MGMT 200 - Exam 1 - Purdue University

What is the process of identifying, measuring,

and communicating economic information to

various users?

A. Accounting

B. Management

C. Business

D. Analysis

A. Accounting

What makes accounting a valuable discipline?

A. Produces financial reports

B. It stores financial information in accounts

C. Provides information to make decisions

D. Records events and transactions

C. Provides information to make decisions

The branch of accounting concerned with providing

management with information to facilitate planning

and control.

A. financial accounting

B. tax accounting

C. managerial accounting

D. control accounting

C. managerial accounting

The main objective of financial reporting is to provide

information

A. on a company's assets, liabilities, and

stockholders' equity.

B. for decision making.

C. about a company's financial performance during

a period.

D. provide stockholders information to assess an

entity's performance.

B. for decision making.

The area of accounting that emphasizes developing

accounting information for use within a company is

A. financial accounting.

B. managerial accounting.

C. manufacturing accounting.

D. operations accounting

B. managerial accounting.

A transaction is any event, external or internal, that is

recognized in a set of financial statements.

A. True

B. False

a. True

Transactions must affect the financial position of

the business to be recorded in a financial

accounting system.

A. true

B. false

A. true

For example, the receipt of a sales order from

a customer is not recorded until the product

or service is provided to the customer.

Which of the following is a business event that is not

considered a recordable transaction?

A. A company receives a product previously

ordered.

B. A company pays an employee for work

performed

C. A customer purchases a service.

D. A customer places an order for product.

D. A customer places an order for product.

Which of the following business events is not a

recordable transaction in accounting?

A. Paying wages

B. Receiving goods

C. Signing a contract

D. Purchasing a service

C. Signing a contract

Although signing a contract could be an important

business event it is not recorded in an accounting

system.

San Pedro Corporation recently purchased a truck for

$60,000, which will be paid within 45 days after

delivery. At what point would the event be recorded in

San Pedro's accounting system?

A. When San Pedro signs the agreement with the

seller.

B. When San Pedro receives delivery of the truck.

C. When San Pedro receives the invoice (a bill)

from the seller.

D. When San Pedro pays the $60,000 to the seller.

delivered

B. When San Pedro receives delivery of the truck.

Agreement Signed - Truck Delivered - Invoice Received - Cash Payment

Assets can be best described as

A. resources owned by the company having future

benefit to the company.

B. collection of resources belonging to the

company and the claims on these resources.

C. cash owned by the company.

D. owners' investment in the business

A. resources owned by the company having future

benefit to the company.

Those who lend money or deliver goods and services

before being paid are called

A. creditors.

B. investors.

C. debtors.

D. stockholders

A. creditors. (suppliers, bank, employees)

Which of the following accounts is not an asset?

A. Inventory

B. Cash

C. Common stock

D. Equipment

C. Common stock

Assets benefit future operations.

Examples are cash, inventory,

supplies, accounts receivable,

buildings and equipment.

At December 31, Burlingame, Inc., an air quality service

business, had total assets of $100,000 and equity of

$10,000. How much were Burlingame's liabilities?

A. $50,000

B. $80,000

C. $90,000

D. $110,000

C. $90,000

assets ‐ equity = liabilities

$100,000 ‐ $10,000 = $90,000

Woodcrest, Inc.'s total assets increased $20,000 during a period

and total liabilities increased $10,000 during the same period,

the amount and direction (increase or decrease) of the change

in stockholders' equity for that period is:

A. a $45,000 decrease.

B. a $45,000 increase.

C. an $15,000 decrease.

D. an $10,000 increase.

D. an $10,000 increase

assets = liabilities + equity

(+$20,000) ‐ (+$10,000) = x

(+$20,000) ‐ (+$10,000) = (+$10,000)

The amounts recorded when the company sells

products or provides services to customers are

referred to as:

A. Revenues

B. Assets

C. Liabilities

D. Expenses

A. Revenues

Revenues are recorded at the time

the company provides products or

services to customers.

The costs associated with producing revenues

are referred to as:

A. Assets.

B. Liabilities.

C. Expenses.

D. Dividends.

C. Expenses.

Dividends represent a return of the company's

profits to its stockholders.

