Baruch College Harry Davis Online Accounting ACC 2101 Midterm Questions and Solutions

1) Is it possible to make an entry which changes only one account?
A) Yes B) No
2) How many of the following transactions would affect operating cash flows reported in the
statement of cash flows (all transaction involve cash)?
Borrowed $50,000 from the bank
Purchased $12,000 in supplies
Provide services to customers for $27,000
Paid the utility bill of $750
Purchased a delivery truck for $12,000
Received $25,000 from issuing common stock
A) Four. B) Two. C) One. D) Three.
3) For a journal entry with only two lines, the following entry is valid:
Decrease in a liability, Decrease in Dividends.
A) False B) True
4) Unearned Revenue is what kind of account?

A) Liability B) Revenue C) Expense D) Asset
5) Usually we measure Inventory at

A) Benefit Value B) $0 C) Sacrifice Value
Increase in an asset, Increase in Dividends.
A) True B) False
Increase in one Revenue, Increase in another Revenue.
A) False B) True
Decrease in Owners' Equity, Decrease in Expense.
A) True B) False
9) If total change in cash = $44,000, net operating cash flows = $22,000, and net investing cash flows
= ($13,000); then net financing cash flows =
A) $35,000. B) $45,000. C) $15,000. D) $25,000.
Decrease in Revenue, Increase in Dividends.
A) False B) True
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11) Which of the following are made ONLY at year end (This question may have multiple answers)
A) Adjusting Entries B) Closing Entries C) Transaction Entries
12) In the Allowance Method when we we collect on a previously written off receivable
A) Assets stay the same, Net Income stays the same.
B) Assets increase, Net Income increases.
C) It depends
D) Assets decrease, Net Income decreases
13) A company received an order from a customer in June for services to be provided. Those services
were provided in July, and the customer paid the full amount in August. According to the revenue
recognition principle, in which month should the company record revenue?
A) June. B) August.
C) Evenly over the three months. D) July.
14) Before the 1st step in the Operating Cycle, the firm has?
A) Cash B) Receivable C) Inventory
15) The following financial information is from ABC:

Accounts Payable $15,000
Buildings 80,000
Cash 10,500
Accounts Receivable 9,500
Sales Tax Payable 4,500
Retained Earnings 47,500
Supplies 40,000
Notes Payable (due in 18 months) 35,000
Interest Payable 3,000
Common Stock 35,000
What is the amount of current assets, assuming the accounts above reflect normal activity?
A) $140,000. B) $20,000. C) $60,000. D) $175,000.
16) The assumption that a business will continue to operate into the future is the:
A) Economic entity assumption. B) Going concern assumption.
C) Monetary unit assumption. D) Periodicity assumption.
17) The usual balance in a Contra-Owners' Equity account is a:

A) DR B) It depends C) CR
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18) The usual balance in a Contra-Revenue account is a:
A) DR B) It depends C) CR
19) Below is the company's Cash T-account.

Cash
Beg. 1,200
5,200
3,100
End. 3,300
The $5,200 amount could represent which of the following?

A) Ending balance of cash. B) Purchase of supplies on account.
C) Collection from customers. D) Payment for salaries.
20) ABC reports the following information for the year:

Net credit sales $120,000
Average accounts receivable 20,000
Cash collections on credit sales 100,000
What is ABC's receivables turnover ratio?
A) 5.0. B) 1.2. C) 0.2. D) 6.0.
Increase in a Liability, Decrease Owners' Equity.
A) True B) False
22) When the company pays stockholders a dividend, what is the effect on the accounting equation for
that company?
A) Decrease assets and decrease liabilities.
B) Decrease assets and decrease stockholders' equity.
C) Decrease stockholders' equity and increase assets.
D) Increase liabilities and increase assets.
23) Which of the following would increase assets and increase liabilities?
A) Provide services to customers on account.
B) Purchase office supplies on account.
C) Pay dividends to stockholders.
D) Receive a utility bill but do not pay it immediately.
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24) Which of the following are classified as Accounts Receivable? (This question may have multiple
answers)
A) Tax refunds owed to us by the IRS.
B) Monies that customers owe us for providing a service.
C) Monies that customers owe us from sale of merchandise.
D) Loans we made to a customer.
Increase in a liability, Increase in an Expense.
A) True B) False
26) Choose one:

A) It is possible for the Income Statement to balance
B) The Income Statement always balances
C) The Income Statement never balances
27) Consider the following list of accounts:
Cash Retained Earnings

Service Revenue Utilities Expense
Salaries Expense Accounts Receivable
Accounts Payable Common Stock
Equipment Dividends
How many of these accounts have a normal debit balance?

A) Four. B) Five. C) Seven. D) Six.
28) After the Third STEP in the Operating Cycle the firm has?
A) Inventory B) None of the other three
C) Account Receivable D) Cash
29) The Income Statement always balances.

