
Answers
For
Scoring
1. An information system that provides essential information about
the economic activities of an entity is called ...........................................................
1. __________accounting__________ ______
2. A business entity owned by two or more individuals is called
a(n) ..........................................................................................................................
2. _____________________________ ______
3. _____________________________ ______
3. A business entity owned by one individual is called a(n) ........................................
4. Accountants who provide services on a fee basis are engaged
in ..............................................................................................................................
4. _____________________________ ______
5. Properties owned by a business are called .............................................................
5. _____________________________ ______
6. A business entity in which ownership is divided into shares of
stock is called a(n) ...................................................................................................
6. _____________________________ ______
7. Moral principles that guide the conduct of individuals are
referred to as ...........................................................................................................
7. _____________________________ ______
8. _____________________________ ______
8. Established rules of accounting for financial reporting are .....................................
9. The expression “Assets = Liabilities + Owner’s Equity” is known
as the .......................................................................................................................
9. _____________________________ ______
10. The four principal financial statements for a corporation are: .................................
10. a.__________________________ ______
b.__________________________ ______
c.__________________________ ______
d.__________________________ ______
11. Claims against customers that result from sales on account are
referred to as ...........................................................................................................
11. ____________________________ ______
12. Henry offered for sale at $3,000 a machine that had been
purchased for $20,000. If Lincoln paid Henry $2,000 for the
machine, the amount that Lincoln would record in the
12. $___________________________ ______
accounting records for the purchase of the machine is ..........................................
13. The occurrence of an event or of a condition that must be
recorded is a(n) .......................................................................................................
13. ____________________________ ______
14. If operations for an accounting period resulted in fees on
account of $40,000 and fees for cash of $20,000, the amount of
14. $___________________________ ______
revenue for the period was ......................................................................................
15. If operations for an accounting period resulted in cash fees of
$10,000, fees on account of $30,000, and expenses paid in
cash of $65,000, did the business incur a net income or a net
loss for the period? ..................................................................................................
15. ____________________________ ______
16. What was the amount of the net income or net loss indicated in
16. $___________________________ ______
Question 15? ...........................................................................................................
17. If owner’s equity is $125,000 and liabilities are $24,000, the
17. $___________________________ ______
amount of assets is .................................................................................................
18. If assets are $60,000 and liabilities are $20,000, the amount of
18. $___________________________ ______
owner’s equity is ......................................................................................................
19. $___________________________ ______
19. The excess of expenses over revenues is referred to as .......................................
20. If total assets increased by $50,000 and owner’s equity
increased by $38,500 during the period, the amount and
direction (increase or decrease) of the period’s change in total
liabilities was ............................................................................................................
20. $___________________________ ______
Answers
For
Scoring
21. The owner’s equity at the beginning of the period was $88,000;
at the end of the period, assets were $115,000 and liabilities
were $39,000. If the owner made no additional investments or
withdrawals during the period, did the business incur a net
income or a net loss for the period? ........................................................................
21. ____________________________ ______
22. What was the amount of the net income or net loss indicated in
22. $___________________________ ______
Question 21? ...........................................................................................................
23. A report of revenues and expenses for a specific period of time
is a(n) .......................................................................................................................
23. ____________________________ ______
24. A report of assets, liabilities, and owner’s equity as of a specific
date is a(n) ...............................................................................................................
24. ____________________________ ______
25. The process of transferring data in an entry to the appropriate
accounts is called ....................................................................................................
25. ____________________________ ______
26. ____________________________ ______
26. Revenue received in advance is called ...................................................................
27. ____________________________ ______
27. Amounts entered on the left side of an account are called .....................................
28. The term for the entire group of accounts maintained by a
business is ...............................................................................................................
28. ____________________________ ______
29. ____________________________ ______
29. The normal balance of expense accounts is ...........................................................
30. ____________________________ ______
30. The erroneous rearrangement of digits in a number is a(n) ....................................
31. A test of the equality of debits and credits of the entire group of
accounts of a business is called a(n) ......................................................................
31. ____________________________ ______
32. ____________________________ ______
32. A listing of accounts in the ledger is called a(n) ......................................................
33. ____________________________ ______
33. The normal balance of liability accounts is ..............................................................
34. An account of a corporation which represents the payments
made to the stockholders is .....................................................................................
34. ____________________________ ______
35. The accounting basis under which revenues are reported in the
period in which they are earned and expenses are reported in
the period in which they are incurred is called the ..................................................
35. ____________________________ ______
36. The difference between the balance in a fixed asset account
and its related accumulated depreciation account is referred to
as the asset’s ...........................................................................................................
36. ____________________________ ______
37. The accounting basis under which revenues are reported in the
period in which cash is received and expenses are reported in
the period in which cash is paid is called the ..........................................................
37. ____________________________ ______
38. The process of analyzing and updating accounts in the ledger at
the end of an accounting period is called the ..........................................................
38. ____________________________ ______
39. Items that have been initially recorded as liabilities but are
expected to become revenues over time or through normal
operations of the business are called ......................................................................
39. ____________________________ ______
40. Expenses that have been incurred but have not been recorded
in the accounts are called ........................................................................................