A. True

B. False

A. True

Not classified as an "expense"

In a corporation, the authority to pay a dividend is

determined by the

A. chief executive officer or president.

B. stockholders.

C. board of directors.

D. creditors.

C. board of directors.

Using the information below from the accounting records of

Modern Ortho Corporation, stockholders' claims to the

company's resources amount to:

Assets $500,000

Liabilities $150,000

Income $200,000

Retained earnings $200,000

A. $500,000

B. $400,000

C. $350,000

D. $100,000

C. $350,000

assets ‐ liabilities = stockholders' equity

$500,000 ‐ $150,000 = $350,000

The financial statements of Timken Corporation contain the

following accounts. How much is its earnings?

Expenses $20,000

Wages payable $10,000

Revenues 100,000

Dividends 15,000

Accounts Receivable 5,000

A. $80,000

B. $55,000

C. $15,000

D. $40,000

A. $80,000

revenues less expenses = income

$100,000 ‐ $20,000 = $80,000

Which of the following statements regarding cash flow

activities is true?

A. Financing activities include borrowed money

necessary to begin and to operate a business.

B. Investing activities are primarily related to

earning interest income on company

investments in securities.

C. Operating activities primarily consist of buying

long‐term assets, such as equipment.

D. Most companies spend the least amount of time

on operating activities.

A. Financing activities include borrowed money

necessary to begin and to operate a business.

Which of the following is an example of operating

activities?

A. Selling common stock to investors.

B. Buying equipment.

C. Selling a building.

D. Selling goods and services to customers

D. Selling goods and services to customers

Allegheny Co., Inc. engages in the following cash payments:

What is the total amount of cash paid for financing

activities?

Salaries & wages $ 1,000

Borrowing from a bank $50,000

Purchase equipment $10,000

Dividends to stockholders $15,000

A. $66,000

B. $65,000

C. $55,000.

D. $50,000

B. $65,000

Which of the following characteristics best describes a

corporation?

A. a business with a single owner

B. is not taxed

C. owners are not personally responsible for the

liabilities of the corporation

D. each year all of its income or earnings are

distributed to stockholders

C. owners are not personally responsible for the liabilities of the corporation

One of the owners of a corporation?

A. creditor

B. stockholder

C. debtor

D. partner

B. stockholder

Transfer of ownership will not affect the

continuity of a

A. sole proprietorship

B. corporation or partnership

C. partnership

D. corporation

D. corporation

The costs related to rent, utilities, and salaries in

the current reporting period are examples of

liabilities.

A. True

B. False

B. False

these are examples of expenses

Which of the following statements is correct

concerning an income statement?

A. The statement will include how much was paid

to stockholders in the form of dividends.

B. The statement shows the results of a company

at a point in time.

C. The statement provides information about a

business' ability to earn a profit and growth.

D. The statement consists of assets, liabilities,

revenues and expenses.

C. The statement provides information about a

business' ability to earn a profit and growth.

Question - LO3

How many of the following accounts would appear

in a year‐end income statement?

1 Sales

2 Dividends to Stockholders

3 Rent Deposit

4 Salaries Expense

5 Accounts Receivable

6 Service Revenue

7 Accounts Payable

A. five

B. four

C. three

D. two

C. three

Given the information below about Kensal Green Corporation,

what was the amount of dividends the company paid in the

current period?

Beginning retained earnings $200,000

Ending retained earnings $100,000

Decrease in cash (-$10,000)

Income $150,000

Change in stockholders' equity $50,000

A. $350,000

B. $150,000

C. $200,000

D. $250,000

D. $250,000

Beginning R/E $ 200,000

Income 150,000

350,000

Less dividends (250,000)

Ending R/E $ 100,000

How many of the following items would affect investing cash flows

reported in the statement of cash flows (all transaction involve

cash)?

1. Decrease in wages payable

2. Borrow from a bank

3. Increase inventory levels

4. Purchase a delivery truck

5. Repay an equipment loan

6. Sell some excess land

A. one

B. two

C. three

D. four

B. two

How many of following accounts would appear in a year‐end

balance sheet?

1. Rent expense

2. Salaries Payable

3. Salaries Expense

4. Common Stock

5. Dividends

6. Service Revenue

7. Retained Earnings

8. Fee income

A. five

B. four

C. three

D. two

C. three

The basic financial statements are listed below:

1. Statement of Cash Flows

2. Balance Sheet

3. Income Statement

4. Statement of Changes in Stockholders' Equity

What is the order of preparing financial statements?

a. 2, 3, 4, 1

b. 3, 4, 2, 1

c. 3, 2, 1, 4

d. 1, 4, 2, 3

b. 3, 4, 2, 1

Income Statement, Statement of Changes in Stockholders' Equity, Balance Sheet, Statement of Cash Flows

Which of the following best represents value

created for stockholders during the current

period?

