Question 1.1. as prepaid expenses expire with the passage of time,

Question 1.1. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

        debit to an asset account and a credit to an expense account.

        debit to an expense account and a credit to an asset account.

        debit to an asset account and a credit to an asset account.

        debit to an expense account and a credit to an expense account.

 

Question 2.2. An investment by the stockholders in a business increases 

        assets and stockholders’ equity.

        assets and liabilities.

        liabilities and stockholders’ equity.

        assets only.

 

Question 3.3. Which of the following describes the classification and normal balance of the Retained Earnings account? 

        Asset, debit

        Stockholders’ equity, credit

        Revenues, credit

        Expense, debit

 

Question 4.4. If total liabilities decreased by $4,000, then 

        stockholders’ equity must have decreased by $4,000.

        assets must have decreased by $4,000, or stockholders’ equity must have increased by $4,000.

        assets and stockholders’ equity each increased by $2,000.

        assets must have increased by $4,000.

 

Question 5.5. If expenses are paid in cash, then 

        assets will increase.

        liabilities will decrease.

        stockholders’ equity will increase.

        assets will decrease.

 

Question 6.6. The Harris Company purchased a computer for $3,000 on December 1. It is estimated that annual depreciation on the computer will be $600. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: 

        debit Depreciation Expense, $600; credit Accumulated Depreciation, $600.

        debit Depreciation Expense, $50; credit Accumulated Depreciation, $50.     

        debit Depreciation Expense, $2,400; credit Accumulated Depreciation, $2,400.

        debit Office Equipment, $3,000; credit Accumulated Depreciation, $3,000.

 

Question 7.7. All of the following are required steps in the accounting cycle except: 

        journalizing and posting closing entries.

        preparing an adjusted trial balance.

        preparing a post-closing trial balance.

        preparing a work sheet.

 

Question 8.8. An adjusting entry: 

        affects two balance sheet accounts.

        affects two income statement accounts.

        affects a balance sheet account and an income statement account.

        is always a compound entry.

 

Question 9.9. Assets normally show 

        credit balances.

        debit balances.

        debit and credit balances.

        debit or credit balances.

 

Question 10.10. Given the following adjusted trial balance:

 

                 Debit       Credit

Cash                $781 

Accounts receivable1,049 

Inventory1,562 

Prepaid rent     43 

Property, plant & equipment150 

Accumulated depreciation26 

Accounts payable41 

Unearned revenue61 

Common stock103 

Retained earnings3,305 

Service revenue134 

Interest revenue28 

Salary expense   80 

Travel expense       33               _____ 

     Total     $3,698          $3,698 

 

 

After closing entries have been posted, the balance in retained earnings will be: 

        $3,256

        $3,170

        $3,440

        $3,354         

 

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