Achievement Test 2: Chapters 3 and 4 Name __________________________

Accounting Principles, 7e Instructor _______________________

Weygandt, Kieso, & Kimmel Section # _______ Date _________

Part I II III IV V Total

Points 39 12 24 8 17 100

Score

PART I — MULTIPLE CHOICE (39 points)

Instructions: Designate the best answer for each of the following questions.

____ 1. The Accumulated Depreciation account is a(n)

a. contra asset.
b. liability.
c. asset.
d. operating expense.

____ 2. A post-closing trial balance contains

a. real and nominal accounts.
b. permanent and temporary accounts.
c. balance sheet or permanent accounts.
d. balance sheet and owner`s equity statement accounts.

____ 3. Which of the following is false with regard to a work sheet?

a. Before the adjusting entries are recorded in the General Journal, they are recorded
in the adjustments columns of the work sheet.
b. A work sheet is a required step in the accounting cycle.
c. When a work sheet is used, the preparation of financial statements is still required.
d. If a credit is needed to balance the income statement columns on the work sheet,
a debit will be needed to balance the balance sheet columns.

____ 4. For which of the following types of adjusting entries are liabilities understated and
expenses understated before the adjusting entry is made?
a. Unearned Revenues
b. Accrued Revenues
c. Prepaid Expenses
d. Accrued Expenses

____ 5. What is the purpose of a post-closing trial balance?

a. Prove that all income statement accounts have been properly posted.
b. Prove the equality of income statement account balances.
c. Prove the equality of all account balances.
d. Prove the equality of permanent account balances.
AT2- 2 Test Bank for Accounting Principles, Seventh Edition

____ 6. The average time that is required to go from "cash to cash" in producing revenues is
referred to as the
a. business cycle.
b. operating cycle.
c. fiscal year cycle.
d. accounting cycle.

____ 7. An accrued revenue account represents revenue that has

a. been earned and received.
b. been received but not earned.
c. not been earned or received.
d. been earned but not received.

____ 8. What type of relationship exists with a prepaid expense adjusting entry?
a. Asset/revenue
b. Expense/liability
c. Asset/expense
d. Liability/revenue

____ 9. The book value of a depreciable asset is defined as the asset's

a. cost less accumulated depreciation.
b. current market value.
c. replacement cost.
d. cost.

____ 10. Malone Co. recorded a payment of cash on account to a creditor by debiting Accounts
Receivable and crediting Cash. The correcting entry is
a. debit Accounts Payable and credit Cash.
b. debit Cash and credit Accounts Receivable.
c. debit Accounts Payable and credit Accounts Receivable.
d. Some other correcting entry is necessary.

____ 11. Greer Company signed an $8,000 six-month note payable on October 1 that bears
interest at a rate of 6%. The total interest to be accrued on this note at December 31 is
a. $40.
b. $120.
c. $240.
d. $480.

____ 12. Which of the following is false?

a. Current assets are listed in the order of magnitude.
b. Obligations expected to be paid after one year are classified as long-term
liabilities.
c. Intangible assets are noncurrent resources that do not have physical substance.
d. Property, plant, and equipment are tangible resources of a relatively permanent
nature that are used in the business and not intended for sale.

____ 13. Omission of a prepaid expense adjusting entry will have the following effects:
Total Assets Total Expenses Total Owners' Equity
a. No Effect Understated Overstated
b. Overstated Understated Overstated
c. Overstated No Effect Overstated
d. Overstated No Effect No Effect
 Achievement Test 2 AT2- 3

PART II — WORK SHEET COMPLETION (12 points)

Instructions: Complete the partial work sheet presented below, inserting additional labels as
needed.

SANTOS SERVICES AGENCY

Partial Work Sheet
For the Month Ended September 30, 2005
——————————————————————————————————————————
Adjusted Income Balance
Trial Balance Statement Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
——————————————————————————————————————————
Cash 6,500
Accounts Receivable 1,000
Supplies 3,075
Prepaid Insurance 2,000
Prepaid Rent 500
Equipment 35,000
Accum. Depreciation—Equipment 4,000
Notes Payable 14,000
Accounts Payable 12,000
Unearned Revenue 2,000
F. Santos, Capital 9,825
F. Santos, Drawing 2,000
Service Revenue 16,000
Interest Expense 400
Salaries Expense 4,000
Supplies Expense 1,500
Rent Expense 2,000
Insurance Expense 1,200
Salaries Payable 1,300
Interest Payable 50
Totals 59,175 59,175
AT2- 4 Test Bank for Accounting Principles, Seventh Edition

PART III—ADJUSTING ENTRIES (24 points)

The ledger accounts given below, with an identification number for each, are used by Tyler
Company.
Instructions: Prepare appropriate adjusting entries for the year ended December 31, 2005, by
replacing the appropriate identification number(s) in the debit and credit columns provided and
the dollar amount in the adjoining column. Item 0 is given as an example.