A. Stockholders' equity.

B. Retained earnings

C. Income.

D. Total assets.

C. Income.

The retained earnings balance reflects

reductions for dividends. Stockholders'

equity balance includes capital contributions.

The most important objective for financial accounting

is to provide information useful for:

A. Predicting cash flows.

B. Providing accountability.

C. Increasing future profits.

D. Documenting business transactions

A. Predicting cash flows.

The assumption that the life of the business can

be divided into time intervals for reporting

purposes is the:

A. Monetary unit assumption.

B. Economic entity assumption.

C. Going concern assumption.

D. Periodicity assumption.

D. Periodicity assumption.

The measurement/communication process of

financial accounting is referred to as the

A. accounting process.

B. chart of accounts.

C. accounting cycle.

D. trial balance.

C. accounting cycle.

Which of the following is not possible when

recording a transaction?

A. Stockholders' equity increases and assets

increase.

B. Stockholders' equity decreases and liabilities

increase.

C. One asset increases and another asset

decreases.

D. Assets decrease and stockholders' equity

increase

D. Assets decrease and stockholders' equity

increase

assets = liabilities + equity

( ‐ )= ( + )

out‐of‐balance

The effects of purchasing inventories on credit are to:

A. increase assets and increase stockholders'

equity.

B. increase assets and increase liabilities.

C. decrease assets and decrease stockholders'

equity.

D. decrease assets and decrease liabilities

B. increase assets and increase liabilities.

Purchasing a building for cash has what effect on the

accounting equation?

A. Increase assets.

B. Decrease stockholders' equity.

C. Decrease liabilities.

D. No effect.

D. No effect.

Investments by stockholders have what effect on the

accounting equation?

A. Assets increase and stockholders' equity

increases.

B. Assets increase and liabilities increase.

C. Expenses increase and liabilities increase.

D. Assets increase and revenues increase.

A. Assets increase and stockholders' equity

increases.

assets = liabilities + equity

(+) cash = (+) common

stock

When a cash payment is made on wages payable.

A. Liabilities and revenues decrease.

B. Assets and liabilities decrease.

C. Assets and stockholders' equity decrease.

D. Assets and expenses decrease.

B. Assets and liabilities decrease.

The purchase of a $5,000 liability insurance policy for

the next year on account will

A. Increase both assets and liabilities by $5,000.

B. Increase both expense and liabilities by $5,000.

C. Increase assets and decrease stockholders'

equity by $5,000.

D. increase both assets and stockholders' equity.

A. Increase both assets and liabilities by $5,000.

Assume that Clifford Gardens, Inc. performed

landscaping services of $1,250 on account for an

office complex. How would this transaction affect

Clifford Gardens?

A. Decrease liabilities by $1,250, and increase equity

by $1,250.

B. Increase both assets and liabilities by $1,250.

C. Increase equity and increase assets by $1,250.

D. Increase equity and increase liabilities by $1,250.

C. Increase equity and increase assets by $1,250.

Which of the following is true?

A. The debit is on the right side of the account.

B. The credit is on the left side of a liability

account.

C. Entries are always recorded on the left side of

the account.

D. The credit is on the right side of an asset account.

D. The credit is on the right side of an asset

account.

Which of the following statements is false?

A. All T‐accounts have both a credit and debit side.

B. The right side of a T‐account is called the debit side.

C. The amount in an account at any time is called the

balance of the account.

D. Many times transactions are analyzed using T‐accounts.

B. The right side of a T‐account is called the debit side.

Account

Dr. | Cr.

For a T account, an account balance is the

difference in total dollars between total debit

footings and total credit footings.

A. True

B. False

A. True

Debits will:

A. decrease liabilities, revenues, and dividends

B. increase assets, expenses, and dividends.

C. decrease assets, liabilities, revenues, expenses,

and dividends.

D. increase assets, liabilities, revenues, expenses,

and dividends

B. increase assets, expenses, and dividends.

Which of the following statements are true?

I. Debits represent decreases, and credits

represent increases.

II. Credits must always equal debits.

III. Liabilities and stockholders' equity have normal credit

balances while assets have normal debit balances.

