ACCOUNTING EXAM - EXAMPLES/ PROBLEMS
1. Purchasing prepaid rent has no effect on .
Answer the income statement total assets
2. True or false
The purchase of supplies on account impacts both the balance sheet and
income statement.
Answer false
3. The cost of supplies used during the period is determined by the calculation
.
Answer beginning supplies balance + supplies purchased - ending supplies balance
4. The statement of changes in stockholders' equity reports .
Answer paying dividends issuing common stock
earning net income
5. Grey Company earned $5,000 of revenue on account during Year 1, but
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,collected the cash associated with the receivables in Year 2. Based on this
information alone, under accrual accounting, the company will report
Answer net income of zero and cash inflow from operations of $5,000 in Year 2.
net income of $5,000 and cash inflow from operations of zero in Year 1.
6. The Prepaid Rent account is shown in the section of the balance sheet.-
Answer assets
7. The purchase of supplies on account is a(n) transaction.
Answer asset source
8. Coffee Company had a $500 beginning balance in its supplies account. The
company purchased $2,000 of supplies during the accounting period. A physi-
cal count of supplies determined that $400 of supplies were on hand at the end
of the accounting period. The amount of supplies expense to be recognized
is
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, Answer $2,100.
9. On August 1 of Year 2, a company paid cash to purchase prepaid rent. The
December 31st adjusting entry will .
Answer decrease assets, net income and stockholders' equity
10. Purchasing prepaid rent is a(n) transaction.
Answer asset exchange
11. On August 1 of Year 1, a company paid $1,200 cash in exchange for an
insurance policy that protects the company from loss due to fire for a one
year term. Based solely on this information, how will the December 31, Year
1 financial statements be affected?
Multiple select question.
Answer The balance sheet will show $700 of prepaid insurance.
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1. Purchasing prepaid rent has no effect on .
Answer the income statement total assets
2. True or false
The purchase of supplies on account impacts both the balance sheet and
income statement.
Answer false
3. The cost of supplies used during the period is determined by the calculation
.
Answer beginning supplies balance + supplies purchased - ending supplies balance
4. The statement of changes in stockholders' equity reports .
Answer paying dividends issuing common stock
earning net income
5. Grey Company earned $5,000 of revenue on account during Year 1, but
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27
,collected the cash associated with the receivables in Year 2. Based on this
information alone, under accrual accounting, the company will report
Answer net income of zero and cash inflow from operations of $5,000 in Year 2.
net income of $5,000 and cash inflow from operations of zero in Year 1.
6. The Prepaid Rent account is shown in the section of the balance sheet.-
Answer assets
7. The purchase of supplies on account is a(n) transaction.
Answer asset source
8. Coffee Company had a $500 beginning balance in its supplies account. The
company purchased $2,000 of supplies during the accounting period. A physi-
cal count of supplies determined that $400 of supplies were on hand at the end
of the accounting period. The amount of supplies expense to be recognized
is
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, Answer $2,100.
9. On August 1 of Year 2, a company paid cash to purchase prepaid rent. The
December 31st adjusting entry will .
Answer decrease assets, net income and stockholders' equity
10. Purchasing prepaid rent is a(n) transaction.
Answer asset exchange
11. On August 1 of Year 1, a company paid $1,200 cash in exchange for an
insurance policy that protects the company from loss due to fire for a one
year term. Based solely on this information, how will the December 31, Year
1 financial statements be affected?
Multiple select question.
Answer The balance sheet will show $700 of prepaid insurance.
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