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4 - University of Massachusetts Dartmouth Accounting 211...

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University of Massachusetts Dartmouth Accounting 211 – Principles of Accounting Chapter 4 Quiz Name: ______________________ True/False - Write “T” or “F” on the line provided. ____ 1. The primary purpose of a trial balance is to disclose that total assets are equal to total liabilities plus stockholders' equity at the end of the accounting period. ____ 2. At the end of the accounting period, wages earned by employees but not yet recorded nor paid amounted to $1,000; therefore, the adjusting entry should be: Debit--Wages expense; Credit--Wages payable. ____ 3. Supplies on hand at the beginning of the period equaled $1,000. During the period $2,500 of supplies were purchased. Since $1,500 was used during the period, the company would adjust the account balance by crediting the asset account, supplies, and debiting supplies expense for $2,000. ____ 4. Deferred expenses are expenses that were paid for before the usage of the goods or services. ____ 5. The accounting period and the calendar year always end on December 31. ____ 6. Payment in advance for goods or services not yet consumed by our company would require a debit to a prepaid expense (asset) account and a credit to cash. ____ 7. Usually, adjusting entries are entered in the accounts at the beginning of the accounting period. ____ 8. Service revenue earned but not yet collected by the end of the period was $5,000; therefore, the adjusting entry should be: Debit--Service revenue receivable, $5,000; Credit--Service revenue, $5,000. ____ 9. On June 30, 2006, a one-year insurance policy was paid for in advance and debited to prepaid insurance for $3,600; therefore; on December 31, 2006, the adjusting entry for the expiration of this item should be a debit to insurance expense for $1,800 and a credit to cash for $1,800. ____ 10. Adjusting entries are recorded in the journal (i.e., journalized) and then they are posted to the ledger. ____ 11. Depreciation expense is an estimated allocation of the cost of long-lived assets and is recorded in a contra asset, accumulated depreciation, because it is only an estimated amount and not known with certainty. ____ 12. It is necessary to prepare the income statement first because we need to know net income or loss for the period in order to compute ending retained earnings on the statement of stockholders' equity. 1
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____ 13. Closing revenues and expenses will reduce the balance in retained earnings if the company recognizes a net loss for the year. ____ 14. The primary purposes of the closing entries are to zero out the temporary accounts and to transfer the net income or loss to retained earnings at the end of each year. Multiple Choice – circle the letter of the answer you select 15. On October 1, 2006, Adams Company paid $4,000 for a two-year insurance policy on the building. The accounting period ends December 31. At the end of 2006, the financial statements should report On the Balance Sheet On the Income Statement A) Prepaid insurance, $4,000 Insurance expense, $0. B) Prepaid insurance, $0 Insurance expense, $4,000. C) Prepaid insurance, $2,000 Insurance expense, $2,000. D) Prepaid insurance, $3,500 Insurance expense, $500. E) None of the above is correct.
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