1. Notes Receivable 10. Unearned Service Revenue

2. Accounts Receivable 11. Notes Payable
3. Interest Receivable 12. Interest Revenue
4. Supplies 13. Service Revenue
5. Prepaid Insurance 14. Depreciation Expense—Equipment
6. Equipment 15. Salaries Expense
7. Accumulated Depreciation—Equipment 16. Interest Expense
8. Salaries Payable 17. Supplies Expense
9. Interest Payable 18. Insurance Expense
——————————————————————————————————————————
Account(s) Account(s) Dollar
Entry Information Debited Credited Amount
——————————————————————————————————————————
0. Interest of $500 is accrued on a note 3 12 $500
receivable at December 31, 2005.
——————————————————————————————————————————
1. Tyler has three employees who earn $120 per $
day per person. At December 31, four days'
salaries have been earned but not paid.
——————————————————————————————————————————
2. A customer paid Tyler $10,000 on December 1, $
2005 for services to be rendered from December 1
through January 31, 2006. The receipt was credited
to a liability account.
——————————————————————————————————————————
3. Tyler purchased equipment costing $48,000 on $
January 1, 2004. Monthly depreciation is $1,000.
——————————————————————————————————————————
4. Tyler provided services to a customer in 2005 at a $
fee of $500. This fee has not yet been received or billed.
——————————————————————————————————————————
5. Tyler started the year with no supplies on hand. $
They purchased $8,000 in supplies during the year
and have $2,000 on hand at December 31. Supplies
were debited to an asset account when purchased.
——————————————————————————————————————————
6. Tyler paid $9,000 for a three-year insurance policy $
on July 1, 2005, debiting an asset account at that time.
——————————————————————————————————————————
7. Tyler borrowed $20,000 by signing a three-month, $
12% interest, note payable on November 1, 2005.
——————————————————————————————————————————
8. Tyler purchased short-term investments on November 1, $
2005. Interest of $200 per month has been earned but
not received prior to December 31.
——————————————————————————————————————————
 Achievement Test 2 AT2- 5

PART IV—CLOSING ENTRIES (8 points)

Instructions: Place a "D" (Debit) or "C" (Credit) in the space provided to indicate whether the
account would be debited or credited for its balance in the closing process. Insert an X in the
space provided if the account is not closed.

____ 1. Cash ____ 8. Interest Receivable

____ 2. Equipment ____ 9. Unearned Subscription Revenue
____ 3. Depreciation Expense ____ 10. Accumulated Depreciation
____ 4. Rent Expense ____ 11. Interest Expense
____ 5. J. Edmonds, Drawing ____ 12. Accounts Receivable
____ 6. Subscription Revenue ____ 13. Prepaid Rent
____ 7. Interest Revenue ____ 14. Income Summary (assume Net Income)

PART V—BALANCE SHEET CLASSIFICATIONS (17 points)

Instructions: Match the account titles given below with the appropriate Balance Sheet classifi-
cation. An individual classification may be used more than once, or not at all. An account may
also not appear in the balance sheet.
Classifications
A. Current Assets E. Current Liabilities
B. Long-term Investments F. Long-term Liabilities
C. Property, Plant and Equipment G. Owner's Equity
D. Intangible Assets H. Not separately presented on the Balance Sheet

Account Titles

____ 1. S. Avery, Capital ____ 10. Prepaid Insurance

____ 2. Unearned Rent Revenue ____ 11. Short-term Investments

____ 3. Supplies ____ 12. Taxes Payable

____ 4. Accounts Payable ____ 13. Copyrights

____ 5. Trademarks ____ 14. Accounts Receivable

____ 6. Salaries Payable ____ 15. Mortgage Payable

____ 7. Equipment ____ 16. S. Avery, Drawing

____ 8. Service Revenue ____ 17. Accumulated Depreciation

—Equipment
____ 9. Rent Expense
AT2- 6 Test Bank for Accounting Principles, Seventh Edition

Solutions — Achievement Test 2: Chapters 3 and 4

PART I — MULTIPLE CHOICE (39 points)

1. a 4. d 7. d 10. c 13. b
2. c 5. d 8. c 11. b
3. b 6. b 9. a 12. a

PART II — WORK SHEET COMPLETION (12 points)

SANTOS SERVICES AGENCY
Partial Work Sheet
For the Month Ended September 30, 2005
——————————————————————————————————————————
Adjusted Income Balance
Trial Balance Statement Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
——————————————————————————————————————————
Cash 6,500 6,500
Accounts Receivable 1,000 1,000
Supplies 3,075 3,075
Prepaid Insurance 2,000 2,000
Prepaid Rent 500 500
Equipment 35,000 35,000
Accum. Depreciation—Equipment 4,000 4,000
Notes Payable 14,000 14,000
Accounts Payable 12,000 12,000
Unearned Revenue 2,000 2,000
F. Santos, Capital 9,825 9,825
F. Santos, Drawing 2,000 2,000
Service Revenue 16,000 16,000
Interest Expense 400 400
Salaries Expense 4,000 4,000
Supplies Expense 1,500 1,500
Rent Expense 2,000 2,000
Insurance Expense 1,200 1,200
Salaries Payable 1,300 1,300
Interest Payable 50 50
Totals 59,175 59,175 9,100 16,000 50,075 43,175
Net Income 6,900 6,900
16,000 16,000 50,075 50,075

PART III — ADJUSTING ENTRIES (24 points)

Account(s) Account(s) Dollar Account(s) Account(s) Dollar
Debited Credited Amount Debited Credited Amount
0. 3 12 $500 5. 17 4 $5,000
1. 15 8 $1,440 6. 18 5 $1,500
2. 10 13 $5,000 7. 16 9 $400
3. 14 7 $12,000 8. 3 12 $800
4. 2 13 $500
 Achievement Test 2 AT2- 7

PART IV—CLOSING ENTRIES (8 points)

1. X 6. D 11. C
2. X 7. D 12. X
3. C 8. X 13. X
4. C 9. X 14. D
5. C 10. X

PART V—BALANCE SHEET CLASSIFICATIONS (17 points)

1. G 6. E 11. A 16. H
2. E 7. C 12. E 17. C
3. A 8. H 13. D
4. E 9. H 14. A
5. D 10. A 15. F