Accounting 101 Midterm Exam with
Complete Solutions
Which of the following accounts is increased with a credit?
a. Land
b. Office Supplies
c. Unearned Revenue
d. Prepaid Insurance - ANS-c. Unearned Revenue
The Double-Entry System
a. is based on the principle of duality
b. requires that each transaction be recorded with at least one debit and one credit
c. total amount of credits must equal the total amount of debits
d. all of the above - ANS-d. all of the above
Receiving cash from a customer for settlement of an Account Receivable will...
a. decrease Stockholder's Equity
b. not a affect total assets
c. increase net income
d. increase total assets - ANS-b. not a affect total assets
The controller for Tires and More, Inc. has recorded the following transactions during
the month: the purchase of equipment for $8,500 cash; payment of $6,300 for 3 months
of rent; and, collection of $2,400 from a customer for services performed. At the
beginning of the month the company was established by selling 10,000 shares of stock
to the public for $15,000 cash. What is the balance in the Cash account at the end of
the month, and is the balance a debit or a credit?
,a. $15,200 debit
b. $6,800 debit
c. $2,600 debit
d. $2,600 credit - ANS-c. $2,600 debit
Mesquite, Inc. is ordering a new machine to be used in its manufacturing facility. Which
of the following events would trigger the recognition of the machine and related liability
on Mesquite's books?
a. The company pays the bill from the supplier.
b. A technician installs the machine on the floor of the manufacturing facility.
c. The company generates a purchase order.
d. The company receives the machine. - ANS-d. the company receives the machine.
All of the following statements about corporations are true except...
a. the stockholders have direct control of the business.
b. they are chartered by the state.
c. the sale of stock does not dissolve the business.
d. ownership is represented by shares of stock - ANS-a. the stockholders have direct
control of the business
Which of the following is legally a separate entity from its owner(s)?
a. Sole proprietorship and partnership only
b. Partnership only
c. Corporation only
d.sp;e proprietorship only - ANS-c. corporation only
T/F the obligation to provide services to another entity is a type of liability - ANS-True
What is the adjusting entry for that portion of revenue received in advance which has
now been earned?
, a. Service Revenue - Debit; Unearned Revenue - Credit
b. Unearned Revenue - Debit; Cash - Credit
c. Unearned Revenue - Debit; Service Revenue - Credit
d. Cash - Debit; Unearned Revenue - Credit - ANS-c. Unearned Revenue - Debit;
Service Revenue - Credit
T/F Accrual accounting recognizes revenues and expenses at the point that cash
changes hands. - ANS-False
Which of the following accounts would likely not need to be adjusted at year end?
a. Prepaid Insurance
b. Equipment
c. Common Stock
d. Supplies - ANS-c. Common Stock
Use this information pertaining to Tucson Company to answer the following question.
1. The corporation's Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2. Depreciation on a building is estimated to be $10,000.
3. A one-year insurance policy was purchased for $4,800. Five months have passed
since the purchase.
4. Accrued interest on a note receivable amounted to $200.
5. The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed. - ANS-
Supplies Expense 1,400
Supplies 1,400
Which of the following accounts is not closed during the closing process?
a. Commissions Earned
b. Income Summary
c. Dividends
d. Common Stock - ANS-d. Common Stock
Which of the following transactions results in the recognition of an expense?
Complete Solutions
Which of the following accounts is increased with a credit?
a. Land
b. Office Supplies
c. Unearned Revenue
d. Prepaid Insurance - ANS-c. Unearned Revenue
The Double-Entry System
a. is based on the principle of duality
b. requires that each transaction be recorded with at least one debit and one credit
c. total amount of credits must equal the total amount of debits
d. all of the above - ANS-d. all of the above
Receiving cash from a customer for settlement of an Account Receivable will...
a. decrease Stockholder's Equity
b. not a affect total assets
c. increase net income
d. increase total assets - ANS-b. not a affect total assets
The controller for Tires and More, Inc. has recorded the following transactions during
the month: the purchase of equipment for $8,500 cash; payment of $6,300 for 3 months
of rent; and, collection of $2,400 from a customer for services performed. At the
beginning of the month the company was established by selling 10,000 shares of stock
to the public for $15,000 cash. What is the balance in the Cash account at the end of
the month, and is the balance a debit or a credit?
,a. $15,200 debit
b. $6,800 debit
c. $2,600 debit
d. $2,600 credit - ANS-c. $2,600 debit
Mesquite, Inc. is ordering a new machine to be used in its manufacturing facility. Which
of the following events would trigger the recognition of the machine and related liability
on Mesquite's books?
a. The company pays the bill from the supplier.
b. A technician installs the machine on the floor of the manufacturing facility.
c. The company generates a purchase order.
d. The company receives the machine. - ANS-d. the company receives the machine.
All of the following statements about corporations are true except...
a. the stockholders have direct control of the business.
b. they are chartered by the state.
c. the sale of stock does not dissolve the business.
d. ownership is represented by shares of stock - ANS-a. the stockholders have direct
control of the business
Which of the following is legally a separate entity from its owner(s)?
a. Sole proprietorship and partnership only
b. Partnership only
c. Corporation only
d.sp;e proprietorship only - ANS-c. corporation only
T/F the obligation to provide services to another entity is a type of liability - ANS-True
What is the adjusting entry for that portion of revenue received in advance which has
now been earned?
, a. Service Revenue - Debit; Unearned Revenue - Credit
b. Unearned Revenue - Debit; Cash - Credit
c. Unearned Revenue - Debit; Service Revenue - Credit
d. Cash - Debit; Unearned Revenue - Credit - ANS-c. Unearned Revenue - Debit;
Service Revenue - Credit
T/F Accrual accounting recognizes revenues and expenses at the point that cash
changes hands. - ANS-False
Which of the following accounts would likely not need to be adjusted at year end?
a. Prepaid Insurance
b. Equipment
c. Common Stock
d. Supplies - ANS-c. Common Stock
Use this information pertaining to Tucson Company to answer the following question.
1. The corporation's Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2. Depreciation on a building is estimated to be $10,000.
3. A one-year insurance policy was purchased for $4,800. Five months have passed
since the purchase.
4. Accrued interest on a note receivable amounted to $200.
5. The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed. - ANS-
Supplies Expense 1,400
Supplies 1,400
Which of the following accounts is not closed during the closing process?
a. Commissions Earned
b. Income Summary
c. Dividends
d. Common Stock - ANS-d. Common Stock
Which of the following transactions results in the recognition of an expense?
