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Test Achievement 2: Chapters 3 and 4 Financial Accounting Kimmel, Weygandt, & Kieso Name _________________________ Instructor ______________________ Section # _______ Date _________ Part Points Score I 33 II 24 III 24 IV 10 V 9 Total 100 PART I MULTIPLE CHOICE (33 points) Instructions Designate the best answer for each of the following questions. ____ 1. The Accumulated Depreciation account is a(n) a. contra asset. b. liability. c. asset. d. operating expense. ____ 2. A post-closing trial balance contains a. real and nominal accounts. b. permanent and temporary accounts. c. balance sheet or permanent accounts. d. balance sheet and retained earnings statement accounts. ____ 3. The procedure of transferring journal entries to ledger accounts is called a. journalizing. b. ledgering. c. recording. d. posting. ____ 4. For which of the following types of adjusting entries are liabilities overstated and revenues understated before the adjusting entry is made? a. Unearned Revenues b. Accrued Revenues c. Prepaid Expenses d. Accrued Expenses ____ 5. Transactions are initially recorded in the a. ledger. b. trial balance. c. journal. d. balance sheet. ____ 6. A credit will reduce ________, but increase ________. a. accounts receivable; accounts payable b. expenses; accounts receivable c. accounts payable; common stock d. common stock; prepaid insurance AT2-2 Test Bank for Financial Accounting: Tools for Business Decision Making, Fourth Edition ____ 7. An accrued expense account represents expenses that have a. been used and paid. b. been paid but not used. c. not been used or paid. d. been used but not paid. ____ 8. What type of relationship exists with an unearned revenue adjusting entry? a. Receivable/revenue b. Liability/revenue c. Asset/revenue d. Expense/liability ____ 9. The book value of a depreciable asset is defined as the asset's a. cost less accumulated depreciation. b. current market value. c. replacement cost. d. cost. ____ 10. A business pays weekly salaries of $15,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Thursday is: a. debit Salaries Payable, $12,000; credit Cash $12,000. b. debit Salaries Expense, $12,000; credit Cash $12,000. c. debit Salaries Expense, $12,000; credit Accounts Payable $12,000. d. debit Salaries Expense, $12,000; credit Salaries Payable $12,000. ____ 11. Kanns Company signed a $3,000 ninety day note payable on November 1 that bears interest at a rate of 7%. The total interest to be accrued on this note at December 31 is a. $17.50. b. $35.00 c. $210. d. $52.50. Achievement Test 2 AT2-3 PART II JOURNAL ENTRIES (24 points) The ledger accounts given below, with an identification number for each, are used by Pender Company. Instructions: Indicate the appropriate entries for the month of July by placing the appropriate identification number(s) in the debit and credit columns provided. Item 0 is given as an example. Write "none" if no entry is appropriate. 1. Cash 7. Salaries Payable 13. Service Revenue 2. Accounts Receivable 8. Accounts Payable 14. Equipment Expense 3. Supplies 9. Unearned Service Revenue 15. Advertising Expense 4. Prepaid Salaries 10. Notes Payable 16. Supplies Expense 5. Prepaid Advertising 11. Common Stock 17. Rent Expense 6. Equipment 12. Dividends 18. Salaries Expense ____________________________________________________________________________ Entry Account(s) Account(s) No. Entry Information Debited Credited 0. July 1 Stockholders invested $20,000 in the business. 1 11 ----------------------------------------------------------------------------------------------------------------------------1. July 4 Paid a supplier $1,500 cash on account. ----------------------------------------------------------------------------------------------------------------------------2. July 5 Equipment was purchased at a cost of $6,000; a three-month, 6% note payable was signed for this amount. ----------------------------------------------------------------------------------------------------------------------------3. July 8 Received $3,000 from customers for services rendered. ----------------------------------------------------------------------------------------------------------------------------4. July 10 Hansen agreed to hire C. Kimler as a vice-president. She will be paid at the rate of $4,000 monthly, receiving $2,000 on the 15th and 30th of each month. She will begin work June 16. ----------------------------------------------------------------------------------------------------------------------------5. July 14 Paid $500 cash to the Daily News for advertisements run this past week. ----------------------------------------------------------------------------------------------------------------------------6. July 19 Paid $2,000 in cash to Carson Company for July rent. ----------------------------------------------------------------------------------------------------------------------------7. July 25 Additional office supplies were purchased on account at a cost of $1,000 from Supply Company. These supplies will be used during August. ----------------------------------------------------------------------------------------------------------------------------8. July 26 Paid the Daily News $400 for an advertisement that will run the first week in August. ----------------------------------------------------------------------------------------------------------------------------9. July 27 Received $5,000 from customers for services to be rendered early in August. ----------------------------------------------------------------------------------------------------------------------------10. July 28 Billed customers $6,000 for services rendered but not collected during July. ----------------------------------------------------------------------------------------------------------------------------11. July 31 Paid $800 of dividends to stockholders. ----------------------------------------------------------------------------------------------------------------------------12. July 31 C. Kimler paid was $2,000 cash for her salary. ----------------------------------------------------------------------------------------------------------------------------- AT2-4 Test Bank for Financial Accounting: Tools for Business Decision Making, Fourth Edition PART III ADJUSTING ENTRIES (24 points) The ledger accounts given below, with an identification number for each, are used by Action Company. Instructions: Prepare appropriate adjusting entries for the year ended December 31, 2007, by replacing the appropriate identification number(s) in the debit and credit columns provided and the dollar amount in the adjoining column. Item 0 is given as an example. 