A. I

B. I and II

C. II and III

D. All of these are true.

C. II and III

Which of the following is correct?

A. Accounts Receivable is increased with a credit.

B. Inventories are decreased with a credit.

C. Rent Payable is increased with a debit

D. Rent Expense is increased with a credit.

B. Inventories are decreased with a credit.

Normal balance rule:

• To increase an account use its normal balance side

• To decrease an account use the opposite of its

normal balance side

assets = liabilities + equity

Normal Balance:

Debit = Credit + Credit

Consider the following list of accounts:

How many of these accounts have a normal debit balance?

Revenues - Prepaid Rent

Equipment - Utilities Expense

Salaries Liabilities - Cash

Accounts Payable - Common Stock

Rent Payable - Dividends

A. four

B. five

C. six

D. seven

B. five

Which of the following transactions would cause a

decrease in both assets and stockholders' equity?

A. Purchasing office equipment on account

B. Paying insurance premium for the next two

years

C. Paying utilities for the current month

D. Providing installation services to customers

C. Paying utilities for the current month

Dr. Cr. Cr. normal balance

Assets = Liabilities + Stockholders' Equity

Cash ( Cr. ) = + Utilities Expense ( Dr. )

Which of the following is not a possible journal entry?

A. Credit assets; Debit expenses.

B. Credit revenues; Debit assets.

C. Debit expenses; Credit liabilities

D. Debit assets; Debit stockholders' equity.

D. Debit assets; Debit stockholders' equity.

Which of the following events does not require

a journal entry?

A. Performance of a service agreed to at a

past date.

B. Purchase of a two‐year insurance policy.

C. Contract to perform a service at a future

date.

D. Payment for a service performed

previously.

C. Contract to perform a service at a future

date.

In a journal entry, credits are always recorded

before debits

A. True

B. False

B. False

The following statements pertain to recording transactions.

Which of them are true?

I. Total debits should equal total credits.

II. Liabilities are listed second in journal entries.

III. It is possible to have multiple debits or credits

in one journal entry.

IV. Some journal entries will have debits only

A. I only.

B. I and III.

C. II and IV.

D. I and IV.

B. I and III.

Knight Co., Inc. performed cleaning services for its

customers on account. These transactions would be

recorded as:

A. Debit Service Revenue, credit Cash.

B. Debit Cash, credit Service Revenue.

C. Debit Cash, credit Accounts Receivable.

D. Debit Accounts Receivable, credit Service

Revenue.

D. Debit Accounts Receivable, credit Service

Revenue.

Lakemont Resources, Inc. purchased office paper on

account for $350. Which journal entry records the payment of the office paper?

A. Accounts Payable $350

Accounts Receivable $350

B. Office Supplies $350

Cash $350

C. Accounts Payable $350

Cash $350

D. Cash $350

Accounts Payable $350

C. Accounts Payable $350

Cash $350

Bampton, Inc. received a $650 invoice for electric

power used in its business for the current month and

immediately paid it. Its journal entry to record this

transaction includes a

A. Debit to Utilities Expense for $650

B. Debit to Accounts Payable for $650

C. Credit to Utility Expense for $650

D. Debit to Cash for $650

A. Debit to Utilities Expense for $650

Posting:

A. involves transferring information to the trial

balance.

B. is an optional step in the accounting cycle.

C. involves the transferring information in journal

entries to the general ledger.

D. is performed after a trial balance is prepared.

C. involves the transferring information in journal

entries to the general ledger.

Below is Birmingham Corporation's Wages Payable T‐account.

The $6,000 amount could represent which of the following?

Wages Payable

Beg. 10,000

6,000

3,000

End. 7,000

A. Cash received from employees

B. Cash payments to employees for services performed

C. Wages earned and not paid

D. Recording expense for wages

B. Cash payments to employees for services performed

Below is the Cambridge Corporation's Prepaid Rent T‐ account.

The $10,000 amount could represent which of the

following?

Prepaid Rent

Beg. 1,000

10,000

7,000

End. 4,000

A. Payment of rent in advance

B. Use of rented warehouse space

C. Recording a rent payable

D. Cash received for rental income from customers

A. Payment of rent in advance

A trial balance:

A. list all accounts and their balances.

B. detects all errors that could be made during the

journalizing or posting steps of the accounting

cycle.

