156 test bank for financial and managerial accounting 9th edition needles

156 Test Bank for Financial and Managerial Accounting
9th Edition Needles

Multiple Choice Questions - Page 1
Which of the following business events is not a transaction?
1.

a.Signing a contract

2.

b.Paying wages

3.

c.Receiving goods

4.

d.Purchasing a service

The issue of deciding when to record a transaction is solved by
1.

a.properly classifying the transaction.

2.

b.deciding on a point of recognition.

3.

c.assigning historical cost to the transaction.

4.

d.analyzing the intent of management.

Which of the following accounts is increased with a debit?
1.

a.Common Stock

2.

b.Rent Payable

3.

c.Legal Fees Earned

4.

d.Dividends


If office equipment is sold at cost in exchange for a promissory note,
1.

a.total liabilities increase.

2.

b.total liabilities and stockholders' equity decrease.

3.

c.total assets decrease.

4.

d.total assets remain the same.

If Accounts Receivable has debit postings of $29,000, credit postings of
$22,000, and a normal ending balance of $24,000, which of the following was its
beginning balance?
1.

a.$31,000 Dr.

2.

b.$17,000 Dr.

3.

c.$17,000 Cr.

4.

d.$31,000 Cr.

Payment on a portion of Accounts Payable will
1.

a.not affect stockholders' equity.

2.

b.decrease net income.

3.

c.increase total liabilities.

4.

d.not affect total assets.

Which pair of accounts follows the rules of debit and credit in the opposite
manner?
1.

a.Prepaid Insurance and Dividends


2.

b.Advertising Expense and Land

3.

c.Dividends and Medical Fees Earned

4.

d.Interest Payable and Common Stock

Which of the following accounts has a normal debit balance?
1.

a.Wages Payable

2.

b.Fees Earned

3.

c.Rent Expense

4.

d.Common Stock

Which of the following is a business event that is considered a recordable
transaction?
1.

a.A company hires a new employee.

2.

b.A customer purchases merchandise.

3.

c.A company orders a product from a supplier.

4.

d.An employee sends a purchase requisition to the purchasing department.

When a company has performed a service but has not yet received payment,
what is the required journal entry to be recorded?
1.

a.Accounts Receivable – Debit; Revenue from Services – Credit

2.

b.Revenue from Services – Debit; Accounts Payable – Credit

3.

c.No entry is required until the cash is received.

4.

d.Revenue from Services – Debit; Accounts Receivable – Credit

The cost principle relates most closely to the
1.

a.recognition point.

2.

b.recognition issue.

3.

c.valuation issue.

4.

d.classification issue.

Which of the following accounts has a normal debit balance?
1.

a.Dividends

2.

b.Common Stock

3.

c.Unearned Fees

4.

d.Retained Earnings

Which of the following transactions decreases both assets and stockholders'
equity?
1.

a.Declaration and payment of a dividend

2.

b.Advance payment made for insurance

3.

c.Receipt of a phone bill, to be paid at a later time

4.

d.Payment of a liability

Which of the following accounts has a normal credit balance?
1.

a.Accounts Receivable

2.

b.Common Stock

3.

c.Wages Expense


4.

d.Dividends

Which pair of accounts follows the rules of debit and credit in the same
manner?
1.

a.Revenue from Services and Equipment

2.

b.Prepaid Rent and Advertising Expense

3.

c.Repair Expense and Notes Payable

4.

d.Common Stock and Rent Expense

To determine the balance of a particular account, one should refer to the

1.

a.source documents.

2.

b.chart of accounts.

3.

c.book of original entry.

4.

d.ledger.

Which of the following is not a measurement issue in accounting?
1.

a.Valuation

2.

b.Recognition

3.

c.Evaluation

4.

d.Classification

When collection is made on Accounts Receivable,
1.

a.stockholders' equity increases.

2.

b.total assets decrease.


3.

c.total assets remain the same.

4.

d.total assets increase.

Which of the following accounts has a normal credit balance?
1.

a.Dividends

2.

b.Automotive Equipment

3.

c.Advertising Fees Earned

4.

d.Interest Expense

Which of the following is not a measurement issue in accounting?
1.

a.When to record a business transaction

2.

b.How to classify the items of a business transaction

3.

c.What value to place on a business transaction

4.

d.Where to record a business transaction

Which of the following events does not require a journal entry?
1.

a.Purchase of a one-year insurance policy

2.

b.Agreement to perform a service at a future date

3.

c.Performance of a service agreed to at a past date

4.

d.Payment for a service performed previously

When a service has been performed, but no cash has been received, which of
the following statements is true?
1.

a.The entry would include a debit to Accounts Receivable.


