practice exam pt. 1

Year-end net assets would be overstated and current expenses would be understated as a result of

failure to record which of the following adjusting entries?

a. Expiration of prepaid rent

b. Amortization of intangible assets

c. Accrued insurance payable

d. All of these

d

Elements are listed in a very specific order on the trial balance. What would be the correct order for the following accounts on a trial balance? (answer with number)

a. AR, Treasury Stock, Dividends Declared, Gain on Truck Sale, COGS, Accrued Expenses

b. AR, Treasury Stock, Accrued Expenses, Dividends Declared, Gain on Truck Sale, COGS

c. AR, Accrued Expenses, COGS, Gain on Truck Sale, Treasury Stock, Dividends Declared

d. AR, Accrued Expenses, Treasury Stock, Dividends Declared, COGS, Gain on Truck Sale

d

Which of the following statements best describes the purpose of closing entries?

a. To facilitate posting and taking a trial balance.

b. To reduce the balances of revenue and expense accounts to zero so that they may be used to accumulate the revenues and expenses in the next period.

c. To determine the amount of net income or net loss for the period.

d. To complete the record of various transactions that were started in a prior period.

b

Toomer Company owns the following investments:

Trading securities (fair value) $120,000

Available-for-sale securities (fair value) 80,000

Held-to-maturity securities (amortized cost) 94,000

Toomer will report securities in its current asset section of

a. $0.

b. exactly $120,000.

c. exactly $210,000.

d. $120,000 or an amount greater than $120,000, depending on the circumstances

d

Big-Mouth Frog Corporation had revenues of $200,000, expenses of $300,000, dividends declared of

$45,000, and dividends paid of $20,000. When Income Summary is closed to Retained Earnings, the

amount of the debit or credit to Retained Earnings is a

a. debit of $100,000.

b. debit of $145,000.

c. credit of $55,000.

d. credit of $75,000

a

6. Presented below are changes in the account balances of Norton Company during the year, except

for retained earnings. The only entries in Retained Earnings were for net income and dividends of $12,000.

Cash $29,000

Accounts Payable $34,000

Accounts Receivable (net) (13,000)

Bonds Payable (20,000)

Inventory 52,000

Common Stock 62,000

Plant Assets (net) 47,000

Additional Paid-in Capital 16,000

Compute Norton's Net Income:

a. $11,000.

b. $23,000.

c. $35,000.

d. $63,000

c

Johnson Corp.'s trial balance reflected the following account balances at December 31st:

Accounts receivable (net) $24,000

Trading securities 6,000

Accumulated depreciation on equipment and furniture 15,000

Cash 11,000

Inventory 30,000

Equipment 25,000

Prepaid expenses 2,000

Land held for future business site 18,000

Other financial data for the year ended December 31st: Included in accounts receivable is $6,000 due

from a customer and payable in quarterly installments of $500. The last payment is due three years

from today.

In Johnson's December 31st balance sheet, the current assets total is:

a. $83,000

b. $78,000

c. $72,000

d. $69,000

d

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year-end. Data

relating to salaries earned in December 2025 are as follows:

The last payroll was paid on 12/26/25, for the 2-weeks ended 12/26/25.

Overtime pay earned in the 2-weeks ended 12/26/25 was $25,000.

The remaining workdays in 2025 were December 29, 30, 31, on which days there was no overtime.

The recurring biweekly salaries total $450,000.

Assuming a five-day workweek, Colaw should record a liability at December 31, 2025 for accrued

salaries of:

a. $135,000.

b. $160,000.

c. $270,000.

d. $295,000

b.

Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned

Service Revenue. This account had a balance of $5,700,000 at December 31, 2025 before the year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense

account, which had a balance of $1,350,000 at December 31, 2025.

Service contracts still outstanding at December 31, 2025 expire as follows:

During 2026 $1,440,000

During 2027 1,710,000

During 2028 1,050,000

What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2025

balance sheet?

a. $4,350,000

b. $4,200,000

c. $2,850,000

d. $1,500,000

b