Unit 2 Challenge 1

Travis reported the financial health of his landscaping company to the board of directors. The financial statements had not yet been issued for the end of the quarter, but Travis included all accounting events that had occurred after the close of the quarter.

Travis is practicing the ___________ principle.

A.)

revenue recognition

B.)

full disclosure

C.)

measurement/cost

D.)

time period

Amy, who has been an accountant for 12 years, worked for Arnold and Post, a mid-size law firm in Huntsville. At the end of each fiscal year, Amy prepares an annual report for the firm's board of directors. The report includes all of the details found in the firm's financial statements. Amy makes sure that the dates on the financial statements are consistent and consecutive from one year to the next.

Amy is practicing the ___________ principle.

A.)

time period

B.)

full disclosure

C.)

matching

D.)

measurement/cost

In order to present an accurate picture of the financial health of his company, Bob reported all of the expenses that had been incurred, even if they had not been paid yet.

Bob is practicing the __________ principle.

A.)

time period

B.)

measurement/cost

C.)

matching

D.)

full disclosure

Brian is putting together a balance worksheet and just finished entering the balances of the general ledger accounts into the trial balance section of the worksheet.

After making sure that the trial balance is accurate, Brian will prepare the __________ section, followed by the __________ section of the worksheet.

income statement; balance sheet

adjusted trial balance; income statement

balance sheet; closing entries

adjusting entries; adjusted trial balance

Which of the following correctly lists the trial balance worksheet sequence?

1. Trial balance is prepared.
2. Adjusting entries are made.
3. Income statement is prepared on the worksheet.
4. Balance sheet is prepared on the worksheet.
5. Closing entries are made to close out temporary accounts and determine net income or net loss for the period.
6. Adjusted trial balance is prepared.

1. Adjusting entries are made.
2. Adjusted trial balance is prepared.
3. Income statement is prepared on the worksheet.
4. Balance sheet is prepared on the worksheet.
5. Trial balance is prepared.
6. Closing entries are made to close out temporary accounts and determine net income or net loss for the period.

1. Trial balance is prepared.
2. Adjusting entries are made.
3. Adjusted trial balance is prepared.
4. Income statement is prepared on the worksheet.
5. Balance sheet is prepared on the worksheet.
6. Closing entries are made to close out temporary accounts and determine net income or net loss for the period.

1. Adjusting entries are made.
2. Adjusted trial balance is prepared.
3. Trial balance is prepared.
4. Income statement is prepared on the worksheet.
5. Balance sheet is prepared on the worksheet.
6. Closing entries are made to close out temporary accounts and determine net income or net loss for the period.

Paula is putting together a balance worksheet and just finished computing the adjusted trial balance section of the worksheet and checked to make sure everything is in balance.

Just prior to completing the adjusted trial balance, Paula prepared the __________ section. After she finishes the adjusted trial balance, she will complete the __________ section of the worksheet.

adjusting entries; closing entries

trial balance; income statement

adjusting entries; income statement

trial balance; closing entries

A trial balance is prepared in the order of:
 

Balance sheet accounts (assets from most liquid to least liquid)
Liabilities (short term followed by long term)
Owner's equity/owner's drawings/retained earnings
Income statement accounts (revenue, expenses)
Sum of debits and sum of credits

Income statement accounts (revenue, expenses)
Owner's equity/owner's drawings/retained earnings
Balance sheet accounts (assets from most liquid to least liquid)
Liabilities (short term followed by long term)
Sum of debits and sum of credits

Balance sheet accounts (assets from least liquid to most liquid)
Liabilities (short term followed by long term)
Income statement accounts (revenue, expenses)
Owner's equity/owner's drawings/retained earnings
Sum of debits and sum of credits

Income statement accounts (revenue, expenses)
Balance sheet accounts (assets from most liquid to least liquid)
Liabilities (short term followed by long term)
Owner's equity/owner's drawings/retained earnings
Sum of debits and sum of credits

Select the option that shows the accounts listed in the correct order on a trial balance worksheet.

Cash
Accounts Receivable
Office Supplies
J. Smith, Owner's Capital
Owner’s Withdrawals
Service Revenue
Wages Expense
Supplies Expense

Service Revenue
Wages Expense
Supplies Expense
Cash
Accounts Receivable
Office Supplies
J. Smith, Owner's Capital
Owner’s Withdrawals

J. Smith, Owner's Capital
Owner’s Withdrawals
Cash
Accounts Receivable
Office Supplies
Service Revenue
Wages Expense
Supplies Expense

Accounts Receivable
Office Supplies
Cash
Wages Expense
Supplies Expense
Service Revenue
J. Smith, Owner’s Capital
Owner’s Withdrawals

Select the option that shows the accounts listed in the correct order on a trial balance worksheet.