2.

b.No journal entry would be made.

3.

c.The entry would include a debit to Accounts Payable.

4.

d.The entry would include a credit to Unearned Revenue.

A purchase is recognized in the accounting records when
1.

a.payment is made for the item purchased.

2.

b.the purchase requisition is sent to the purchasing department.

3.

c.title transfers from the seller to the buyer.

4.

d.the buyer receives the seller's bill.

If Accounts Payable has debit postings of $17,000, credit postings of $14,000,
and a normal ending balance of $6,000, what was its beginning balance?
1.

a.$9,000 Cr.

2.

b.$3,000 Cr.

3.

c.$9,000 Dr.

4.

d.$3,000 Dr.

Which of the following is a business event that is not considered a recordable
transaction?
1.

a.A company receives a product previously ordered.

2.

b.A company pays an employee for work performed.

3.

c.A customer inquires about the availability of a service.

4.

d.A customer purchases a service.


A company that receives money in advance of performing a service. What is
the journal entry for the transaction?
1.

a.Unearned Revenue – Debit; Accounts Payable – Credit

2.

b.Cash – Debit; Unearned Revenue – Credit

3.

c.Cash – Debit; Prepaid Fees – Credit

4.

d.Cash – Debit; Accounts Receivable. – Credit

A $4,000 machine is purchased by paying $1,000 cash and issuing a
promissory note for the remainder. The journal entry should include a
1.

a.credit to Machinery.

2.

b.credit to Notes Payable.

3.

c.credit to Notes Receivable.

4.

d.debit to Cash.

Which of the following accounts is decreased with a credit?
1.

a.Advertising Fees Earned

2.

b.Insurance Expense

3.

c.Common Stock

4.

d.Unearned Revenue

Which of the following accounts has a normal debit balance?
1.

a.Art Fees Earned

2.

b.Notes Payable


3.

c.Prepaid Insurance

4.

d.Unearned Art Fees

The declaration and payment of a dividend will
1.

a.decrease net income.

2.

b.increase liabilities.

3.

c.not affect total assets.

4.

d.decrease stockholders' equity.

When a magazine company receives advance payment for a subscription, what
is the required journal entry to be recorded?
1.

a.Cash – Debit; Unearned Subscriptions Revenue – Credit

2.

b.Prepaid Subscriptions – Debit; Cash – Credit

3.

c.Cash – Debit; Subscriptions Revenue – Credit

4.

d.Unearned Subscriptions Revenue – Debit; Cash – Credit

Which of the following accounts is decreased with a debit?
1.

a.Notes Payable

2.

b.Cash

3.

c.Interest Expense

4.

d.Dividends

Which of the following events does not result in the recording of an expense?
1.

a.Payment of a dividend


2.

b.Purchase of gasoline for fill-up of a company car

3.

c.Receipt of a bill from the telephone company

4.

d.Payment of wages

When a business records revenue before it has been earned, it has violated the
measurement issue of
1.

a.recognition.

2.

b.evaluation.

3.

c.classification.

4.

d.valuation.

When a business erroneously records expenses as assets, it has violated the
measurement issue of
1.

a.communication.

2.

b.classification.

3.

c.valuation.

4.

d.recognition.

When a business reports an asset at an inflated dollar amount, it has violated
the measurement issue of
1.

a.recognition.

2.

b.valuation.

3.

c.classification.


4.

d.realization.

When a company receives an electric bill but does not pay it right away, what is
the required journal entry to be recorded?
1.

a.Utilities Expense – Debit; Accounts Receivable – Credit

2.

b.No entry is required until the bill is paid.

3.

c.Utilities Expense – Debit; Accounts Payable – Credit

4.

d.Accounts Payable – Debit; Utilities Expense – Credit

Which of the following is an illustration of the classification issue?

1.

a.At what amount should an old machine be shown on the balance sheet?

2.

b.At what point should the purchase of art supplies be recorded?

3.

c.Should tools be recorded as an asset or as an expense?

4.

d.At what point should a bill be paid for the purchase of an item?

Which of the following accounts is increased with a credit?
1.

a.Supplies

2.

b.Fees Earned

3.

c.Supplies Expense

4.

d.Dividends

A transaction in which six months' rent is paid in advance results in which of
the following journal entries?
1.

a.Prepaid Rent – Debit; Cash – Credit


2.

b.Rent Receivable – Debit; Cash – Credit

3.

c.Rent Revenue – Debit; Cash – Credit

4.

d.Rent Expense– Debit; Cash – Credit

81 Free Test Bank for Financial and Managerial
Accounting 9th Edition Needles Multiple Choice Questions
- Page 2
The Office Supplies account is classified as a(n)
1.

a.expense.

