Mid Term Exam Review

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(Chapters 1 thru 6)

Chapter 1

1.The basic accounting equation may be expressed as
a.Assets = Equities.
b.Assets – Liabilities = Owner's Equity.
c.Assets = Liabilities + Owner's Equity.
d.all of these.

2.Owner's equity is increased by

3.Collection of a $500 Accounts Receivable
a.increases an asset $500; decreases an asset $500.
b.increases an asset $500; decreases a liability $500. c.decreases a liability $500; increases owner's equity $500. d.decreases an asset $500; decreases a liability $500.

4.If services are rendered for credit, then
a.assets will decrease.
b.liabilities will increase.
c.owner's equity will increase.
d.liabilities will decrease.

Chapter 2

5.The steps in preparing a trial balance include all of the following except

a.listing the account titles and their balances.
b.totaling the debit and credit columns.
c.proving the equality of the two columns.
d.transferring journal amounts to ledger accounts.

6.A trial balance would only help in detecting which one of the following errors?

a.A transaction that is not journalized
b.A journal entry that is posted twice
c.Offsetting errors are made in recording the transaction d.A transposition error when transferring the debit side of journal entry to the ledger

7.Which of the following statements is false?
a.Revenues increase owner's equity.
b.Revenues have normal credit balances.
c.Revenues are a positive factor in the computation of net income. d.Revenues are increased by debits.

8.Jack Wiser withdraws $300 cash from his business for personal use. The entry for this transaction will include a debit of $300 to a.Jack Wiser, Drawing.
b.Jack Wiser, Capital.
c.Owner's Salary Expense.
d.Salaries Expense.

9.On October 3, Nick Carter, a carpenter, received a cash payment for services previously billed to a client. Nick paid his telephone bill, and he also bought equipment on credit. For the three transactions, at least one of the entries will include a a.credit to Nick Carter, Capital.

b.credit to Notes Payable.
c.debit to Accounts Receivable.
d.credit to Accounts Payable.

Chapter 3

10.Unearned revenues are
a.received and recorded as liabilities before they are earned. b.earned and recorded as liabilities before they are received. c.earned but not yet received or recorded.
d.earned and already received and recorded.

11.At December 31, 2008, before any year-end adjustments, Karr Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be a.$3,000.


12.A new accountant working for Metcalf Company records $800 Depreciation Expense on store equipment as follows: Dr.Depreciation Expense 800
Cr.Cash 800
The effect of this entry is to

a.adjust the accounts to their proper amounts on December 31. b.understate total assets on the balance sheet as of December 31. c.overstate the book value of the depreciable assets at December 31. d.understate the book value of the depreciable assets as of December 31.

13.On July 1, Dexter Shoe Store paid $8,000 to Ace Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Dexter Shoe Store is a.Debit Rent...
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