40. ____________________________ ______
41. The general term applied to accumulated depreciation accounts
that are “offset against” fixed asset accounts is ......................................................
41. ____________________________ ______
42-44. Indicate whether each of the following would be reported on the
retained earnings statement for the current year (answer yes or
no):
42. Supplies at the end of the current year ...................................................................
42. ____________________________ ______
43. Net loss for the current year ....................................................................................
43. ____________________________ ______
44. Dividends for the current year .................................................................................
44. ____________________________ ______
Problem 3: ADJUSTING ENTRIES
Instructions: Journalize the adjusting entries for the items below. Assume a June 30 fiscal year-end.
a. The company received $10,000 as cash in advance for services to be performed. The
company’s accountant debited Cash and credited Unearned Fees upon receiving this
cash. As of June 30, 20% of the services had been performed.
b. Supplies at the beginning of the fiscal period amounted to $500. During the period,
the company purchased additional supplies totaling $1,000. At June 30, supplies on
hand were $300.
c. Fees earned but not yet billed as of June 30 totaled $1,500.
d. Salaries for a five-day work week total $60,000. June 30 ended on a Tuesday.
e. The company paid rent in advance of $18,000 on April 30 for a six-month lease. The
company’s accountant debited Prepaid Rent and credited Cash when this payment
was made.
Date
Description
Debit
Credit
Problem 4: DEBIT AND CREDIT
Instructions: Indicate the manner in which each of the increases and decreases in the accounts listed below
would be recorded by placing a check mark in the debit column or the credit column at the right.
Answers
Debit
Credit
For
Scoring
1. Prepaid insurance is increased .......................................................
2. Accounts Payable is decreased ......................................................
 __ ________ ________
________ ________ ________
3. Cash is decreased ...........................................................................
________ ________ ________
________ ________ ________
4. Salaries Expense is increased .........................................................
5. Notes Payable is increased .............................................................
6. Fees Earned is increased ................................................................
7. Accounts Receivable is decreased .................................................
8. Land is increased ............................................................................
9. Prepaid Insurance is increased .......................................................
________ ________ ________
________ ________ ________
________ ________ ________
________ ________ ________
10. Capital Stock is increased ..............................................................
________ ________ ________
________ ________ ________
11. Inventory is decreased ....................................................................
________ ________ ________
Problem 5: SHORT ESSAY
On December 30, 2007, you buy a Ford Expedition. It comes with a three-year, 36,000-mile warranty. On January 31,
2008, you return the Expedition to the dealership for some repairs covered under warranty. The cost of the repairs to
the dealership is $500. In what year, 2007 or 2008, should Ford recognize the cost of the warranty repairs as expense?
Explain your answer. Focus on the matching principle and the accrual basis of accounting.
Problem 6: ANALYSIS OF TRANSACTIONS
Instructions: For Power Enviro Systems Consultants, Inc. indicate the accounts to be debited and credited in
recording the transactions described below by inserting the letter designation for the accounts in
the appropriate columns.
A.
B.
C.
D.
Accounts Payable
Accounts Receivable
Building
Cash
E.
F.
G.
H.
Equipment
Land
Notes Payable
Notes Receivable
I.
J.
K.
L.
Capital Stock
Dividends
Office Supplies
Office Supplies Expense
TRANSACTIONS
1. Provided professional services on account ...................................
Debit
1. B
2. Provided professional services for cash ........................................
2.
3. Paid dividends to stockholders ....................................................
3.
4. Purchased office supplies on account ...........................................
5. Discovered an error in computing and paying the wages of an
employee. Paid cash to the employee for the amount of the
underpayment ...............................................................................
6. Paid insurance premium covering a two-year period ...................
7. Purchased building and equipment, paying one-fourth in cash and
giving a note for the balance .........................................................
4.
8. Sold office supplies to employees at cost, receiving cash ............
9. Returned for credit equipment purchased on account ..................
10. Received cash from customers on account ...................................
M.
N.
O.
P.
Prepaid Insurance
Professional Fees
Rent Expense
Wages Expense
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Credit
N
For
Scoring
5.
6.
7.
8.
9.
10.
Problem 7: CLASSIFICATION OF ACCOUNTS
Instructions:
The customary classifications for accounts listed in the chart of accounts are listed below.
Classify each account by inserting the appropriate letter in the classification column and indicate
the normal balance by inserting a check mark in the debit column or the credit column.
Classes:
A) Assets
B) Liabilities
C) Owner’s Equity
D) Revenue
E) Expenses
Normal Balance
ACCOUNTS
1. Land ..............................................................................
Classification
1.
A
2. Equipment ....................................................................
2.
3. Accounts Receivable ....................................................
10. Cash ..............................................................................
3.
4.
5.
6.
7.
8.
9.
10.
11. Unearned Revenue .......................................................
11.
4. Notes Payable ...............................................................
5. Supplies ........................................................................
6. Dividends .....................................................................
7. Fees Earned ..................................................................
8. Prepaid Insurance .........................................................
9. Wages Expense ............................................................
Debit

Credit
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