2.

b.stockholders' equity account.

3.

c.asset.

4.

d.liability, if the supplies have not yet been paid for.

Unearned revenues are recorded by companies that
1.

a.receive money in advance of the performance of a service.

2.

b.pay money at the time the performance of a service is complete.

3.

c.receive money at the time the performance of a service is complete.

4.

d.pay money in advance of the performance of a service.

All of the following are examples of source documents except

1.

a.checks.

2.

b.invoices.

3.

c.journals.


4.

d.receipts.

All of the following actions can help a business manage its cash flows except
1.

a.convince its creditors to allow payment over a period of time.

2.

b.pay for all expenditures immediately.

3.

c.be efficient in making collections from its customers.

4.

d.arrange for a line of credit at the bank, should the funds be needed.

Which of the following accounts should be credited in a journal entry?
1.

a.Dividends, when it has been increased

2.

b.Accounts Receivable, when it has been decreased

3.

c.Wages Expense, when it has been increased

4.

d.Wages Payable, when it has been decreased

The process of transferring journal entry information from the journal to the
ledger is called
1.

a.journalizing.

2.

b.posting.

3.

c.footing.

4.

d.analyzing.

Which of the following statements is true about a journal entry?
1.

a.The Post. Ref. column is filled in prior to posting.

2.

b.All debits are listed before any credits.


3.

c.The name of the month should be repeated for each entry.

4.

d.An explanation must follow each debit and each credit.

Which of the following accounts will not affect stockholders' equity?
1.

a.Advertising Expense

2.

b.Dividends

3.

c.Land

4.

d.Sales

Which of the following accounts is not a stockholders' equity account?
1.

a.Common Stock

2.

b.Retained Earnings

3.

c.Notes Payable

4.

d.Dividends

Which of the following does not affect retained earnings?
1.

a.Declaration and payment of dividends

2.

b.Earning of revenues

3.

c.Investments by stockholders

4.

d.Incurring of expenses

The account most recently posted is determined most efficiently by referring to
the
1.

a.Post. Ref. column of the ledger.


2.

b.balance column of the ledger.

3.

c.date column of the general journal.

4.

d.Post. Ref. column of the general journal.

Which of the following accounts is an asset?
1.

a.Retained Earnings

2.

b.Notes Payable

3.

c.Prepaid Rent

4.

d.Supplies Expense

The principal purpose of posting is to
1.

a.enter transactions directly into the ledger.

2.

b.help identify errors made in the journal.

3.

c.obtain updated account balances.

4.

d.help determine if the financial statements are ready to be prepared.

Which of the following accounts will eventually be followed with an outflow of
cash?
1.

a.Design Revenue

2.

b.Notes Receivable

3.

c.Accounts Payable

4.

d.Prepaid Rent

Which of the following terms does not mean the same as the others?
1.

a.Footing

2.

b.Folio

3.

c.LP

4.

d.Post. Ref.

Which of the following accounts is classified differently from the others listed?
1.

a.Accounts Receivable

2.

b.Retained Earnings

3.

c.Prepaid Rent

4.

d.Cash

A dividend will reduce which of the following accounts?
1.

a.Dividends

2.

b.Retained Earnings

3.

c.Common Stock

4.

d.Accounts Payable

Which of the following bookkeeping techniques generally is not acceptable?
1.

a.Dollar signs on financial statements

2.

b.Commas and periods in ruled columns

3.

c.A double line after final totals


4.

d.A dash in the cents column to indicate zero cents

The chart of accounts is the starting point for a
1.

a.journal.

2.

b.trial balance.

3.

c.ledger.

4.

d.financial statement.

For which of the following accounts would a related Accumulated Depreciation
account be recorded?
1.

a.Office Equipment

2.

b.Land

3.

c.Office Supplies

4.

d.Prepaid Rent

Which of the following transactions increases both assets and stockholders'
equity?
1.

a.Payment received from a credit customer

2.

b.Received a bank loan

3.

c.Rendered a service, payment not yet received

4.

d.Declared and paid a dividend


The Post. Ref. column in the general ledger shows that an amount has been
posted when which of the following is placed in it?
1.

a.The journal page number

2.

b.An X

3.

c.A check mark

4.

d.The account number

Which of the following accounts is classified differently from the others listed?
1.

a.Notes Payable

2.

b.Unearned Revenue

3.

c.Accounts Payable

4.

d.Fees Earned

The general journal does not have a column titled
1.

a.Description.