A) False B) True
30) If a Trial Balance balances

A) all account balances must be correct B) some account balances may be wrong
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31) How many of the following events would require an expense to be recorded?
Ordering office supplies
Hiring a receptionist
Paying employees' salaries for the current month
Receiving but not paying a current utility bill
Paying for insurance in advance
A) Three. B) Two. C) One. D) Four.
32) When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the
debit is usually made to:
A) Cash. B) Rent Expense.
C) Rent Receivable. D) Rent Payable.
33) Which of the accounts are increased with a debit and decreased with a credit?
A) Liabilities, stockholders' equity, and revenues.
B) Assets, dividends, and expenses.
C) Expenses, dividends, and stockholders' equity.
D) Dividends, liabilities, and assets.
34) Consider the following transactions:

Issued common stock for cash.
Purchased equipment by signing a note payable.
Paid rent for the current month.
Collected cash from customers on account.
How many of these four transactions increased the given company's total assets?
A) Four. B) One. C) Three. D) Two.
35) Usually we measure Accounts Receivable at

A) Benefit Value B) Sacrifice Value C) $0
Increase in a liability, Decrease in an Expense.
A) True B) False
37) An example of an adjusting entry would not include:

A) Recording unpaid salaries.
B) Recording the expiration of prepaid insurance.
C) Paying salaries to company employees.
D) Recording the use of office supplies.
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38) Which of the following best represents value created for stockholders during the current period?
A) Retained earnings. B) Stockholders' equity.
C) Total assets. D) Net income.
39) When you develop an entry

A) Debits are on top, Credits are on the bottom
B) There is no required ordering of Debits and Credits
C) Credits are on top, Debits are on the bottom
40) In Cash Flow reporting at the collection of an Account Receivable

A) There is no Loss and no Gain B) There is a Loss
C) There is a Gain D) It depends on the measuring system
41) Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities,
$5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000.
A) $14,000. B) $6,000. C) $4,000. D) $8,000.
42) Duality of Asset Valuation is primarily as issue in

A) Measuring Assets B) Measuring Income
43) The ending balance of Retained Earnings can best be described as:
A) The amount of net income over the life of the company.
B) The amount of dividends paid over the life of the company.
C) The amount of cash received from stockholders over the life of the company.
D) The amount of net income over the life of the company not paid to owners in the form of
dividends.
Increase in Expense, Decrease in Dividends.
A) False B) True
Decrease in an asset, Decrease in an Expense.
A) False B) True
Increase in an asset, Increase in a Owners' Equity.
A) False B) True
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47) On January 1, ABC sold $30,000 in products to a customer on account. Then on January 10, ABC
collected the cash on that account. What is the impact on ABC's accounting equation from the
collection of cash on January 10?
A) Assets decrease and liabilities decrease.
B) No net effect on the accounting equation.
C) Assets increase and stockholders' equity increases.
D) Assets increase and liabilities decrease.
48) In a sale on account, who is undertaking a financial risk of non-payment?

A) The seller B) Both the buyer and the seller
C) Neither the buyer nor the seller D) The buyer
49) In Cash Flow reporting when the firm acquires inventory

A) There is no Loss and no Gain B) There is a Gain
C) There is a Loss D) It depends on the measuring system
50) Separation of duties refers to auditors not being allowed to perform both audit and nonaudit
services for the same client.
A) False B) True
51) Purchasing office equipment on account has what impact on the accounting equation?
A) Stockholders' equity decreases and assets increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and assets increase.
D) Assets decrease and liabilities decrease.
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52) The following financial information is from ABC. All debt is due within one year unless stated
otherwise.
Retained Earnings $52,000
Supplies 37,000
Equipment 72,000
Accounts Receivable 8,600
Deferred Revenue 6,000
Accounts Payable 15,000
Common Stock 25,000
Notes Payable (due in 18 months) 35,000
Interest Payable 7,000
Cash 22,400
What is the amount of current liabilities?

A) $28,000. B) $22,000. C) $45,600. D) $63,000.
53) After the Second STEP in the Operating Cycle the firm has?
A) Inventory B) Account Receivable
C) Cash D) None of the other three
54) The Balance Sheet is a:

A) Snapshot B) Video
55) ABC engages in the following cash payments:

Purchase equipment $2,000
Pay rent 500
Repay loan to the bank 5,000
Pay worker's salaries 1,000
What is the total amount of cash paid for operating activities?
A) $7,000. B) $6,000. C) $1,500. D) $2,000.
56) Which of the following is not a major section in the statement of cash flows?
A) Cash flows from customers. B) Cash flows from operating activities.
C) Cash flows from investing activities. D) Cash flows from financing activities.
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57) In the Allowance Method when we write off a receivable
A) It depends
B) Assets increase, Net Income increases.
C) Assets decrease, Net Income decreases
D) Assets stay the same, Net Income stays the same.
58) ABC had the following final balances after the first year of operations: assets, $55,000;
stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of
ABC's liabilities?
A) $30,000. B) $13,000. C) $7,000. D) $55,000.
59) ABC has the following information:

Net credit sales = $400,000
Net income = $100,000
Average total assets = $80,000
Average accounts receivable = $20,000
What is ABC's average collection period (rounded to the nearest whole day)?
A) 9 days. B) 5 days. C) 18 days. D) 73 days.
60) Given the information below about ABC, what was the amount of dividends the company paid in
the current period?
Beginning retained earnings $54,000
Ending retained earnings $110,000
Decrease in cash $10,000
Net income $84,000
Change in stockholders’ equity $15,000
A) $13,000. B) $18,000. C) $110,000. D) $28,000.
61) Which of the following is possible for a particular business transaction?

