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Intermediate Accounting Chapter 3 Quiz

Ch 3 MCA

Q.1 In terms of debits and credits, which types of accounts have the same (debit or credit) normal balances?

a. assets, capital stock, revenues

b. retained earnings, dividends, liabilities

c. dividends, expenses, assets

d. expenses, liabilities, capital stock

2. Which of the following adjusting entries involves the recognition of an accrued expense?

a. Writing off the portion of an insurance policy that has expired

b. Recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period

c. Recognition of interest revenue to be received in the next period

d. Recording depreciation on a long-lived asset

3. Posting is the procedure of transferring information from the

a. journal to the ledger.

b. ledger to the journal.

c. trial balance to the worksheet.

d. worksheet to the financial statements.

4. The basic purpose of a trial balance is to

a. list all of the accounts in the general ledger.

b. verify that the total credits equal the total debits.

c. list all of the accounts in the general ledger that have a balance.

d. be sure that all journal entries have been recorded.

5. Which T-account is incorrect?

a. Unearned Rent

b. Depreciation Expense

c. Capital Stock

d. Interest Receivable

6. Question Content AreaAn adjusting entry always affects

a. an income statement account and a balance sheet account.

b. income statement accounts only.

c. either a balance sheet account or an income statement account but not both.

d. balance sheet accounts only.

7. The entire group of accounts for a company is referred to as the

a. worksheet.

b. general ledger.

c. document of original entry.

d. journal.

8. When you prepare a journal entry, the standard format is to list all

a. accounts to be debited first.

b. liability accounts first.

c. asset accounts first.

d. accounts to be credited first.

9. Which of the following is a permanent account?

a. Allowance for Doubtful Accounts

b. Dividend Revenue

c. Interest Expense

d. Sales Revenue

10. Accrued revenues

a. have been earned but not yet collected or recorded.

b. have been earned and collected but not yet recorded.

c. have been collected and recorded.

d. have been collected but not yet earned or recorded.

11. The accounting equation can be expressed as

a. Assets + Liabilities = Shareholders’ Equity.

b. Assets + Shareholders’ Equity = Liabilities.

c. Assets – Liabilities = Shareholders’ Equity.

d. Assets = Liabilities – Shareholders’ Equity

12. Which of the following rules is incorrect?

a. Expense accounts normally have debit balances.

b. Common stock accounts are increased by debit entries and decreased by credit entries.

c. The accounting equation must always remain in balance.

d. Asset accounts are increased by debit entries and decreased by credit entries.

13. Which of the following is a temporary account?

a. Purchases Returns and Allowances

b. Accounts Receivable

c. Accumulated Depreciation

d. Retained Earnings

14. Information related to the Berkley Company for Year 2 follows:

Liabilities, December 31, Year 2$400
Assets, December 31, Year 2700
Dividends distributed during Year 290
Liabilities, December 31, Year 1250
Assets, December 31, Year 1350

Assuming no capital stock was issued during Year 2, the net income earned by the Berkley Company during Year 2 was

a. $200.

b. $110.

c. $290.

d. $260.

Calculation:

End of Year Equity = $700 – $400 = $300

Beginning of year Equity = $350 – $250 = $100

Net Income = End of year Equity – Beginning of year Equity + Dividend

Net Income = $300 – $100 + $90 = $290


15. Adjusting journal entries are made

a. at the end of the accounting period.

b. anytime we need to adjust an account.

c. at the beginning of the accounting period.

d. when revenue is realized (or realizable)

16. Which accounts are increased by using debits?

a. Dividends, Revenue, Liabilities

b. Assets, Cost of Goods Sold, Expenses

c. Cost of Goods Sold, Common Stock, Assets

d. Liabilities, Capital Stock, Revenue

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