2.

b.Account Balance.

3.

c.Date.

4.

d.Post. Ref.

The purpose of the ledger is to
1.

a.keep a record of documentation to support each transaction.

2.

b.make sure that all assets, liabilities, etc., have credit balances at all times.

3.

c.record chronologically the day's transactions.


4.

d.maintain a separate account for each asset, liability, etc.

Which of the following accounts might be used when there is a time delay
between a transaction and its related cash flow?
1.

a.Accounts Payable

2.

b.Fees Earned

3.

c.Cash

4.

d.Prepaid Rent

Which of the following accounts might be placed first in a journal entry?
1.

a.Bonds Payable, when it has been decreased

2.

b.Cash, when it has been decreased

3.

c.Unearned Revenue, when it has been increased

4.

d.Interest Income, when it has been increased

Which of the following gives the correct sequence of accounting procedures?
1.

a.Financial statements, trial balance, ledger, journal

2.

b.Financial statements, journal, ledger, trial balance

3.

c.Journal, ledger, trial balance, financial statements

4.

d.Ledger, trial balance, journal, financial statements

The Unearned Fees account is classified as a(n)
1.

a.liability.

2.

b.revenue.


3.

c.asset.

4.

d.expense.

Which of the following accounts probably would be listed before the others in a
chart of accounts?
1.

a.Insurance Expense

2.

b.Dividends

3.

c.Notes Payable

4.

d.Accumulated Depreciation, Buildings

Office supplies become expenses
1.

a.when they are consumed (used up).

2.

b.when they are paid for.

3.

c.at no time, since they are an asset.

4.

d.when they are purchased.

The Post. Ref. column in the general journal is used to show that an amount
has been posted to the ledger when which of the following is placed in it?

1.

a.An X

2.

b.Journal number

3.

c.Journal page number

4.

d.Account number


Which of the following accounts will eventually be followed with an inflow of
cash?
1.

a.Prepaid Insurance

2.

b.Unearned Revenue

3.

c.Dividends

4.

d.Accounts Receivable

Which of the following accounts probably would be listed after the others in a
chart of accounts?
1.

a.Unearned Art Fees

2.

b.Prepaid Rent

3.

c.Retained Earnings

4.

d.Art Fees Earned

A $70 credit item is accidentally posted as a debit. The trial balance column
totals will therefore differ by
1.

a.$0.

2.

b.$35.

3.

c.$70.

4.

d.$140.

Which of the following statements is true about a journal entry?
1.

a.Decreases in liabilities are indented.


2.

b.The Post. Ref. column is left blank until entries are posted.

3.

c.A line is skipped between each debit and each credit.

4.

d.Assets are entered before liabilities.

To find an explanation of a transaction, one should look at the

1.

a.ledger.

2.

b.trial balance.

3.

c.journal.

4.

d.chart of accounts.

Which of the following statements is false about a journal entry?
1.

a.It may have more than one debit or credit entry.

2.

b.Credits are always indented.

3.

c.Accounts that are increased are always listed first.

4.

d.A space should be skipped between journal entries.

Which of the following statements is not necessarily true about a journal
entry?
1.

a.Liabilities are indented.

2.

b.An explanation follows the journal entry.

3.

c.The Post. Ref. column is left blank until the entry is posted.

4.

d.All debits must be recorded before any credits.


Typically, the chart of accounts begins with
1.

a.revenue accounts.

2.

b.asset accounts.

3.

c.liability accounts.

4.

d.expense accounts.

Posting is performed by transferring information from the
1.

a.source documents to the journal.

2.

b.source documents to the ledger.

3.

c.journal to the ledger.

4.

d.ledger to the journal.


True - False Questions - Page 1
The classification issue involves the assignment of accounts to business
transactions.

1.

True

2.

False

When revenue has been earned, no entry is recorded until the related cash has
been collected.
1.

True

2.

False

In accounting, to recognize means to record a transaction or event.
1.

True

2.

False

A decrease in a stockholders' equity account is recorded with a credit.
1.

True

2.

False

The recognition issue deals with when a user of financial statements should
use accounting information.
1.

True

2.

False


When a company receives an order, a transaction has occurred.
1.

True

2.

False

A basic storage unit for accounting data is the account.
1.

True

2.

False

When payment is received for services not yet rendered, no entry is recorded
until that service has been rendered.
1.

True

2.

False

Dividends should appear on the statement of retained earnings.
1.

True

2.

False

Column totals are called footings.
1.

True

2.

False

The most generally accepted value used in accounting is market value.
1.

True

2.

False