1 Which of the following is a real permanent account a Goodwill b Sales c Accounts Payable d Both Goodwill and Accounts Payable 2 When a corporation pays a note payable and interest a the account notes payable will be increased b the account interest expense will be decreased c they will debit notes payable and interest expense d they will debit cash 3 Which of the following is a nominal temporary account a Unearned Revenue b Sales Returns c Inventory d Retained Earnings 4 Which of the following criteria must be met before an event or item should be recorded for accounting purposes a The event or item can be measured objectively in financial terms b The event or item is relevant and reliable c The event or item is an element d All of these must be met 5 Which of the following is a recordable event or item a Changes in managerial policy b The value of human resources c Changes in personnel d None of these 6 Which of the following errors will cause an imbalance in the trial balance a Omission of a transaction in the journal b Posting an entire journal entry twice to the ledger c Posting a credit of 720 to Accounts Payable as a credit of 720 to Accounts Receivable d Listing the balance of an account with a debit balance in the credit column of the trial balance 7 Which of the following is an example of an accrued expense a Office supplies purchased at the beginning of the year and debited to an expense account b Property taxes incurred during the year to be paid in the first quarter of the subsequent year c Depreciation expense d Rent earned during the period to be received at the end of the year 8 Which of the following properly describes a deferral a Cash is received after revenue is earned b Cash is received before revenue is earned c Cash is paid after expense is incurred d Cash is paid in the same time period that an expense is incurred 9 Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for a an unearned revenue b a prepaid expense c an accrued revenue d an accrued expense 10 When an item of revenue or expense has been earned or incurred but not yet collected or paid it is normally called a n revenue or expense a prepaid b adjusted c accrued d estimated 11 A prepaid expense can best be described as an amount a paid and currently matched with revenues b paid and not currently matched with revenues c not paid and currently matched with revenues d not paid and not currently matched with revenues 12 A trial balance a supplies a listing of open accounts and their balances that are used in preparing financial statements b proves that debits and credits are equal in the ledger c is normally prepared three times in the accounting cycle d all of these 13 Mune Company recorded journal entries for the declaration of 100 000 of dividends the 64 000 increase in accounts receivable for services rendered and the purchase of equipment for 42 000 What net effect do these entries have on owners equity a Increase of 22 000 b Decrease of 36 000 c Decrease of 58 000 d Decrease of 142 000 14 A company receives interest on a 50 000 9 5 year note receivable each September 1 Assuming that the company does not use reversing entries what entry should be made on September 1 when the annual interest payment is received a Cash 4 500 Interest Receivable 3 000 Interest Revenue 1 500 b Cash 4 500 Interest Receivable 4 500 c Cash 4 500 Interest Receivable 1 500 Interest Revenue 3 000 d Cash 4 500 Interest Revenue 4 500 15 A machine costing 30 000 with a salvage value of 5 000 is to be depreciated on a straightline basis over 5 years The failure to properly record the adjusting entry for the depreciation of the machine will result in an a understatement of expenses and an understatement of liabilities b understatement of expenses and an understatement of assets c overstatement of expenses and an overstatement of liabilities d understatement of expenses and an overstatement of assets 16 A 1 year insurance policy was purchased on September 1 for 6 000 and prepaid insurance was debited Assuming a December 31 year end what is the adjusting entry on December 31 a Debit prepaid insurance for 1 000 and credit insurance expense for 1 000 b Debit insurance expense for 2 000 and credit prepaid insurance for 2 000 c Debit insurance expense for 1 000 and credit prepaid insurance for 1 000 d Debit prepaid insurance for 2 000 and credit insurance expense for 2 000 17 On February 1 ABC company purchased the copyright to a book for 15 000 and agreed to pay royalties equal to 10 of book sales with a guaranteed minimum royalty of 60 000 ABC had book sales of 550 000 during the year In its income statement what amount should ABC report as royalty expense for the year a 90 000 b 70 000 c 75 000 d 60 000 18 Murphy Company sublet a portion of its warehouse for five years at an annual rental of 15 000 beginning on November 1 2012 The tenant paid one year s rent in advance which Murphy recorded as a credit to Unearned Rent Revenue Murphy reports on a calendar year basis The adjustment on December 31 2012 for Murphy should be a No entry b Unearned Rent Revenue 12 500 Rent Revenue 12 500 c Rent Revenue 2 500 Unearned Rent Revenue 2 500 d Unearned Rent Revenue 2 500 Rent Revenue 2 500 19 At the end of Year 1 Star Co s actual year end supplies amounted 5 500 During Year 2 supplies in the amount of 25 800 were purchased All purchases were recorded as assets Actual year end supplies at the end of Year 2 amounted to 8 600 The adjusting entry for store supplies will a decrease net income by 22 700 b increase expenses by 28 900 c decrease supplies by 8 600 d debit Accounts Payable for 28 900 20 How would the proceeds received from the advance sale of nonrefundable tickets for a theatrical performance be reported by the seller before the performance a Revenue for the entire proceeds b Revenue to the extent of related costs expended c Unearned revenue for the entire proceeds d Unearned revenue to the extent of related costs expended 21 Pappy Corporation received cash of 18 000 on May 1 2012 for one year s rent in advance and recorded the transaction with a credit to Unearned Rent Revenue The December 31 2012 adjusting entry is a debit Rent Revenue and credit Unearned Rent Revenue 6 000 b debit Rent Revenue and credit Unearned Rent Revenue 12 000 c debit Unearned Rent Revenue and credit Rent Revenue 12 000 d debit Unearned Rent Revenue and credit Rent Revenue 6 …