A) Increase assets; Decrease liabilities
B) Decrease assets; Increase assets
C) Decrease assets; Increase stockholders' equity
D) Decrease liabilities; Increase expenses
62) On March 3, ABC purchased a desk for $450 on account. On March 22, ABC purchased another
desk for $500 also on account, and then on March 24, ABC paid $400 on account. At the end of
March, what amount should ABC report for desks (assuming these two desks were the only desks
they had)?
A) $950. B) $50. C) $450. D) $500.
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Increase in a liability, Decrease in Revenue.
A) True B) False
Decrease in one Owners' Equity, Decrease in a second Owners' Equity.
A) False B) True
65) Which of the following statements is NOT correct about the financial statements?
A) A balance sheet reports assets, liabilities, revenues, and expenses.
B) The statement of stockholders' equity presents common stock, dividends, and retained
earnings information.
C) An income statement reports revenues, expenses, and net income information.
D) The statement of cash flows shows cash inflows and outflows from operating, financing, and
investing activities.
66) Consider the following account balances of ABC at the end of the year:
Salaries Expense 12,800
Cash 1,700
Common Stock 2,400
Service Revenue 8,300
Supplies 4,300
Utilities Expense 5,000
How many of these accounts would appear in ABC's year-end balance sheet?
A) Three. B) Two. C) Five. D) Four.
Decrease in Owners' Equity, Decrease in Revenue.
A) True B) False
Increase in Revenue, Increase in Expense.
A) True B) False
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69) A company receives a $50,000 cash deposit from a customer on October 15 but will not provide
services until November 20. Which of the following statements is true?
A) The company records service revenue on October 15.
B) The company records cash collection on November 20.
C) The company records nothing on October 15.
D) The company records deferred revenue on October 15.
Increase in one Owners' Equity, Decrease in a second Owners' Equity.
A) False B) True
71) ABC estimates uncollectible accounts based on the percentage of accounts receivable. What effect
will recording the estimate of uncollectible accounts have on the accounting equation?
A) Increase liabilities and decrease stockholders' equity.
B) Decrease assets and decrease liabilities.
C) Decrease assets and decrease stockholders' equity.
D) Increase assets and decrease stockholders' equity.
Increase in one Liability, Decrease in a second second liability.
A) True B) False
Increase in an asset, Increase in an Expense.
A) False B) True
74) Which of the following is not possible when recording a transaction?

A) Liabilities increase and assets decrease.
B) Stockholders' equity increases and assets increase.
C) Stockholders' equity decreases and assets decrease.
D) One asset increases and another asset decreases.
75) How many of the following events would require an expense to be recorded?
Ordering office supplies
Hiring a receptionist
Paying employees' salaries for the current month
Receiving but not paying a current utility bill
Paying for insurance in advance
A) Three. B) One. C) Two. D) Four.
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76) ABC had the following net income (loss) the first three years of operation: $7,100, ($1,600), and
$3,600. If the Retained Earnings balance at the end of year three is $1,100, what was the total
amount of dividends paid over these three years?
A) $8,000. B) $500. C) $0. D) $9,100.
77) In a Big Bath, a firm

A) increases revenue B) changes accounting firms
C) does window dressing D) increases Expenses
78) Which of the following are made when the business does something
A) Closing Entries B) Adjusting Entries C) Transaction Entries
Decrease in an asset, Decrease in a liability.
A) True B) False
Increase in an asset, Decrease in an Expense.
A) False B) True
Increase in Owners' Equity, Increase in Revenue.
A) False B) True
82) Of the following, the most important objective for financial accounting is to provide information
useful for:
A) Providing accountability. B) Increasing future profits.
C) Predicting cash flows. D) Determining taxable income.
83) Following are transactions of ABC., a new company, during the month of January:
1. Issued 10,000 shares of common stock for $15,000 cash.
2. Purchased land for $12,000, signing a note payable for the full amount.
3. Purchased office equipment for $1,200 cash.
4. Received cash of $14,000 for services provided to customers during the month.
5. Purchased $300 of office supplies on account.
6. Paid employees $10,000 for their first month's salaries.
How many of these transactions decreased ABC's total assets?
A) Three. B) One. C) Two. D) Four.
84) After the First STEP in the Operating Cycle the firm has?
A) Inventory B) Cash
C) Account Receivable D) None of the other three
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85) How many types of Cash Flow are there on the Cash Flow statement
A) Three B) Four C) Two D) One
Decrease in a liability, Increase in an Expense.
A) True B) False
Increase in an asset, Increase in a liability.
A) False B) True
88) Which statement is true?

A) All Balance Sheet accounts are Temporary
B) All Balance Sheet accounts are Permanent
C) Some Balance Sheet accounts are Temporary and some are Permanent
89) Which of the following are made BEFORE we start preparing the financial statements?
90) Allowance for Bad Debts is what kind of account?

A) Expense B) Contra-Expense C) Asset D) Contra-Asset
91) We always sell pens at $8. We sold a pen for $7 because it was damaged. Record the sale at
A) It depends B) $7 C) $8
92) Which of the following accounts would normally have a credit balance?
A) Salaries Payable, Deferred Revenue, Delivery Expense.
B) Accounts Payable, Service Revenue, Common Stock.
C) Cash, Repairs and Maintenance Expense, Dividends.
D) Income Tax Payable, Service Revenue, Dividends.
93) Investors and Creditors are interested in which of these entries? (This question may have multiple
answers)
A) Transaction Entries B) Closing Entries C) Adjusting Entries
Decrease in one Expense, Decrease in another Expense.
A) True B) False
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95) Which of the following transactions would cause an increase in both the assets and liabilities of a
company?
A) Pay for inventory purchased 90 days ago.
B) Services received on account.
C) Paying for the current month's rent.
D) Purchase of a building by issuing a note payable.
Decrease in an asset, Decrease in a Owners' Equity.
A) True B) False
Decrease in an asset, Decrease in Dividends.
A) True B) False
Increase in an asset, Decrease in Dividends.
A) True B) False
99) ABC paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the company's
existence. If Retained Earnings after year four has an ending balance of $9,700, what is the
average annual amount of net income (loss) over the past four years for ABC?
A) $3,685. B) $840. C) $1,260. D) $14,740.
Increase in one Liability, Increase Owners' Equity.
A) False B) True
Increase in an asset, Increase in Revenue.
A) False B) True
Decrease in Owners' Equity, Increase in Dividends.
A) False B) True
103) Which of the following items would not appear in an income statement?
A) Cash. B) Service revenue.
C) Salaries expense. D) Advertising expense.
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104) When Managers report they
A) Always try to look bad
B) Sometimes like to look good, and sometimes like to look bad
C) Always try to look good
105) Subsidiary Acounts and Master Accounts

