Gb518 Exam Unit 2

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1.| Question :| The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:|

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| Student Answer:| | Income Summary account |
| | | Closing account |
| | | Balance column account |
| | | Contra account |
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2.| Question :| Which of the following statements is incorrect?|
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| Student Answer:| | An income statement reports revenues earned less expenses incurred | | | | An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments | | | | Interim financial reports can be based on one-month or three-month accounting periods | | | | Property, plant and equipment are referred to as plant assets | |

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3.| Question :| A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:|

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| Student Answer:| | $200 less in net income |
| | | $200 more in net income |
| | | $200 difference between the debit and credit columns of the Unadjusted Trial Balance | | | | $200 of prepaid insurance |
| | | An error in the financial statements |
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4.| Question :| The main purpose of adjusting entries is to:|
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| Student Answer:| | Record external transactions and events | | | | Record internal transactions and events |
| | | Recognize assets purchased during the period |
| | | Recognize debts paid during the period |
| | | Correct errors |
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5.| Question :| Which of the following identifies the proper order of the accounting cycle?|
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| Student Answer:| | Analyze, Journalize, Unadjusted Trial Balance | | | | Analyze, Post, Unadjusted Trial Balance |
| | | Journalize, Post, Adjusted Trial Balance |
| | | Unadjusted Trial Balance, Adjusted Trial Balance, Close | | | | Adjusted Trial Balance, Adjustments, Financial Statements | |
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6.| Question :| A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:|
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| Student Answer:| | 2% |
| | | 20% |
| | | 200% |
| | | 500% |
| | | $8,000 |
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7.| Question :| An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n):|
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| Student Answer:| | Accrued expense |
| | | Contra account |
| | | Accrued revenue |
| | | Intangible asset |
| | | Adjunct account |
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8.| Question :| The accrual basis of accounting:|
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| Student Answer:| | Is generally accepted for external reporting since it is more useful for most business decisions | | | | Is flawed because it gives complete information about cash flows | | | | Recognizes revenues when received in cash |

| | | Recognizes expenses when paid in cash |
| | | Eliminates the need for adjusting entries at the end of each period | |
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9.| Question :| On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2011?|

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| Student Answer:| | $500 |
| | | $4,000 |
| | | $6,000 |
| | | $14,000 |
| | | $18,000 |
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10.| Question :| A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n):|

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| Student Answer:| | Adjusted trial balance |
| | | Work sheet |
| |...
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