Multiple choice questions
1. Recording depreciation expense each period is necessary in accordance with the
a.matching principle.
b.going concern principle.
c.cost principle.
d.asset valuation principle.
2. The common characteristic possessed by all assets is
a.tangible nature.
b.long life.
c.great monetary value.
d.future economic benefit.
3. Dividends are deducted from
a.common stock.
b.retained earnings.
c.cash.
d.revenue.
4.The double-entry system requires that each transaction must be recorded
a.in at least two different accounts.
b.in two sets of books.
c.in a journal and in a ledger.
d.first as a revenue and then as an expense.
5. Which of the following reflect the balances of prepayment accounts prior to adjustment?
a.Balance sheet accounts are understated and income statement accounts are understated.
b.Balance sheet accounts are overstated and income statement accounts are overstated.
c.Balance sheet accounts are overstated and income statement accounts are understated.
d.Balance sheet accounts are understated and income statement accounts are overstated.
6.If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be
a.debit Unearned Revenue and credit Prepaid Expense.
b.debit Unearned Revenue and credit Accounts Receivable.
c.debit Unearned Revenue and credit Revenue Earned.
d.debit Unearned Revenue and credit Cash.
7. All the following are needed for the computation of depreciation except
a.estimated useful life.
b.training costs of manufacturing personnel.
c.cost.
d.salvage value.
8. The LIFO inventory method assumes that the cost of the latest units purchases are
a.the last to be allocated to cost of goods sold.
b.the first to be allocated to ending inventory.
c.the first to be allocated to cost of goods sold.
d.not allocated to cost of goods sold or ending inventory.