A) Are reported in the Financial Statmnts B) Are only used in the Income Statement
C) Are bookkeeping devices D) Are only used in the Balance Sheet
106) Which of the following is recorded upon receipt of a payment on April 7, 2018, by a customer who
pays a $900 invoice dated March 3, 2018, with terms 2/10, n/60?
A) Debit Cash $900. B) Debit Sales Discounts $18.
C) Credit Accounts Receivable $882. D) Credit Purchase Discounts $18.
107) How many of the following transactions are operating activities?

Borrowed $50,000 from the bank
Purchased $12,000 in supplies
Provide services to customers for $27,000
Paid the utility bill of $750
Purchased a delivery truck for $12,000
Received $25,000 from issuing common stock
A) Four. B) Three. C) One. D) Two.
108) ABC opened for business on January 1, 2018, and paid for two insurance policies effective that
date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for
a two-year term. What was the balance in ABC's Prepaid Insurance account as of December 31,
2018?
A) $48,000. B) $30,000. C) $18,000. D) $9,000.
Decrease in an asset, Increase in a liability.
A) True B) False
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110) ABC has the following balances on December 31 prior to closing entries:
Revenues $35,000
Retained Earnings, Jan. 1 10,000
Cash 7,000
Expenses 23,000
Dividends 1,000
Supplies 18,000
Based upon the balances above, what net adjustment would be made to Retained Earnings due to
closing entries?
A) Increase of $13,000. B) Increase of $12,000.
C) Increase of $14,000. D) Increase of $11,000.
111) The Accounts Receivable account has a beginning balance of $10,000 and the company provides
services of $50,000 on account during the month. The ending balance was $12,000.
How much did the company receive from customers during the month?
A) $48,000. B) $52,000. C) $50,000. D) $62,000.
112) In Cash Flow reporting at the point of Sale

A) There is a Loss B) There is no Loss and no Gain
C) There is a Gain D) It depends on the measuring system
113) A company has 1,184 customers they extend credit to, how many accounts receivable will they
have on their books?
A) 1 B) 1,185
C) None of the other three D) 1,184
114) Which of the following best explains the meaning of total stockholders' equity?
A) The difference between total revenues and total expenses, less dividends for the year.
B) The amount of common stock less dividends over the life of the company.
C) All revenues, expenses, and dividends over the life of the company.
D) The amount of capital invested by stockholders plus profits retained over the life of the
company.
115) Choose one:

A) The Statement of Cash Flows never balances
B) It is possible for Cash Inflows to balance Cash Outflows on the Statement of Cash Flows
C) The Statement of Cash Flows always balances
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116) After the 2nd step in the Operating Cycle, the firm has?
A) Cash B) Inventory C) Receivable
117) A company has the following transactions:
1. Pay employees' salaries for the current period.

2. Pay rent in advance.
3. Pay dividends to stockholders in the current period.
4. Receive (but do not pay) a utility bill.
5. Use supplies previously purchased.
How many of these transactions result in an expense being reported in the current period using
accrual-basis accounting?
A) 4. B) 1. C) 3. D) 2.
Decrease in Expense, Increase in Dividends.
A) True B) False
119) If the liabilities of a company increased by $55,000 during a month and the stockholders' equity
decreased by $21,000 during that same month, did assets increase or decrease and by how much?
A) $76,000 increase. B) $34,000 decrease.
C) $55,000 increase. D) $34,000 increase.
120) The Accounts Payable account has a beginning balance of $12,000 and the company purchased
$50,000 of supplies on account during the month. The ending balance was $10,000.
How much did the company pay to creditors during the month?
A) $50,000. B) $60,000. C) $52,000. D) $62,000.
Decrease in a liability, Decrease in an Expense.
A) False B) True
Decrease in a liability, Increase in Dividends.
A) True B) False
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123) Below is the company's Cash T-account.
Cash
Beg. 1,200
5,200
3,100
End. 3,300
The $3,100 amount could represent which of the following?

A) Payment for salaries. B) Purchase of supplies on account.
C) Ending balance of cash. D) Collection from customers.
Decrease in one Revenue, Decrease in another Revenue.
A) True B) False
Decrease in a Liability, Increase Owners' Equity.
A) False B) True
126) Which of the accounts are decreased on the debit side and increased on the credit side?
A) Expenses, dividends, and stockholders' equity.
B) Liabilities, stockholders' equity, and revenues.
C) Dividends, liabilities, and assets.
D) Assets, dividends, and expenses.
127) Marketing is involved in which step in the Operating cycle?

A) Fourth B) First C) Third D) Second
128) For most businesses what is the critical event?

A) Sale of Inventory
B) Collecting Cash for Receivables
C) Acquiring Inventory
Increase in one asset, Decrease in a second asset.
A) True B) False
Decrease in Revenue, Decrease in Expense.
A) True B) False
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Increase in Owners' Equity, Increase in Dividends.
A) False B) True
Increase in an asset, Decrease in a Owners' Equity.
A) False B) True
133) Which of the following are made BEFORE a Trial Balance is prepared?
134) Which of the following is a balance sheet item?