1. Notes Receivable 10. Unearned Service Revenue 2. Accounts Receivable 11. Notes Payable 3. Interest Receivable 12. Interest Revenue 4. Supplies 13. Service Revenue 5. Prepaid Insurance 14. Depreciation ExpenseEquipment 6. Equipment 15. Salaries Expense 7. Accumulated DepreciationEquipment 16. Interest Expense 8. Salaries Payable 17. Supplies Expense 9. Interest Payable 18. Insurance Expense ___________________________________________________________________________ Account(s) Account(s) Dollar Entry Information Debited Credited Amount 0. Interest of $300 is accrued on a note 3 12 $300 receivable at December 31, 2007. ----------------------------------------------------------------------------------------------------------------------------1. Action has four employees who earn $120 per $ day per person. At December 31, two days' salaries have been earned but not paid. ----------------------------------------------------------------------------------------------------------------------------2. A customer paid Action $9,000 on December 1, $ 2007 for services to be rendered from December 1 through January 31, 2008. The receipt was credited to a liability account. ----------------------------------------------------------------------------------------------------------------------------3. Action purchased equipment costing $45,000 on $ January 1, 2007. Monthly depreciation is $1,250. ----------------------------------------------------------------------------------------------------------------------------4. Action provided services to a customer in 2007 at a $ fee of $500. This fee has not yet been received or billed. ----------------------------------------------------------------------------------------------------------------------------5. Action started the year with no supplies on hand. $ They purchased $5,000 in supplies during the year and have $1,000 on hand at December 31. Supplies were debited to an asset account when purchased. ----------------------------------------------------------------------------------------------------------------------------6. Action paid $6,000 for a three-year insurance policy $ on July 1, 2007, debiting an asset account at that time. ----------------------------------------------------------------------------------------------------------------------------7. Action borrowed $18,000 by signing a three-month, $ 7% interest, note payable on December 1, 2007. ----------------------------------------------------------------------------------------------------------------------------8. Action purchased marketable securities on October 1, $ 2007. Interest of $300 per month has been earned but not received or recorded prior to December 31. ----------------------------------------------------------------------------------------------------------------------------- Achievement Test 2 AT2-5 PART IV NORMAL BALANCES (10 points) Instructions: Place a "D" (Debit) or "C" (Credit) in the space provided to indicate whether the account has a normal debit balance (D) or normal credit balance (C). ____ ____ ____ ____ ____ 1. Retained Earnings 2. Equipment 3. Depreciation Expense 4. Dividends 5. Service Revenue ____ 6. Common Stock ____ 7. Unearned Service Revenue ____ 8. Accumulated Depreciation ____ 9. Accounts Payable ____ 10. Prepaid Rent PART V MATCHING (9 points) Instructions: Match the items below by entering the appropriate letter in the space. A. B. C. D. E. F. General Journal Trial Balance Time period assumption Accrual Accounting Cash Basis Accounting Matching principle G. H. I. J. K. Permanent Accounts Revenue Recognition Principle Prepayments Accrued Expenses Adjusting Entries ____ 1. Expenses incurred but not yet paid in cash or recorded. ____ 2. An assumption that the economic life of a business can be divided into artificial time period. ____ 3. Accounting basis in which a company records revenues only when it receives cash and an expense only when it pays out cash. ____ 4. The principle that companies recognize revenue in the accounting period in which it is earned. ____ 5. The most basic form of journal. ____ 6. A list of accounts and their balances at a given time. ____ 7. Accounting basis in which companies record in the periods in which the events occur rather than in the periods in which the company receives or pays cash. ____ 8. Balance sheet accounts whose balances are carried forward to the next accounting period. ____ 9. The principle that dictates that companies accomplishments (revenues). match efforts (expenses) with AT2-6 Test Bank for Financial Accounting: Tools for Business Decision Making, Fourth Edition Solutions Achievement Test 2: Chapters 3 and 4 PART I MULTIPLE CHOICE (33 points) 1. a 2. c 3. d 4. a 5. c 6. a 7. d 8. b 9. a 10. d 11. b PART II JOURNAL ENTRIES (24 points) Account(s) Debited 1 8 6 1 None 15 17 Account(s) Credited 11 1 10 13 None 1 1 Account(s) Debited 3 5 1 2 12 18 Account(s) Credited 8 1 9 13 1 1 0. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. PART III ADJUSTING ENTRIES (24 points) Account(s) Debited 3 15 10 14 2 Account(s) Credited 12 8 13 7 13 Dollar Amount $300 $960 $4,500 $15,000 $500 Account(s) Debited 5. 17 6. 18 7. 16 8. 3 Account(s) Credited 4 5 9 12 Dollar Amount $4,000 $1,000 $105 $900 0. 1. 2. 3. 4. PART IV NORMAL BALANCES (10 points) 1. 2. 3. 4. 5. C D D D C 6. 7. 8. 9. 10. C C C C D PART V MATCHING (9 points) 1. 2. 3. 4. 5. J C E H A 6. 7. 8. 9. B D G F ... View Full Document

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