Building mortgage totaling $250,000
Car wash machines totaling $175,000
Expenses totaling $45,000
Retained earnings totaling $89,000

Expenses totaling $45,000
Building mortgage totaling $250,000
Car wash machines totaling $175,000
Retained earnings totaling $89,000

Retained earnings totaling $89,000
Car wash machines totaling $175,000
Building mortgage totaling $250,000
Expenses totaling $45,000

Car wash machines totaling $175,000
Building mortgage totaling $250,000
Retained earnings totaling $89,000
Expenses totaling $45,000

 

Which of the following statements most accurately describes the trial balance worksheet above?

This sheet is correct, because it has been published to the public.

This sheet is correct, because balances are shown for each account.

This sheet is NOT correct, because the credits and debits balance.

This sheet is NOT correct, because journalizing errors still exist.

Which of the following statements is NOT a characteristic of a trial balance?

Posting errors are identified.

The report is made public.

All account totals are summarized.

Debit totals and credit totals are compared.

What is the purpose of a trial balance worksheet?

To report unrecognized income

To close account balances annually

To ensure that all data is correct

To match expenses to the correct time period

As Bob and Robert reviewed the balance sheet accounts for their car wash business, Robert reminded Bob of the money that had not yet been paid to their mechanic. The mechanic fixed a coin-collecting machine, but Robert did not pay him because he had run out of checks. Based on this information, Bob made an adjustment to the trial balance worksheet. He recorded the money that Robert would pay the mechanic next week.

The type of adjustment Bob recorded is called __________.

accrued expenses

error correction

prepaid expenses

unearned revenues

Which scenario below correctly describes an unearned revenue adjustment entry?

Brian was halfway through a project that involved creating and printing advertisement posters for a local hardware store. He would not be paid until the project was complete.

Brian was recently hired to create and print brochures and business cards for the customer's new landscaping company. Brian was given a down payment for his work, but had not yet begun work for this order.

Brian accounted for the printer ink cartridges that he used during the month for his various orders.

Brian made the next adjustment and recorded $2,975 to be paid to graphic artist contractors at the end of the month, when paychecks were sent out.

Which scenario below correctly describes a supply adjustment entry?

Sarah made an adjustment for $250 for the printer ink cartridges that had been used.

Sarah made an adjustment for $1,000 for the work she has completed but will not receive payment until June 15.

Sarah made an adjustment for $975 that would be paid to the technology consultant firm next week when payroll is completed.

Sarah made an adjustment for $500 to reflect that six months of useful life of a printer had been used.

Bob would make an adjustment entry to the __________ account to record the $250 he spent on ink cartridges and printer paper.

Suppose that before making this adjustment, the balance in this account totaled $3,095. Bob’s ending balance for this account would now total __________.

accrued expense; $3,345

error correction; $3,345

prepaid expense; $2,845

supplies; $2,845

Sharon would make an adjustment entry to __________ to record the $500 her company received from a customer to perform future services.

Suppose that before the adjusting entry, the balance in this account was $2,725. After the adjusting entry, the ending balance will be __________.

accounts receivable; $2,225

accrued revenue; $3,225

unearned revenue; $3,225

prepaid expenses; $2,225

Terrance determined $1,000 of Prepaid Insurance was used as of January 31.

What would the adjusting entry be?

Insurance Expense credited and Prepaid Insurance debited, both for $1,000.

 Insurance Expense debited and Prepaid Insurance credited, both for $1,000.

Insurance debited and Insurance Expense credited, both for $1,000.

Insurance Expense debited and Accounts Payable credited, both for $1,000.

The account groups that are NOT involved with closing entries are known as __________ accounts.

REDI

temporary

permanent

drawing

If the expense closing entry was just made, then the __________ closing entry was made in the previous step.

The next step will be to complete the __________ closing entry.

drawing; income summary

retained earnings; revenue

revenue; drawing

income summary; retained earnings

Which of the following actions are taken when making closing entries?

Adjust the total to account for net loss

Debit the expense accounts

Relocate the temporary net income to equity

Consider only the revenue and expense accounts

Sheri noticed that one of the firm's partners withdrew $1,500 from her firm.

Which of the following accounts would appear as a credit in the closing general journal entry?

Accounts Payable

Cash

Owner's Equity

Owner's Draw

In the general journal, Amy saw a record in the owner's drawing account indicating that a partner withdrew $675 from her firm last month.

Which of the following is a closing general journal entry that Amy will make related to this withdrawal?

Amy will record a credit of $675 to accounts payable.

Amy will record a debit of $675 to the owner's capital account.

Amy will not make a closing general journal entry related to this withdrawal.

Amy will record a credit of $675 to the cash account.

Earlier in the month, Harrison was informed that one of the firm's partners withdrew $1,300 from the firm, so he recorded a transaction to the owner's drawing account.

To close out the $1,300 balance, Harrison must record a debit to the __________ account, and a credit to the __________ account for $1,300.

owner's equity; owner's draw

accounts payable; expense account

expense account; owner's equity

owner's draw; accounts payable

Which of the following characteristics describes an income statement?

A document that presents information about the firms assets, liabilities and owner's equity.

A document that presents the revenues and expenses for the business for the past year.

A document that shows how much money the owner invested in the past year.

A document showing all the transactions that were recorded in the past year.

How is an income statement prepared?

Calculate net income or net loss by including revenue and expenses

Calculate assets by including revenue, equity and owner investment

Calculate assets by including revenue and expenses

Calculate net income or net loss by including revenue, expenses and equity

Which of the following examples corresponds with an income statement?

Anton created a report that listed information about the firm’s assets, liabilities and equity for the month of June.

Cybil generated a report that described the firm's profitability from the last year.

Seth reviewed a report from a board member that gave information about the firm’s investments.

Kylie presented a report to the firm that detailed return on investments for the first quarter of the fiscal year.

Consider the following information:

Rent Revenue: $5,000
Rent Receivable: $2,000
Interest Revenue: $2,000
Interest Receivable: $1,000
Rent Expense: $4,000
Insurance Expense: $1,200
Insurance Payable: $1,200
Salaries Expense: $3,000
Salaries Payable: $500

Which of the following states the amount of net profit or loss for this company?

Net Loss of $2,900

Net Profit of $100

Net Profit of $1,200

Net Loss of $1,200

Consider the following information:

Cash: $10,000
Sales Revenue: $45,000
Accounts Payable: $5,000
Rent Expense: $10,000
Wages Expense: $15,000
Utilities Expense: $2,000

What would be the net profit or loss?

Net Loss of $3,000

Net Profit of $18,000

Net Loss of $32,000

Net Profit of $23,000

Ted told Ian that it was necessary to include all relevant information on an income statement and showed Ian the following data:

Owner investment: $8,000
Revenue: $15,000
Equity: $21,000
Expenses: $3,000

Based on this data, the net profit or loss on the income statement should be:

Net Loss of $33,000

Net Loss of $5,000

Net Profit of $12,000

Net Profit of $44,000

Seth owns a bakery and recorded the following statements:

Service Revenue: $25,000
Interest Revenue: $2,000
Cash: $4,000
Accounts Receivable: $5,000
Office Supplies: $3,000
Salaries Payable: $4,000
Wages Expense: $5,000
Rent Expense: $4,000
Utilities Expense: $2,000

Using this data, determine the net profit or loss for Seth's bakery.

Net Loss of $16,000

Net Loss of $21,000

Net Profit of $2,000

Net Profit of $16,000

Jessica is the co-owner for a local boutique and has recorded the following statements:

Service Revenue: $15,000
Cash: $3,000
Accounts Receivable: $6,000
Office Supplies: $2,000
Salaries Payable: $1,000
Wages Expense: $15,000
Rent Expense: $2,000

Using this data, determine the net profit or loss for Jessica's boutique.

Net Loss of $2,000

Net Profit of $2,000

Net Profit of $3,000

Net Loss of $3,000

Peter is head of accounting at the paper company that he works at and recorded the following statements:

Service Revenue: $20,000
Cash: $2,000
Accounts Receivable: $3,000
Office Supplies: $1,000
Salaries Payable: $5,000
Wages Expense: $15,000
Rent Expense: $2,000

Using this data, determine the net profit or loss for Peter's paper company.

Net Income = $8,000

Net Income = $4,000

Net Income = $22,000

Net Income = $3,000

Which of the following characteristics describes a statement of changes in owner's equity?

Is of interest to potential investors

Shows the variation in retained earnings from last year

Calculated by subtracting expenses from revenue

Displays how much revenue the firm earned in the last year

 

Determine which example describes a statement of change in owner's equity.

Displays a list of expenses shared with potential company investors

Shows a company's profitability over the last six months

Lists withdrawals made by a company's owners

Gives a picture of a company's financial status

Which of the following documents describes a statement of changes in owner's equity?

A document showing all the transactions that were recorded in the past year

A document that shows how much money the owner invested in the past year

A document that presents the revenues and expenses for the business for the past year

A document that presents information about the firms assets, liabilities and owner's equity

At Ryan's company, the beginning capital totaled $20,000, the investment by owner totaled $8,000, the net income totaled $10,000 and the drawings totaled $6,000.

Using these figures, Ryan calculated the business's ending owner's equity, which totaled __________.

$16,000

$44,000

$22,000

$32,000

Paula prepared a statement of changes in owner's equity to determine the possibility of opening more locations for her car wash business. She used the following totals to help in her calculations:

Beginning Balance $120,000
Cash = $5,000
Revenues = $10,000
Capital added = $10,000
Net income = $30,000
Expenses = $40,000
Owner’s Withdrawals = $115,000

What would be the ending balance on the Statement of Changes of Equity given this data?

$50,000

$55,000

$45,000

$15,000

To better understand if it was possible to consider opening more locations, Robert wanted to know how much equity he had in his business and used the following totals to help in his calculations:

Beginning capital = $35,000
Drawings = $4,000
Net income = $18,000
Investment by owner = $9,000


__________ was the ending owner’s equity that Robert calculated.

$62,000

$49,000

$40,000

$58,000

What is the total beginning balance in the statement of changes in owner's equity that Tyler drafted for his shoe store, shown here?

$20,500

$56,000

$53,000

$23,500

What is the total net income in the statement of changes in owner's equity that Seth drafted for his music store, shown here?

$6,000

$31,000

$37,000

$10,000

What is the total owner drawings in the statement of changes in owner's equity that Cindy drafted for her grocery store, shown here?

$9,500

$17,000

$1,500

$2,500

Which of the following examples corresponds with a balance sheet?

Stacey generated a report that described the firm's profitability from the last year.

Todd reviewed a report from a board member that gave information about the firm’s investments.

Alice created a report that listed information about the firm’s assets, liabilities and equity for the month of June.

Paul presented a report to the firm that detailed return on investments for the first quarter of the fiscal year.

The accounting __________ is a fundamental premise in accounting which states that a company's assets will be equal to the sum of its __________.

equation; net income and equity

statement; liabilities and equity

statement; net income and equity

equation; liabilities and equity

The balance sheet is a financial statement that is __________ and provides information about the __________ of a business at a given time.

prepared second; revenues, liabilities and equity

prepared third; assets, liabilities and equity

prepared second; assets, liabilities and equity

prepared third; revenues, liabilities and equity

Patrick recorded $85,000 in assets and $62,000 in equity on a balance sheet.

What is the total of Patrick's liabilities?

$124,000

$31,000

$150,000

$23,000

Theresa recorded $12,000 as liabilities and $64,000 as equity in a balance sheet she created.

Which of the following is the correct total of Theresa's assets?

$52,000

$24,000

$128,000

$76,000

Lisa is the owner of a company in which she originally invested $15,500. On her most recent balance sheet, her liabilities total $4,500 and her assets total $28,500.

Which of the following is the correct total of Susan’s equity?

$13,000

$20,000

$24,000

$11,000

Consider the following information:

Cash: $10,000
Accounts Receivable: $7,000
Office Supplies: $2,000
Prepaid Insurance: $3,000
Buildings: $150,000
Accumulated Depreciation: ($30,000)
Accounts Payable: $5,000
Notes Payable: $30,000
Owner's Equity: $107,000

From the above set of data, what is the total for assets, liabilities, and equity?

Total Assets: $172,000
Total Liabilities: $35,000
Total Equity: $137,000

Total Assets: $167,000
Total Liabilities: $30,000
Total Equity: $137,000

Total Assets: $152,000
Total Liabilities: $35,000
Total Equity: $117,000

Total Assets: $142,000
Total Liabilities: $35,000
Total Equity: $107,000

Consider the following information:

Cash: $10,000
Accounts Payable: $3,000
Accounts Receivable: $2,000
Office Supplies: $1,000
Furniture: $15,000
Notes Payable: $10,000
Equity: $5000

From the above set of data, what is the total for assets, liabilities, and equity?

Total Assets: $36,000
Total Liabilities: $21,000
Total Equity: $15,000

Total Assets: $28,000
Total Liabilities: $13,000
Total Equity: $5,000

Total Assets: $31,000
Total Liabilities: $15,000
Total Equity: $16,000

Total Assets: $48,000
Total Liabilities: $43,000
Total Equity: $5,000

Consider the following information:

Accounts Payable: $4,000
Notes Payable: $10,000
Salaries payable: $1,000
Revenues: $5,000
Accounts Receivable: $5,000
Utilities Expense: $2,000
Cash: $5,000
Office Supplies: $1,000
Equipment: $20,000
Accumulated Depreciation Equipment: $5,000
Unearned Revenue: $2,000
Equity: $22,000
Salaries Expense: $1,000

From the above set of data, what is the total for assets, liabilities, and equity?

Total Assets: $29,000
Total Liabilities: $12,000
Total Equity: $9,000

Total Assets: $26,000
Total Liabilities: $17,000
Total Equity: $9,000

Total Assets: $36,000
Total Liabilities: $14,000
Total Equity: $9,000

Total Assets: $29,000
Total Liabilities: $14,000
Total Equity: $9,000

 

 

 

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ACC----------- 10-----------0 U-----------nit----------- 2 -----------Cha-----------lle-----------nge-----------s S-----------oph-----------ia-----------

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