A) Net Income. B) Cash.
C) Utilities Expense. D) Dividends.
Increase in a liability, Decrease in Dividends.
A) True B) False
Decrease in an asset, Increase in an Expense.
A) True B) False
137) On September 30, ABC Co. paid employee salaries of $7,000, including $1,000 it owed to its
employees last month. What are the effects of this transaction on the accounting equation?
A) Expenses increased, liabilities increased, and assets increased.
B) Assets decreased, liabilities decreased, and expenses increased.
C) Expenses decreased, liabilities decreased, and assets decreased.
D) Assets decreased, expenses decreased, and liabilities increased.
E) Assets increased, expenses increased, and liabilities decreased.
Increase in Revenue, Decrease in Dividends.
A) True B) False
139) A company provides services on account. Indicate how this transaction would affect (1) assets, (2)
stockholders' equity, and (3) revenues.
A) (1) No effect, (2) No effect (3) No effect B) (1) Increase, (2) Increase (3) Increase
C) (1) No effect, (2) Increase (3) Increase D) (1) Increase, (2) No effect (3) Increase
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140) Which of the following is not a possible journal entry?
A) Debit assets; Debit stockholders' equity. B) Credit revenues; Debit assets.
C) Debit expenses; Credit liabilities. D) Credit assets; Debit expenses.
Increase in one Liability, Increase in a second second liability.
A) True B) False

Paid rent for the current month.
How many of these four transactions increased the given company's total assets?
A) One. B) Four. C) Two. D) Three.
Decrease in an asset, Increase in a Owners' Equity.
A) True B) False
144) For which of the following must Debits equal Credits (This question may have multiple answers)
Increase in a Liability, Increase in Revenue.
A) False B) True
Decrease in Owners' Equity, Increase in Revenue.
A) False B) True
147) When writing formal journal entries

A) There is no required ordering of Debits and Credits
B) Credits are on top, Debits are on the bottom
C) Debits are on top, Credits are on the bottom
148) Which of the following accounts would normally have a debit balance?
A) Accounts Payable, Service Revenue, Common Stock.
B) Income Tax Payable, Service Revenue, Dividends.
C) Salaries Payable, Deferred Revenue, Utilities Expense.
D) Cash, Delivery expense, Dividends.
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149) Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are:
A) Debit Rent Expense, credit Cash. B) Debit Prepaid Rent, credit Rent Expense.
C) Debit Cash, credit Prepaid Rent. D) Debit Prepaid Rent, credit Cash.
150) On January 1, ABC started the year with a $492,000 balance in Retained Earnings and a $605,000
balance in Common Stock. During the year, the company reported net income of $92,000, paid a
dividend of $15,200, and issued more common stock for $27,500. What is total stockholders'
equity at the end of the year?
A) $1,201,300. B) $1,588,300. C) $1,097,000. D) $1,231,700.
Increase in an asset, Decrease in a liability.
A) True B) False
152) Which of the following has the single greatest impact on stock prices?
A) Total dividends. B) Net income. C) Total revenues. D) Total assets.
153) At the beginning of December, ABC had $2,000 in supplies on hand. During the month, supplies
purchased amounted to $3,000, but by the end of the month the supplies balance was only $800.
What is the appropriate month-end adjusting entry?
A) Debit Supplies $4,200, credit Supplies Expense $4,200.
B) Debit Cash $800, credit Supplies $800.
C) Debit Supplies Expense $4,200, credit Supplies $4,200.
D) Debit Cash $4,200, credit Supplies $4,200.
154) Receiving a utility bill for costs in the current period but delaying payment until the following
period is an example of a(n):
A) Deferred revenue. B) Prepaid expense.
C) Accrued revenue. D) Accrued expense.
155) The usual balance in a Contra-Expense account is a:

A) It depends B) DR C) CR

Provided services to customers on account.
How many of these four transactions increased the given company's total liabilities?
A) Four. B) Three. C) One. D) Two.
21
Increase in Owners' Equity, Decrease in Expense.
A) False B) True
158) The Statement of Cash Flows is a:

159) The following table contains financial information for ABC before closing entries:
Cash $23,000
Common Stock 34,000
Supplies 4,000
Advertising Expense 2,000
Prepaid Rent 4,000
Dividends 3,000
Equipment 45,000
How many of the above accounts are permanent?

A) Three. B) Five. C) Four. D) Six.
Increase in one revenue, Decrease in another revenue.
A) False B) True
161) Separation of duties occurs when two or more people act in coordination to circumvent internal
controls.
A) False B) True
162) The Trueblood Criterion is used by

A) Managers when reporting to the public
B) Internal Management reports (Managerial Accounting)
C) Accountants
D) Managers when reporting to the IRS
22
163) The ending Retained Earnings balance of ABC decreased by $1.0 million from the beginning of
the year. The company declared a dividend of $5.4 million during the year. What was the net
income for the year?
A) $6.4 million. B) $4.4 million. C) $7.5 million. D) $1.0 million.
164) The Income Statement is a:

A) Video B) Snapshot
Decrease in Revenue, Decrease in Dividends.
A) True B) False
Decrease in Owners' Equity, Increase in Expense.
A) False B) True
167) When a company makes an end-of-period adjusting entry, which includes a debit to Supplies
Expense, the usual credit entry is made to:
A) Supplies. B) Retained Earnings.
C) Cash. D) Accounts Payable.
168) ABC sold $500 in widgets to a customer on account on January 1. On January 11 ABC collected
the cash from that customer. What is the impact on ABC's accounting equation from the collection
of cash?
A) Decrease assets and increase liabilities. B) Decrease assets and decrease liabilities.
C) No net effect to the accounting equation. D) Increase assets and increase liabilities.
169) After the 1st step in the Operating Cycle, the firm has?
A) Inventory B) Receivable C) Cash
Increase in one Owners' Equity, Increase in a second Owners' Equity.
A) True B) False
171) The second step in the Operating Cycle is called?

