1. An adjusting entry often includes an entry to Cash.
True False
2. The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, and recording closing and adjusting entries. True False
3. An annual reporting period consisting of any twelve consecutive months is known as:
Natural business year.
Interim financial period.
Seasonal year. Calendar year.
Fiscal year.
4. On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines. Santa Fe debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What adjusting entry should be made by Santa Fe, Inc. for the adjustment on December 31 of the first year assuming the company is using a calendar reporting period and no previous adjustments had been made?
Debit Prepaid Subscriptions $516 and credit Subscription Expense $516.
Debit Subscription Expense $516 and credit Prepaid Subscriptions $516.
Debit Unearned Subscriptions $387 and credit Subscription Expense $387.
Debit Subscription Expense $387 and credit Prepaid Subscriptions $387.
Debit Subscription Expense $387 and credit Cash $387.
5. In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.
True False
6. Closing entries are required at the end of each accounting period to close all ledger accounts.
True False
7. Two common subgroups for liabilities on a classified balance sheet are:
Current liabilities and long-term liabilities.
Present liabilities and operating liabilities.
Current liabilities and intangible liabilities.
General liabilities and specific liabilities.
Intangible liabilities and long-term liabilities.
8. Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance?
Entering a liability amount in the Balance Sheet Credit column.
Entering an expense amount in the Balance Sheet Debit column.
Entering a liability amount in the Income Statement Credit column.
Entering a revenue amount in the Balance Sheet Debit column.
Entering an asset amount in the Income Statement Debit column.
9. Adjusting entries are made after the preparation of financial statements.
True False
10. On July 1 Plum Co. paid $7,500 cash for management services to be performed over a two-year period. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Plum should record:
A credit to a prepaid expense and a debit to Cash for $7,500.
A debit to Cash for $7,500 and a credit to an expense for $7,500.
A debit to an expense and credit to a prepaid expense for $7,500.
A debit to an expense and credit to Cash for $7,500.
A debit to a prepaid expense and a credit to Cash for $7,500.