C. lists only revenue and expense accounts.

D. will help detect omitted journal entries.

A. list all accounts and their balances.

After preparing a trial balance, which situation(s)

indicate(s) a potential adjustment(s)?

A. Prepaid insurance account has a credit balance

B. A liability account for royalties due on product

sales has a debit balance

C. Product sales account for the current month is

less than half of the previous month's balance

D. All of the above

D. All of the above

When payment is received for services not yet

rendered, no entry is recorded until that service

has been rendered.

A. True

B. False

B. False

Record the cash received and a liability (deferred revenue)

A concert promoter received $50,000 in cash deposits

from students in September for a concert to be held in

December. Which of the following statements is true?

A. The promoter records revenue in September.

B. The promoter records the cash collections in

December.

C. The promoter records deferred revenue in

September.

D. The promoter records nothing in September.

C. The promoter records deferred revenue in

September.

Which of the following transactions results in an

increase in revenues?

A. Receipt of cash from bank loan.

B. Sale of land at cost for cash.

C. Collection of cash on account.

D. Sale of a product on credit.

D. Sale of a product on credit.

Trans American Airlines, Inc. flies throughout North

America employing a strategy of short flights using

smaller aircraft to increase efficiencies and utilization.

The Company's policy is to provide a cash refund to

customers for unused aircraft tickets. When should

Trans American recognize revenue for ticket sales?

A. When the passenger pays for the ticket.

B. When the airline sells the ticket.

C. When boarding passes are taken at the plane

door.

D. When the plane arrives at its destination.

D. When the plane arrives at its destination.

revenue is recorded at the completion of service

Which principle requires that expenses be recorded

and reported in the same period as revenue that it

helped generate?

A. Revenue recognition

B. Conservatism

C. Matching

D. Historical cost

C. Matching

JW Enterprises, Co. Inc. orders copier paper in October.

The paper was received and used in November. The

paper was paid for in December. When should JW

Enterprises record copier paper expense?

A. October

B. November

C. December.

D. Spread over the fourth quarter

B. November

record expense when used

Which statement best describes when exp.enses should

be recorded?

A. Expenses are recorded the day a company

promises to pay.

B. Expenses are recorded when the cost is used to help earn revenue.

C. Expenses are recorded when paid.

D. As soon as you realize a cost has been incurred.

B. Expenses are recorded when the cost is used to help earn revenue.

The cash basis of accounting does not result in a

more accurate measurement of net income for

the period as compared to the accrual basis of

accounting.

A. True

B. False

A. True

Adjusting accounts is the process of

A. zeroing out account balances to prepare for the next period.

B. reducing revenues by deducting expenses to measure income.

C. posting transactions as they occur during the period.

D. updating accounts at the end of an accounting period.

D. updating accounts at the end of an accounting period

Adjusting entries are useful in apportioning

costs among two or more accounting periods.

A. True

B. False

A. True

All transactions can be easily assigned to

specific accounting periods.

A. True

B. False

B. False

When cash has been paid or received but expense or

revenue has not been recognized this represents a (an)

A. accrual.

B. deferral.

B. deferral.

Which of the following statements is false?

A. Adjusting entries are necessary because timing

differences exist between when revenue or expense is

recognized and cash is received or paid.

B. Adjusting entries can be classified as either accruals or

deferrals.

C. The cash account will always be affected by adjusting

entries.

D. Adjusting entries always affect at least one revenue or

expense account and one asset or liability account.

C. The cash account will always be affected by adjusting entries.

Adjusting entries:

A. Often include the Cash account.

B. Usually are recorded at the beginning of the

accounting period.

C. Always involve at least one income statement

account and one balance sheet account.

D. Adjust the balance of revenue and expense

accounts to zero.

C. Always involve at least one income statement

account and one balance sheet account.

Which transaction would require adjustment at

December 31?

A. Common stock was issued on December 15.

B. Manager salaries were paid on December 31

for services performed during the month of December.

C. Sale of inventory for cash on December 30.

D. A six month prepayment of rent (which took effect immediately) was received on the first day of December.

D. A six month prepayment of rent (which took effect immediately) was received on the first day of December.

Which of the following is an example of a prepaid or

deferral adjusting entry?

A. Recording interest expense incurred on a bank

borrowings that are payable next year.