A) Purchase B) Collection C) Manufacture D) Sale
172) In the lecture, when there is a Purchase or Manufacture in the operating cycle, what happens to
cash?
A) It depends B) Increases C) Decreases D) Stays the Same
23
173) If a company 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 assets for the current period?
A) Not possible to determine. B) Total assets will be correct.
C) Total assets will be too low. D) Total assets will be too high.
174) If a company has stockholders' equity of $60,000 at the end of the year, which of the following
statements must be true?
A) The company has issued $60,000 of common stock.
B) Total revenues during the year equal $60,000.
C) The company's assets exceed liabilities by $60,000.
D) Net income for the year equals $60,000.
175) Following are transactions of ABC, a new company, during the month of January:
How many of these transactions decreased ABC's total assets?

A) Four. B) One. C) Two. D) Three.
176) The usual balance in a Contra-Liability account is a:

A) CR B) DR C) It depends
177) Prior to year-end adjusting entries, what would explain the Allowance for Uncollectible Accounts
having a debit balance?
A) The amount of cash collections from customers in the current year was less the amount of
cash collections from customers in the prior year.
B) The amount of credit sales in the current year was greater than the amount of credit sales
made in the prior year.
C) The amount of actual uncollectible accounts in the current year was greater than the estimate
of uncollectible accounts made at the end of the prior year.
D) The amount of actual uncollectible accounts in the current year was less than the estimate of
uncollectible accounts made at the end of the prior year.
178) Which statement below best describes the accounting equation?

A) Resources of the company equal creditors' and owners' claims to those resources.
B) The change in retained earnings equals net income less dividends.
C) Equality of revenue and expense transactions over time.
D) Financing activities equal investing and operating activities.
24
179) The owner of an office building should report rent collected in advance as a debit to Cash and a
credit to:
A) Revenue. B) A liability.
C) An asset other than Cash. D) Stockholders' equity.
Increase in Revenue, Increase in Dividends.
A) False B) True
Increase in Owners' Equity, Decrease in Dividends.
A) True B) False
182) The following table contains financial information for ABC before closing entries:
Cash $12,000
Supplies 4,500
Prepaid Rent 2,000
Equipment 65,000
Miscellaneous Expenses 20,000
Dividends 3,000
Common Stock 68,000
What is the amount of ABC's total assets?

A) $83,500. B) $82,500. C) $68,500. D) $81,500.
Decrease in Revenue, Increase in Expense.
A) True B) False
Increase in one Expense, Decrease in another Expense.
A) True B) False
25
185) Which of the following is not a balance sheet item?
A) Revenues. B) Assets.
C) Retained earnings. D) Common stock.
Decrease in Expense, Decrease in Dividends.
A) True B) False
187) In the Allowance Method when we do the year end adjusting entry for Bad Debts
A) Assets increase, Net Income increases.
B) Assets stay the same, Net Income stays the same.
C) Assets decrease, Net Income decreases
D) It depends on the balance in the Allowance account before we make the entry.
188) The third step in the Operating Cycle is called?

A) Manufacture B) Sale C) Collection D) Purchase
Increase in an asset, Decrease in Revenue.
A) False B) True
190) Prepaid Rent is what kind of account?

A) Revenue B) Asset C) Expense D) Liability
Increase in Owners' Equity, Decrease in Revenue.
A) False B) True
192) The following amounts are reported in the ledger of ABC:
Assets $80,000
Liabilities 36,000
What is the balance in the Common Stock account?

A) $44,000. B) $48,000. C) $32,000. D) $42,000.
193) The adjusting entry required when amounts previously recorded as deferred revenues are earned
by providing goods or services to customers includes:
A) A credit to a liability. B) A credit to an asset.
C) A debit to a liability. D) A debit to an asset.
26
Decrease in one Liability, Decrease in a second second liability.
A) False B) True
195) Which statement is true?

A) Some Income Statement accounts are Temporary and some are Permanent
B) All Income Statement accounts are Temporary
C) All Income Statement accounts are Permanent
196) Following are transactions of ABC, a new company, during the month of January:
What was the total amount of ABC's liabilities following these six transactions?
A) $12,300. B) $15,500. C) $27,300. D) $22,600.
197) Choose one

A) Articulation has to do only with numbers on one statment in multiple years
B) Articulation has to do only with numbers on one statment in one year
C) Articulation has to do only with multiple statemtns in one year
D) Articulation has to do with numbers on multiple statements in multiple years
198) The following statements pertain to recording transactions. Which of them are true?
I. Total debits should equal total credits.

