Test Bank for Intermediate Accounting 10th Edition by Spiceland Nelson Thomas sample

Intermediate Accounting,10e (Spiceland) Chapter 2 Review of the Accounting Process Answer Key 1) Owners' equity can be expressed as assets minus liabilities. Answer: TRUE Difficulty: 1 Easy Topic: Accounting equation Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 2) Debits increase asset accounts and decrease liability accounts. Answer: TRUE Difficulty: 1 Easy Topic: Account relationships and records Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 3) Balance sheet accounts are referred to as temporary accounts because their balances are always changing. Answer: FALSE Difficulty: 1 Easy Topic: Account relationships and records Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 4) After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements. Answer: FALSE Difficulty: 1 Easy Topic: Accounting processing cycle steps Learning Objective: 02-02 Describe the steps in the accounting processing cycle . Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 5) Adjusting journal entries are recorded at the end of any period when financial statements are prepared. Answer: TRUE Difficulty: 1 Easy Topic: Accounting processing cycle steps Learning Objective: 02-02 Describe the steps in the accounting processing cycle. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 6) Accruals occur when the cash flow precedes either revenue or expense recognition. Answer: FALSE Difficulty: 1 Easy Topic: Analyze updating-Identify type of adjustment Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 7) The adjusted trial balance contains only permanent accounts. Answer: FALSE Difficulty: 1 Easy Topic: Trial balance―Adjusted Learning Objective: 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 8) The income statement summarizes the operating activity of a company at a particular point in time. Answer: FALSE Difficulty: 1 Easy Topic: Financial statement―Income Statement Learning Objective: 02-07 Describe the four basic financial statements. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking AICPA: FN Measurement 9) The balance sheet can be considered a change or flow statement. Answer: FALSE Difficulty: 1 Easy Topic: Financial statement―Balance sheet Learning Objective: 02-07 Describe the four basic financial statements. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking AICPA: FN Measurement   10) The statement of cash flows summarizes transactions that caused cash to change during a reporting period. Answer: TRUE Difficulty: 1 Easy Topic: Financial statement―Cash flow Learning Objective: 02-07 Describe the four basic financial statements. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking AICPA: FN Measurement 11) The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts. Answer: FALSE Difficulty: 2 Medium Topic: Financial statement―Shareholders equity Learning Objective: 02-07 Describe the four basic financial statements. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking AICPA: FN Measurement 12) The post-closing trial balance contains only permanent accounts. Answer: TRUE Difficulty: 1 Easy Topic: The closing process Learning Objective: 02-08 Explain the closing process. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 13) The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account. Answer: TRUE Difficulty: 1 Easy Topic: The closing process Learning Objective: 02-08 Explain the closing process. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 14) A reversing entry at the beginning of a period for salaries would include a debit to salaries expense. Answer: FALSE Difficulty: 2 Medium Topic: Reversing entries Learning Objective: Appendix 2B Reversing Entries. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 15) The sale of merchandise on account would be recorded in a sales journal. Answer: TRUE Difficulty: 1 Easy Topic: Subsidiary ledgers and Special journals Learning Objective: Appendix 2C Subsidiary Ledgers and Special Journals. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 16) The payment of cash to a supplier would be recorded in a purchases journal. Answer: FALSE Difficulty: 1 Easy Topic: Subsidiary ledgers and Special journals Learning Objective: Appendix 2C Subsidiary Ledgers and Special Journals. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 17) The accounting equation can be stated as: A) A + L − OE = 0. B) A − L + OE = 0. C) −A + L − OE = 0. D) A − L − OE = 0. Answer: D Difficulty: 2 Medium Topic: Accounting equation Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts. Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical thinking 18) Examples of external transactions include all of the following except: A) Paying employee salaries. B) Purchasing equipment. C) Depreciating equipment. D) Collecting a receivable. Answer: C Difficulty: 2 Medium Topic: Account relationships and records Topic: Analyze transaction-Record journal entry Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-03 Analyze and record transactions using journal entries Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical thinking   19) Examples of internal transactions include all of the following except: A) Writing off an uncollectible account. B) Recording the expiration of prepaid insurance. C) Recording unpaid salaries. D) Paying salaries to company employees. Answer: D Difficulty: 2 Medium Topic: Account relationships and records; Analyze updating-Record adjusting entry Learning Objective: 02-01 Understand routine economic events-transactions-and determine their effects on a company's financial position and on specific accounts.; 02-06 Record adjusting journal entries in general journal format, post entries, and prepare an adjusted trial balance. Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical thinking 20) XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a: A) Debit to investments. B) Credit to retained earnings. C) Credit to common stock. D) Credit to revenue. Answer: C Difficulty: 2 Medium Topic: Analyze transaction-Record journal entry Learning Objective: 02-03 Analyze and record transactions using journal entries. Blooms: Analyze AACSB: Analytical Thinking AICPA: BB Critical thinking AICPA: FN Measurement 21) Incurring an expense for advertising on account would be recorded by: A) Debiting liabilities. B) Crediting assets. C) Debiting an expense. D) Debiting assets. Answer: C Difficulty: 2 Medium Topic: Analyze transaction-Record journal entry Learning Objective: 02-03 Analyze and record transactions using journal entries. Blooms: Analyze AACSB: Analytical Thinking AICPA: BB Critical thinking AICPA: FN Measurement