B. Recording wages for employees not paid.

C. Recording revenue that has been earned but not yet received.

D. Recording the usage of supplies inventory during the period.

D. Recording the usage of supplies inventory during the period.

Question - LO3

On July 1, 2018, a two‐year insurance policy was purchased

for $30,000 with coverage to begin immediately. What is

the amount of insurance expense for the year ending

December 31, 2018?

A. $2,500

B. $5,000

C. $7,500

D. $15,000

E. $30,000

C. $7,500

In September, 2017, Building & Trade Magazine received cash of

$50,000 for annual magazine subscriptions and credited Deferred

Revenue. The magazine will begin to be delivered in October of

2017. At December 31, 2017, Building & Trade should make the

following adjustment:

A. Debit Sales Revenue by $12,500 and Credit Deferred Sales

Revenue $12,500

B. Debit Deferred Sales Revenue by $50,000 and Credit Sales

Revenue $50,000

C. Debit Sales Revenue by $50,000 and Credit Deferred Sales

Revenue $50,000

D. Debit Deferred Sales Revenue by $12,500 and Credit Sales

Revenue $12,500

D. Debit Deferred Sales Revenue by $12,500 and Credit Sales Revenue $12,500

A fitness club receives $540 from a customer for six physical

training classes. The training classes will be performed later.

After providing four training classes to the customer, what

should the fitness club record on the income statement using

the accrual method of accounting?

A. Service revenue of $540

B. Unearned revenue of $360

C. Service revenue of $360

D. Cash of $180

C. Service revenue of $360

Pacifica Corporation received the following bills for

December 2017 utilities:

• water & sewage: $500 on December 27, 2017

• electricity: $800 on January 9, 2018

Both bills were paid on January 12, 2018. Pacifica will

report accrued expenses at December 31, 2017 of

A. $500

B. $800

C. $ ‐0‐

D. $1,300

D. $1,300

Kensal Green, Inc. pays its sales employees $300 per

day for a five‐day work week that runs from Monday to

Friday. If December 31 is a Wednesday what is the

amount of the salaries adjustment at December 31,

assuming that Friday is payday?

A. $300

B. $600

C. $900

D. $1,200

C. $900

Recorded as salary expense for the three days ended December 31

During the month of January, Expert Law Services, Inc. provided

legal services of $10,000 to a client that were not billed. What is the required adjusting entry by the law firm at January 31?

A. Dr. Accounts receivable

$10,000

Cr. Legal service revenue

$10,000

B. Dr. Legal service revenue

$10,000

Cr. Accounts receivable

$10,000

C. Dr. Unearned revenue $10,000

Cr. Legal service revenue

$10,000

D. Dr. Legal service revenue

$10,000

Cr. Cash $10,000

A. Dr. Accounts receivable

$10,000

Cr. Legal service revenue

$10,000

If Bridgetown Corporation records cash received for

services to be provided in the future with a debit to

Cash and a credit to Service Revenue, how will this

error affect total liabilities for the current period?

A. Total liabilities will be too low.

B. Total liabilities will be too high.

C. Total liabilities will be correct.

D. Not possible to determine.

A. Total liabilities will be too low.

Once the adjusted trial balance is complete,

financial statements are prepared.

A. True

B. False

A. True

Current assets are assets that provide a benefit to a

company over more than one year.

A. True

B. False

B. False

An advantage of a classified balance sheet is that it is

easy to see:

A. If the company is likely to be profitable in future periods.

B. If current assets are large enough to pay current liabilities.

C. If the company is profitable in the current period.

D. If dividends have been paid to stockholders.

B. If current assets are large enough to pay current liabilities.

Closing journal entries are made at the end of an

accounting period to return the balance in all

temporary accounts to zero and to transfer the net

income or loss and the dividends to retained earnings.

A. True

B. False

A. True

In 2017, San Bruno Corporation reported sales of $100,000

and expenses of $75,000. The Company also paid a dividend

of $10,000 in 2017. At December 31, 2017, San Bruno

prepared closing entries. The net effect of the closing entries

on retained earnings was a(n)

A. An increase of $25,000

B. An increase of $85,000

C. An increase of $15,000

D. A decrease of $10,000

C. An increase of $15,000

Of the following five accounts, which ones are

permanent accounts:

(1) Cash

(2) Deferred Revenue

(3) Prepaid Expense

(4) Common Stock

(5) Retained Earnings

A. (1), (4) and (5).

B. (1), (3) and (4).

C. (1), (3) and (5).

D. All of the accounts

D. All of the accounts