II. It is possible to have multiple debits or credits in one journal entry.
III. Assets are always listed first in journal entries.
IV. Some journal entries will have debits only.
A) I, II, and IV. B) II, III, and IV. C) I only. D) I and II.
199) Allocation is primarily as issue in

A) Both Measuring Assets and Income B) Measuring Income
C) Measuring Assets D) None of the other three
27
200) For the past five years, ABC reported the following annual net income and dividend amounts:
Year Net Income Dividends
1 $22,000 $2,000
2 17,000 2,000
3 9,000 1,000
4 14,000 3,000
5 25,000 4,000
If ABC had Retained Earnings of $88,000 at the end of year 5, what was the company's Retained
Earnings at the beginning of Year 1?
A) $13,000. B) $7,000. C) $1,000. D) $25,000.
201) The primary focus for financial accounting information is to provide information useful for:
A) Investment decisions and credit decisions.
B) Credit decisions but not investment decisions.
C) Investment decisions but not credit decisions.
D) Neither investment decisions nor credit decisions
Decrease in Owners' Equity, Decrease in Dividends.
A) True B) False
203) The ending Retained Earnings balance of ABC increased by $3.2 million from the beginning of the
year. The company declared a dividend of $1.3 million during the year. What was the net income
earned during the year?
A) $1.9 million. B) $3.2 million. C) $4.5 million. D) $1.3 million.
204) In Cash Flow reporting inventory is measured at

A) It depends on the measuring system B) Sacrifice Value
C) $0 D) Benefit Value
205) Usually we pick up Income at:

A) Collection of a Receivable
B) Acquisition of Inventory
C) Point of Sale
206) An example of separation of duties would be not allowing an employee who receives cash to also
be responsible for depositing that cash in the bank account.
A) True B) False
28
207) Consider the following account balances of ABC at the end of the year:
Cash 1,700
Common Stock 2,400
Supplies 4,300
Utilities Expense 5,000
How many of these accounts would appear in ABC's year-end Income Statement?
A) Four. B) Two. C) Five. D) Three.
208) Consider the following list of accounts:

Accounts Payable
Cash
Prepaid Rent
Common Stock
Salaries Payable
Equipment
Supplies
Rent Expense
How many of these accounts have a normal credit balance?

A) Three. B) Four. C) Five. D) Two.
209) The Income Statement is a:

Decrease in an asset, Increase in Dividends.
A) False B) True
211) After the 3rd step in the Operating Cycle, the firm has?
A) Inventory B) Cash C) Receivable
Increase in Owners' Equity, Increase in Expense.
A) False B) True
29
213) Cash Retained Earnings
Service Revenue Utilities Expense
Salaries Expense Accounts Receivable
Accounts Payable Common Stock
Equipment Dividends
How many of the above accounts have a normal debit balance?
A) Six. B) Five. C) Four. D) Seven.
Increase in Revenue, Decrease in Expense.
A) True B) False
Increase in Expense, Increase in Dividends.
A) False B) True
216) DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of
$4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance?
A) $32,900. B) $69,300. C) $24,300. D) $300.
Decrease in a Liability, Decrease in Owners' Equity.
A) True B) False
218) The usual balance in a Contra-Dividend account is a:

A) It depends B) CR C) DR
Increase in one Expense, Increase in another Expense.
A) False B) True
220) The third step in the operating cycle is:

A) Manufacture B) Sale C) Purchase D) Collection
Decrease in an asset, Decrease in a Owners' Equity.
A) True B) False
30
222) When a company pays cash for equipment, what is the effect on the accounting equation for that
company?
A) No change.
B) Increase assets and increase liabilities.
C) Decrease assets and decrease liabilities.
D) Increase assets and increase stockholders' equity.
223) On September 30, ABC paid employee salaries of $7,000, including $1,000 it owed to its
employees last month. What are the effects of this transaction on the accounting equation?
A) Expenses increased, liabilities increased, and assets increased.
B) Assets decreased, expenses decreased, and liabilities increased.
C) Assets increased, expenses increased, and liabilities decreased.
D) Assets decreased, liabilities decreased, and expenses increased.
E) Expenses decreased, liabilities decreased, and assets decreased.
224) When a company provides services on account, the accounting equation would be affected as
follows:
A) Revenues increase.
B) Assets increase and stockholders' equity increases.
C) Assets increase and liabilities decrease.
D) Assets increase.
225) When a magazine sells one-year subscriptions to customers but receives the full amount of cash
immediately, it is an example of a(n):
A) Accrued revenue. B) Prepaid expense.
C) Deferred revenue. D) Accrued expense.
226) An alternative form of the accounting equation is:

A) Net Income = Revenues − Expenses.
B) Assets − Liabilities = Stockholders' Equity.
C) Stockholders' Equity = Assets + Liabilities.
D) Assets = Liabilities − Stockholders' Equity.
227) For which step in the Operating cycle is there a difference between manufacturers and retailers?
A) First B) Fourth C) Second D) Third
228) Which of the following is not a balance sheet item?

A) Retained Earnings. B) Assets.
C) Liabilities. D) Expenses.
229) What is usually a better predictor of future cash flow to the firm?
A) Past Cash Flows B) Past Income
31
230) In Outsourcing, a firm
A) hires a firm to do some work it was doing itself
B) increase revenue
C) increases expenses
D) changes accounting firms
Decrease in a liability, Decrease in Revenue.
A) False B) True
232) GAAP is an abbreviation for:

A) Generally accepted auditing practices.
B) Generally applied accounting procedures.
C) Generally authorized accounting procedures.
D) Generally accepted accounting principles.
233) Given the following, stockholders' claims to the company's resources amount to:
Assets $1,200,000
Liabilities $800,000
Net income $100,000
Retained earnings $250,00
A) $400,000. B) $800,000. C) $1,200,000. D) $250,000.
Increase in a liability, Increase in Dividends.
A) False B) True
235) Receiving cash from customers before services are performed results in:
A) Prepaid Assets. B) Service Revenue.
C) Accounts Receivable. D) Deferred Revenues.
236) The usual balance in a Contra-Asset account is a:

A) CR B) DR C) It depends
237) Accounts Receivable are like

A) Dead Fish B) a Fine Wine
32
238) ABC provides music for special occasions. On January 14, the Smith family hired ABC for an
upcoming family wedding for an agreed upon fee of $10,000. The wedding was scheduled for May
23. As part of the agreement, the Smiths paid ABC half of the fee at the end of April with the
remaining amount due by the end of June. How would ABC record the receipt of the final payment
in June?
A) Debit to Deferred Revenue. B) Credit to Service Revenue.
C) Credit to Cash. D) Credit to Accounts Receivable.
239) Assume that ABC had a retained earnings balance of $10,000 on April 1, and that the company
had the following transactions during April.
Issued common stock for cash, $5,000.
Provided services to customers on account, $2,000.
Provided services to customers in exchange for cash, $900.
Purchased equipment and paid cash, $4,300.
Paid April rent, $800.
Paid employees' salaries for April, $700.
What was ABC's retained earnings balance at the end of April?

A) $11,400. B) $16,400.
C) Some other amount. D) $12,100.
240) In a Balanced set of Accounting Records, EVERY Account must balance.

A) True B) False
241) During a Sale in the operating cycle, what happens to cash?

A) Increases B) Stays the Same C) It depends D) Decreases
242) A company orders office supplies in June. Those supplies are received and paid for in July. The
supplies are used in August. In which month should the company record supplies expense?
A) August. B) Evenly over the three months.
C) July. D) June.
243) Income in the operating cycle equals

A) It depends on the Measuring system. B) Benefit Value Plus Sacrifice Value
C) Benefit Value Minus Sacrifice Value D) Sacrifice Value Minus Benefit Value
Decrease in an asset, Increase in Revenue.
A) False B) True
245) In Cash Flow reporting Accounts Receivable is measured at

A) It depends on the measuring system B) Sacrifice Value
C) Benefit Value D) $0
33
246) Which of the following are made AFTER the financial statements are prepared?
247) Which of the following is NOT possible for a business transaction?

A) Decrease assets and increase expense. B) Increase liabilities and increase expense.
C) Decrease liabilities and increase revenue. D) Increase assets and decrease revenue.
248) ABC had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the
company's existence. If the average annual amount of dividends paid over the last four years is
$3,000, what is the ending retained earnings balance?
A) $35,000. B) $23,000. C) $7,000. D) $47,000.

Provided services to customers on account.
How many of these four transactions increased the given company's total liabilities?
A) Two. B) One. C) Four. D) Three.
250) Choose one:

A) The Statement of Cash Flows always balances
B) The Statement of Cash Flows never balances
C) It is possible for Balance in Cash on the Statement of Cash Flows to be zero
34

Baruch College Harry Davis Online Accounting ACC 2101 Midterm Questions and Solutions

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Baruch College Harry Davis Online Accounting ACC 2101 Midterm Questions and Solutions

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1) Is it possible to make an entry which changes only one account?

4) Unearned Revenue is what kind of account?

5) Usually we measure Inventory at

15) The following financial information is from ABC:

17) The usual balance in a Contra-Owners' Equity account is a:

19) Below is the company's Cash T-account.

The $5,200 amount could represent which of the following?

20) ABC reports the following information for the year:

26) Choose one:

27) Consider the following list of accounts:

Cash Retained Earnings

How many of these accounts have a normal debit balance?

29) The Income Statement always balances.

30) If a Trial Balance balances

34) Consider the following transactions:

35) Usually we measure Accounts Receivable at

37) An example of an adjusting entry would not include:

39) When you develop an entry

40) In Cash Flow reporting at the collection of an Account Receivable

42) Duality of Asset Valuation is primarily as issue in

48) In a sale on account, who is undertaking a financial risk of non-payment?

49) In Cash Flow reporting when the firm acquires inventory

What is the amount of current liabilities?

54) The Balance Sheet is a:

55) ABC engages in the following cash payments:

59) ABC has the following information:

A) $13,000. B) $18,000. C) $110,000. D) $28,000.

61) Which of the following is possible for a particular business transaction?

74) Which of the following is not possible when recording a transaction?

77) In a Big Bath, a firm

88) Which statement is true?

90) Allowance for Bad Debts is what kind of account?

105) Subsidiary Acounts and Master Accounts

107) How many of the following transactions are operating activities?

112) In Cash Flow reporting at the point of Sale

115) Choose one:

117) A company has the following transactions:

1. Pay employees' salaries for the current period.

The $3,100 amount could represent which of the following?

127) Marketing is involved in which step in the Operating cycle?

128) For most businesses what is the critical event?

134) Which of the following is a balance sheet item?

142) Consider the following transactions:

147) When writing formal journal entries

155) The usual balance in a Contra-Expense account is a:

156) Consider the following transactions:

158) The Statement of Cash Flows is a:

How many of the above accounts are permanent?

162) The Trueblood Criterion is used by

164) The Income Statement is a:

171) The second step in the Operating Cycle is called?

How many of these transactions decreased ABC's total assets?

176) The usual balance in a Contra-Liability account is a:

178) Which statement below best describes the accounting equation?

What is the amount of ABC's total assets?

188) The third step in the Operating Cycle is called?

190) Prepaid Rent is what kind of account?

192) The following amounts are reported in the ledger of ABC:

What is the balance in the Common Stock account?

195) Which statement is true?

197) Choose one

I. Total debits should equal total credits.

199) Allocation is primarily as issue in

204) In Cash Flow reporting inventory is measured at

205) Usually we pick up Income at:

208) Consider the following list of accounts: