Achievement Test 2: Chapters and Accounting Principles, 12e Weygandt, Kimmel, & Kieso Part Points Name _ Instructor Section # _ Date I II III IV V Total 26 25 24 17 100 Score PART I — MULTIPLE CHOICE (26 points) Instructions: Designate the best answer for each of the following questions The Accumulated Depreciation account is a(n) a operating expense b contra asset c asset d liability A post-closing trial balance contains a balance sheet or permanent accounts b balance sheet and income statement accounts c permanent and temporary accounts d real and nominal accounts An adjusting entry a is always a compound entry b affects two balance sheet accounts c affects two income statement accounts d affects a balance sheet account and an income statement account For which of the following types of adjusting entries are both assets and revenues understated before the adjusting entry is made? a Accrued Expenses b Unearned Service Revenues c Accrued Revenues d Prepaid Expenses A law firm received $1,200 cash for legal services to be rendered in the future The full amount was credited to the liability account Unearned Service Revenue If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause a revenues to be understated b expenses to be overstated c net income to be overstated d liabilities to be understated AT2- Test Bank for Accounting Principles, Twelfth Edition Assuming that there is a net loss for the period, in which section of the worksheet will debits not be equal to credits? a Adjusted trial balance columns b Income statement columns and balance sheet columns c Adjustments columns d Trial balance columns An accrued revenue account represents revenue for which a services have been performed and received in cash b services have not been performed nor received in cash c services have been performed, but not received in cash or recorded d cash has been received and recorded, but services have not been performed What type of relationship exists with a prepaid expense adjusting entry? a Asset/revenue b Expense/asset c Expense/liability d Liability/revenue The book value of a depreciable asset is defined as the asset's a cost b current market value c cost less accumulated depreciation d replacement cost 10 Sander Farms recorded a payment of cash on account to a creditor by debiting Accounts Receivable and crediting Cash Which of the following is the correcting entry? a Debit Accounts Payable and credit Cash b Debit Cash and credit Accounts Receivable c Debit Accounts Receivable and credit Accounts Payable d Debit Accounts Payable and credit Accounts Receivable 11 Stately Decor signed an $18,000 six-month note payable on September that bears interest at a rate of 5% How much is the total interest to be accrued on this note at December 31? a $900 b $75 c $300 d $450 12 The net income (or loss) for the period a is found by computing the difference between the trial balance totals and the adjusted trial balance totals b is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet c cannot be found on the worksheet d is found by computing the difference between the income statement columns of the worksheet Achievement Test AT2- 13 What effects will the omission of a prepaid expense adjusting entry have on a company? Total Assets Total Expenses Total Owners' Equity a Overstated No Effect No Effect b No Effect Understated Overstated c Overstated Understated Overstated d Overstated No Effect Overstated PART II — WORKSHEET COMPLETION (25 points) Instructions: Complete the partial worksheet presented below, inserting additional labels as needed LAWN BUTLER Partial Worksheet For the Month Ended April 30, 2017 Adjusted Trial Income Statement Balance Sheet Balance Account Titles Dr Cr Dr Cr Dr Cr Cash 6,500 Accounts Receivable 2,000 Supplies 3,075 Prepaid Insurance 2,000 Prepaid Rent 500 Equipment 35,000 Accum Depreciation—Equip 4,000 Notes Payable 14,000 Accounts Payable 12,000 Unearned Service Revenue 2,000 Salaries and Wages Payable 1,300 Interest Payable 50 Owner’s Capital 9,825 Owner’s Drawing 2,000 Service Revenue 20,300 Interest Expense 400 Salaries and Wages Expense 7,000 Supplies Expense 1,500 Rent Expense 2,000 Insurance Expense 1,500 _ Totals 63,475 63,475 AT2- Test Bank for Accounting Principles, Twelfth Edition PART III—ADJUSTING ENTRIES (24 points) The ledger accounts given below, with an identification number for each, are used by Sun Cleaning Instructions: Prepare appropriate adjusting entries for the year ended December 31, 2017, by replacing the appropriate identification number(s) in the debit and credit columns provided and the dollar amount in the adjoining column Item is given as an example Cash 10 Unearned Service Revenue Accounts Receivable 11 Notes Payable Interest Receivable 12 Interest Revenue Supplies 13 Service Revenue Prepaid Insurance 14 Depreciation Expense—Equipment Equipment 15 Salaries and Wages Expense Accumulated Depreciation—Equipment 16 Interest Expense Salaries and Wages Payable 17 Supplies Expense Interest Payable 18 Insurance Expense —————————————————————————————————————————— Account(s) Account(s) Dollar Entry Information Debited Credited Amount —————————————————————————————————————————— Interest of $300 is accrued on a note 12 $ 300 receivable at December 31, 2017 —————————————————————————————————————————— A customer paid Sun Cleaning $16,000 on December 1, $ 2017, for services to be rendered from December through January 31, 2018 The receipt was credited to a liability account —————————————————————————————————————————— Sun has two employees who each earn $110 $ per day At December 31, 2017, four days' salaries have been earned but not paid —————————————————————————————————————————— Sun provided services to a customer in 2017 at a $ fee of $1,000 This fee has not yet been received or billed —————————————————————————————————————————— Sun purchased equipment costing $28,000 on $ January 1, 2016 Monthly depreciation is $400 —————————————————————————————————————————— Sun borrowed $8,000 by signing a three-month, $ 6% interest, note payable on November 1, 2017 —————————————————————————————————————————— Sun paid $9,000 for a three-year insurance policy $ on July 1, 2017, debiting an asset account at that time —————————————————————————————————————————— Sun started the year with no supplies on hand $ Sun purchased $4,000 in supplies during the year and has $1,800 on hand at December 31 Supplies were debited to an asset account when purchased —————————————————————————————————————————— Sun purchased short-term investments on October 1, $ 2017 Interest of $200 per month has been earned but not received prior to December 31 Achievement Test AT2- —————————————————————————————————————————— PART IV—CLOSING ENTRIES (8 points) Instructions: Place a "D" (Debit) or "C" (Credit) in the space provided to indicate whether the account would be debited or credited to close the account at yearend Insert an X in the space provided if the account is not closed Cash Interest Expense Rent Expense Unearned Subscription Revenue Depreciation Expense 10 Interest Revenue Equipment 11 Interest Receivable Owner’s Drawing 12 Subscription Revenue Accounts Receivable 13 Prepaid Rent Accumulated Depreciation 14 Income Summary (assume Net Loss) PART V—BALANCE SHEET CLASSIFICATIONS (17 points) Instructions: Match the account titles given below with the appropriate balance sheet classification An individual classification may be used more than once, or not at all An account may also not appear in the balance sheet Classifications CA Current Assets CL Current Liabilities PPE Property, Plant and Equipment LTL Long-term Liabilities LTI Long-term Investments OE Owner's Equity IA Intangible Assets NP Not separately presented on the balance sheet Account Titles Service Revenue _ 10 Owner’s Drawing Unearned Rent Revenue _ 11 Supplies Accumulated Depreciation—Equipment _ 12 Taxes Payable Accounts Payable _ 13 Rent Expense Trademarks _ 14 Salaries and Wages Payable Short-term Investments _ 15 Mortgage Note Payable Owner’s Capital _ 16 Copyrights Prepaid Insurance _ 17 Equipment Accounts Receivable AT2- Test Bank for Accounting Principles, Twelfth Edition Solutions — Achievement Test 2: Chapters and PART I — MULTIPLE CHOICE (26 points) b a d c a b c b c 10 d 11 c 12 d 13 c PART II — WORKSHEET COMPLETION (25 points) LAWN BUTLER Partial Worksheet For the Month Ended April 30, 2017 —————————————————————————————————————————— Adjusted Income Balance Trial Balance Statement Sheet Account Titles Dr Cr Dr Cr Dr Cr —————————————————————————————————————————— Cash 6,500 6,500 Accounts Receivable 2,000 2,000 Supplies 3,075 3,075 Prepaid Insurance 2,000 2,000 Prepaid Rent 500 500 Equipment 35,000 35,000 Accum Depreciation—Equipment 4,000 4,000 Notes Payable 14,000 14,000 Accounts Payable 12,000 12,000 Unearned Service Revenue 2,000 2,000 Salaries and Wages Payable 1,300 1,300 Interest Payable 50 50 Owner’s Capital 9,825 9,825 Owner’s Drawing 2,000 2,000 Service Revenue 20,300 20,300 Interest Expense 400 400 Salaries and Wages Expense 7,000 7,000 Supplies Expense 1,500 1,500 Rent Expense 2,000 2,000 Insurance Expense 1,500 1,500 Totals 63,475 63,475 12,400 20,300 51,075 43,175 Net Income 7,900 7,900 20,300 20,300 51,075 51,075 PART III — ADJUSTING ENTRIES (24 points) Account(s) Debited 10 15 14 Account(s) Credited 12 13 13 Dollar Amount $300 $8,000 $880 $1,000 $4,800 Account(s) Debited 16 18 17 Account(s) Credited 12 Dollar Amount $80 $1,500 $2,200 $600 Achievement Test AT2- PART IV—CLOSING ENTRIES (8 points) X C C X C 10 X X C X D 11 12 13 14 X D X C PART V—BALANCE SHEET CLASSIFICATIONS (17 points) NP CL PPE CL IA 10 CA OE CA CA NP 11 12 13 14 15 CA CL NP CL LTL 16 IA 17 PPE .. .AT2 - Test Bank for Accounting Principles, Twelfth Edition Assuming that there is a net loss for the period, in which section of the... Equity a Overstated No Effect No Effect b No Effect Understated Overstated c Overstated Understated Overstated d Overstated No Effect Overstated PART II — WORKSHEET COMPLETION (25 points) Instructions:... _ Totals 63,475 63,475 AT2 - Test Bank for Accounting Principles, Twelfth Edition PART III—ADJUSTING ENTRIES (24 points) The ledger accounts given below, with an identification number for each,