Achievement Test 2: Chapters and Financial and Managerial Accounting, 2e Part Points Name _ Instructor Section # _ Date I II III IV V Total 26 25 24 12 13 100 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 contra asset account b liability account c asset account d operating expense account 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, Boswell borrowed $20,000 at 6% interest for year Boswell 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 for January? a Revenues will be overstated by $100 b Expenses will be understated by $1,200 c Liabilities will be understated by $2,000 d Net Income will be overstated by $100 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 and Managerial Accounting, Second 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, Jerry’s Printing Service received a payment of $9,000 for contracted printing work that will be 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 unearned revenue will include a a debit to Unearned Service Revenue for $9,000 b a credit to Unearned Service Revenue for $6,000 c a credit to Service Revenue for $3,000 d a debit to Cash for $3,000 On February 1, Andrews Company purchased printing supplies of $2,500 A month end inventory shows that the company has supplies of $600 on hand The adjusting entry for this prepaid expense will include a a debit to Supplies for $600 and a credit to Supplies Expense for $600 b a debit to Supplies Expense and a credit to Cash for $1,900 c a debit to Supplies Expense and a credit to Supplies for $1,900 d a debit to Supplies and a credit to Cash for $600 _ Hillman Company purchased printing equipment at a cost of $24,000 The monthly depreciation on the equipment is $400 As of December 31, 2017, the balance in Accumulated Depreciation is $9,600 The book value of the equipment reported on the December 31, 2017 balance sheet will be a $24,000 b $23,600 c $14,400 d $9,600 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, 2017, Greer Company signed a $20,000 six-month note payable that bears interest at a rate of 6% Since no interest has been previously accrued on this note, the total interest to be accrued on this note at December 31, 2017, is a $100 b $300 c $600 d $1,200 AT2- Achievement Test 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 Assets Total Expenses Total Stockholders' Equity a No Effect Understated Overstated b Overstated Understated Overstated c Overstated No Effect Overstated d Overstated No Effect No Effect PART II — WORKSHEET COMPLETION (25 points) Instructions: Complete the partial worksheet presented below, inserting additional labels as needed MILTON SERVICES AGENCY Partial Worksheet For the Month Ended September 30, 2017 —————————————————————————————————————————— Adjusted Income Balance Trial Balance Statement Sheet Account Titles Dr Cr Dr Cr Dr Cr —————————————————————————————————————————— Cash 4,500 Accounts Receivable 3,000 Supplies 3,075 Prepaid Insurance 2,000 Prepaid Rent 500 Equipment 35,000 Accum Depreciation—Equipment 6,000 Notes Payable 14,000 Accounts Payable 12,000 Unearned Service Revenue 2,000 Common Stock 9,825 Dividends 2,000 Service Revenue 18,000 Interest Expense 400 Salaries and Wages Expense 8,000 Supplies Expense 1,500 Rent Expense 2,000 Insurance Expense 1,200 Salaries and Wages Payable 1,300 Interest Payable 50 Totals 63,175 63,175 AT2- Test Bank for Financial and Managerial Accounting, Second Edition PART III—ADJUSTING ENTRIES (24 points) The ledger accounts given below, with an identification number for each, are used by Riley Company Instructions: Prepare appropriate adjusting entries for the year ended December 31, 2017, by placing 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 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 $500 is accrued on a note 12 $500 receivable at December 31, 2017 —————————————————————————————————————————— Riley has three employees who each earn $120 $ per day At December 31, four days' salaries have been earned but not paid —————————————————————————————————————————— A customer paid Riley $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 Half of the services were rendered in December —————————————————————————————————————————— Riley purchased equipment costing $48,000 on $ January 1, 2016 Monthly depreciation is $400 —————————————————————————————————————————— Riley provided services to a customer in 2017 at a $ fee of $500 This fee has not yet been received or billed —————————————————————————————————————————— Riley started the year with no supplies on hand $ They purchased $6,000 in supplies during the year and have $1,500 on hand at December 31 Supplies were debited to an asset account when purchased —————————————————————————————————————————— Riley paid $15,000 for a three-year insurance policy $ on July 1, 2017, debiting an asset account at that time —————————————————————————————————————————— Riley borrowed $30,000 by signing a three-month, $ 6% interest, note payable on November 1, 2017 —————————————————————————————————————————— Riley purchased short-term investments on November 1, $ 2017 Interest of $300 per month has been earned but not received prior to December 31 Achievement Test AT2- PART IV—CLOSING ENTRIES (12 points) Remington Company had the following income statement at December 31, 2017: Remington Company Income Statement For the Year Ended Dec 31, 2017 Service Revenue Expenses: Supplies Expense Maintenance and Repairs Expense Utilities Expense Total expenses Net income $10,900 $3,300 2,000 800 6,100 $ 4,800 No dividends were paid during the year Prepare the closing entries at December 31, 2017 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 _ Service Revenue Unearned Rent Revenue _ Prepaid Insurance Supplies _ 10 Copyrights Accounts Payable _ 11 Accounts Receivable Trademarks _ 12 Dividends Salaries and Wages Payable _ 13 Accumulated Depreciation Equipment AT2- Test Bank for Financial and Managerial Accounting, Second Edition Solutions — Achievement Test 2: Chapters and PART I — MULTIPLE CHOICE (26 points) a c b d d b c c c 10 c 11 b 12 a 13 b PART II — WORKSHEET COMPLETION (25 points) MILTON SERVICES AGENCY Partial Worksheet For the Month Ended September 30, 2017 —————————————————————————————————————————— Adjusted Income Balance Trial Balance Statement Sheet Account Titles Dr Cr Dr Cr Dr Cr —————————————————————————————————————————— Cash 4,500 4,500 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 6,000 6,000 Notes Payable 14,000 14,000 Accounts Payable 12,000 12,000 Unearned Service Revenue 2,000 2,000 Common Stock 9,825 9,825 Dividends 2,000 2,000 Service Revenue 18,000 18,000 Interest Expense 400 400 Salaries and Wages Expense 8,000 8,000 Supplies Expense 1,500 1,500 Rent Expense 2,000 2,000 Insurance Expense 1,200 1,200 Salaries and Wages Payable 1,300 1,300 Interest Payable 50 50 Totals 63,175 63,175 13,100 18,000 50,075 45,175 Net Income 4,900 4,900 18,000 18,000 50,075 50,075 PART III — ADJUSTING ENTRIES (24 points) Account(s) Debited 15 10 14 Account(s) Credited 12 13 13 Dollar Amount $500 $1,440 $8,000 $4,800 $500 Account(s) Debited 17 18 16 Account(s) Credited 12 Dollar Amount $4,500 $2,500 $300 $600 Achievement Test AT2- PART IV—CLOSING ENTRIES (12 points) (1) Close revenue account: Service Revenue Income Summary (2) Close expense accounts: Income Summary Supplies Expense Maintenance and Repairs Expense Utilities Expense (3) Close Income Summary: Income Summary Retained Earnings 10,900 10,900 6,100 3,300 2,000 800 4,800 PART V—BALANCE SHEET CLASSIFICATIONS (13 points) G H E A A 10 D E 11 A D 12 H E 13 C C 4,800 ... 12 Dividends Salaries and Wages Payable _ 13 Accumulated Depreciation Equipment AT2 - Test Bank for Financial and Managerial Accounting, Second Edition Solutions — Achievement Test 2: .. .AT2 - Test Bank for Financial and Managerial Accounting, Second Edition The average time that is required to go from "cash to cash" in producing... Salaries and Wages Expense 8,000 Supplies Expense 1,500 Rent Expense 2, 000 Insurance Expense 1 ,20 0 Salaries and Wages Payable 1,300 Interest Payable 50 Totals 63,175 63,175 AT2 - Test Bank for Financial