Achievement Test 2: Chapters and Financial Accounting, 6e Part Points Name Instructor _ Section # _ Date _ I II III IV V Total 39 12 24 17 100 Score PART I — MULTIPLE CHOICE (39 points) Instructions: Designate the best answer for each of the following questions The Accumulated Depreciation account is a(n) a contra asset b liability c asset d operating expense A post-closing trial balance contains a real and nominal accounts b permanent and temporary accounts c balance sheet or permanent accounts d balance sheet and revenue accounts Which of the following is false with regard to a worksheet? a Before the adjusting entries are recorded in the General Journal, they are recorded in the adjustments columns of the worksheet b A worksheet is a required step in the accounting cycle c When a worksheet is used, the preparation of financial statements is still required d If a credit is needed to balance the income statement columns on the worksheet, a debit will be needed to balance the balance sheet columns On January 1, Altillo borrowed $10,000 at 6% interest for year Altillo accrues interest on the note monthly If no adjusting entry is made at the end of January, what will be the impact on the financial statements? a Revenues will be overstated by $50 b Expenses will be understated by $600 c Liabilities will be understated by $1,000 d Net Income will be overstated by $50 What is the purpose of a post-closing trial balance? a Prove that all income statement accounts have been properly posted b Prove the equality of income statement account balances c Prove the equality of all account balances d Prove the equality of permanent account balances AT2- Test Bank for Financial Accounting, Sixth Edition The average time that is required to go from "cash to cash" in producing revenues is referred to as the a business cycle b operating cycle c fiscal year cycle d accounting cycle On February 2, Reedy’s Printing Service received a payment of $6,000 for contracted printing work that will completed over the next months As of the end of February, the company had completed 1/3 of the work The adjusting journal entry at the end of February for prepaid revenue will include a a debit to Unearned Revenue for $6,000 b a credit to Unearned Revenue for $4,000 c a credit to Printing Revenues for $2,000 d a debit to Cash for $2,000 On February 1, Andrews Company purchased printing supplies of $2,200 A month end inventory shows that the company has supplies of $900 on hand The adjusting entry for this prepaid expense will include a a debit to Supplies for $900 and a credit to Supplies Expense for $900 b a debit to Supplies Expense and a credit to Cash for $1,300 c a debit to Supplies Expense and a credit to Supplies for $1,300 d a debit to Supplies and a credit to Cash for $900 _ Braxton Company purchased printing equipment at a cost of $18,000 The monthly depreciation on the equipment is $300 As of December 31, 2008, the balance in Accumulated Depreciation is $7,200 The book value of the equipment reported on the December 31, 2008 balance sheet will be a $18,000 b $17,700 c $10,800 d $7,200 10 Malone Co recorded a payment of cash on account to a creditor by debiting Accounts Receivable and crediting Cash The correcting entry is a debit Accounts Payable and credit Cash b debit Cash and credit Accounts Receivable c debit Accounts Payable and credit Accounts Receivable d Some other correcting entry is necessary 11 On October 1, 2008, Greer Company signed a $6,000 six-month note payable that bears interest at a rate of 6% The total interest to be accrued on this note at December 31, 2008, is a $30 b $90 c $180 d $360 Achievement Test AT2- 12 Which of the following is false? a Current assets are listed in the order of magnitude b Obligations expected to be paid after one year are classified as long-term liabilities c Intangible assets are non-current resources that not have physical substance d Property, plant, and equipment are tangible resources of a relatively permanent nature that are used in the business and not intended for sale 13 Omission of a prepaid expense adjusting entry will have the following effects: Total Expenses Total Stockholders' Equity Total Assets a No Effect Understated Overstated b Overstated Understated Overstated c Overstated No Effect Overstated d Overstated No Effect No Effect PART II — WORK SHEET COMPLETION (12 points) Instructions: Complete the partial work sheet presented below, inserting additional labels as needed SANTOS SERVICES AGENCY Partial Work Sheet For the Month Ended September 30, 2008 —————————————————————————————————————————— Adjusted Income Balance Trial Balance Statement Sheet Account Titles Dr Cr Dr Cr Dr Cr —————————————————————————————————————————— Cash 6,500 Accounts Receivable 3,000 Supplies 3,075 Prepaid Insurance 2,000 Prepaid Rent 500 Equipment 35,000 Accum Depreciation—Equipment 4,000 Notes Payable 14,000 Accounts Payable 12,000 Unearned Revenue 2,000 Common Stock 9,825 Dividends 2,000 Service Revenue 20,000 Interest Expense 400 Salaries Expense 6,000 Supplies Expense 1,500 Rent Expense 2,000 Insurance Expense 1,200 Salaries Payable 1,300 Interest Payable 50 Totals 63,175 63,175 AT2- Test Bank for Financial Accounting, Sixth Edition PART III—ADJUSTING ENTRIES (24 points) The ledger accounts given below, with an identification number for each, are used by Silas Company Instructions: Prepare appropriate adjusting entries for the year ended December 31, 2008, 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 Notes Receivable 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 Expense Accumulated Depreciation—Equipment 16 Interest Expense Salaries Payable 17 Supplies Expense Interest Payable 18 Insurance Expense —————————————————————————————————————————— Account(s) Account(s) Dollar Entry Information Debited Credited Amount —————————————————————————————————————————— Interest of $500 is accrued on a note 12 $500 receivable at December 31, 2008 —————————————————————————————————————————— Silas has three employees who each earn $160 $ per day At December 31, four days' salaries have been earned but not paid —————————————————————————————————————————— A customer paid Silas $16,000 on December 1, $ 2008 for services to be rendered from December through January 31, 2009 The receipt was credited to a liability account —————————————————————————————————————————— Silas purchased equipment costing $48,000 on $ January 1, 2007 Monthly depreciation is $600 —————————————————————————————————————————— Silas provided services to a customer in 2008 at a $ fee of $500 This fee has not yet been received or billed —————————————————————————————————————————— Silas started the year with no supplies on hand $ They purchased $6,000 in supplies during the year and have $2,000 on hand at December 31 Supplies were debited to an asset account when purchased —————————————————————————————————————————— Silas paid $12,000 for a three-year insurance policy $ on July 1, 2008, debiting an asset account at that time —————————————————————————————————————————— Silas borrowed $20,000 by signing a three-month, $ 9% interest, note payable on November 1, 2008 —————————————————————————————————————————— Silas purchased short-term investments on November 1, $ 2008 Interest of $300 per month has been earned but not received prior to December 31 —————————————————————————————————————————— Achievement Test AT2- PART IV—CLOSING ENTRIES (12 points) P.T Ellison Company had the following income statement at December 31, 2008: P T Ellison Company Income Statement For the Year Ended Dec 31, 2008 Service Revenue Expenses: Supplies expense Automobile expense Utilities expense Total expenses Net income $10,900 $2,300 2,000 800 5,100 $ 5,800 No dividends were paid during the year Prepare the closing entries at December 31, 2008 PART V—BALANCE SHEET CLASSIFICATIONS (13 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 A Current Assets E Current Liabilities B Long-term Investments F Long-term Liabilities C Property, Plant, and Equipment G Stockholders’ Equity D Intangible Assets H Not separately presented on the Balance Sheet Account Titles Common Stock Prepaid Insurance Unearned Rent Revenue 10 Copyrights Supplies 11 Accounts Receivable Accounts Payable 12 Dividends Trademarks 13 Accumulated Depreciation Salaries Payable Equipment Service Revenue AT2- Test Bank for Financial Accounting, Sixth Edition Solutions — Achievement Test 2: Chapters and PART I — MULTIPLE CHOICE (39 points) a c b d d b c c c 10 c 11 b 12 a 13 b PART II — WORK SHEET COMPLETION (12 points) SANTOS SERVICES AGENCY Partial Work Sheet For the Month Ended September 30, 2008 —————————————————————————————————————————— Adjusted Income Balance Trial Balance Statement Sheet Account Titles Dr Cr Dr Cr Dr Cr —————————————————————————————————————————— Cash 6,500 6,500 Accounts Receivable 3,000 3,000 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 Revenue 2,000 2,000 Common Stock 9,825 9,825 Dividends 2,000 2,000 Service Revenue 20,000 20,000 Interest Expense 400 400 Salaries Expense 6,000 6,000 Supplies Expense 1,500 1,500 Rent Expense 2,000 2,000 Insurance Expense 1,200 1,200 Salaries Payable 1,300 1,300 Interest Payable 50 50 Totals 63,175 63,175 11,100 20,000 52,075 43,175 Net Income 8,900 8,900 20,000 20,000 52,075 52,075 PART III — ADJUSTING ENTRIES (24 points) Account(s) Debited 15 10 14 Account(s) Credited 12 13 13 Dollar Amount $500 $1,920 $8,000 $7,200 $500 Account(s) Debited 17 18 16 Account(s) Credited 12 Dollar Amount $4,000 $2000 $300 $600 Achievement Test PART IV—CLOSING ENTRIES (12 points) (1) Close revenue account Service Revenue Income Summary 10,900 10,900 (2) Close expense accounts Income Summary Supplies Expense Automobile Expense Utilities Expense 5,100 2,300 2,000 800 (3) Close Income Summary Income Summary Retained Earnings 5,800 5,800 PART V—BALANCE SHEET CLASSIFICATIONS (13 points) G E A E D 10 E C H A D 11 A 12 H 13 C AT2- ... Depreciation Salaries Payable Equipment Service Revenue AT2- Test Bank for Financial Accounting, Sixth Edition Solutions — Achievement Test 2: Chapters and PART I — MULTIPLE CHOICE (39 points) a... 1,200 Salaries Payable 1,300 Interest Payable 50 Totals 63,175 63,175 AT2- Test Bank for Financial Accounting, Sixth Edition PART III—ADJUSTING ENTRIES (24 points) The ledger accounts given below,...AT2- Test Bank for Financial Accounting, Sixth Edition The average time that is required to go from "cash to cash" in producing