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Chapter 1
MULTIPLE CHOICE QUESTIONS
1. The time period assumption states that
a. a transaction can only affect one period of time.
b. estimates should not be made if a transaction affects more than
one time period.
c. adjustments to the enterprise's accounts can only be made in the
time period when the business terminates its operations.
d. the economic life of a business can be divided into artificial time
periods.

e. Ans: d

2. An accounting time period that is one year in length, but does not begin on
January 1, is referred to as
a. a fiscal year.
b. an interim period.
c. the time period assumption.
d. a reporting period.
Ans: a

3. Adjustments would not be necessary if financial statements were prepared

to reflect net income from
a. monthly operations.
b. fiscal year operations.
c. interim operations.
d. lifetime operations.

Ans: d

4. Management usually desires ________ financial statements and the IRS

requires all businesses to file _________ tax returns.
a. annual, annual
b. monthly, annual
c. quarterly, monthly
d. monthly, monthly

Ans: b

5. The time period assumption is also referred to as the

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a. calendar assumption.
b. cyclicity assumption.
c. periodicity assumption.
d. fiscal assumption.

Ans: c

6. In general, the shorter the time period, the difficulty of making the proper
adjustments to accounts
a. is increased.
b. is decreased.
c. is unaffected.
d. depends on if there is a profit or loss.

Ans: a

which of the following is not a common time period chosen by businesses

as their accounting period?
A. Daily
B. Monthly
C. Quarterly
D. Annually

Ans: a

which of the following time periods would not be referred to as an interim

period?
A. Monthly
B. Quarterly
C. Semi-annually
D. Annually

Ans: d

The fiscal year of a business is usually determined by

A. a government agency.
B. a lottery.
C. the business.
D. the IASB.

Ans: c

Which of the following are in accordance with IFRS?

A. Accrual basis accounting
B. Cash basis accounting
C. Both accrual basis and cash basis accounting
D. Neither accrual basis nor cash basis accounting

Ans: a
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The revenue recognition principle dictates that revenue should be recognized

in the accounting records
A. when cash is received.
B. when it is earned.
C. at the end of the month.
D. in the period that income taxes are paid.

Ans: b

7. In a service-type business, revenue is considered earned

a. at the end of the month.
b. at the end of the year.
c. when the service is performed.
d. when cash is received.

Ans: c

8. The expense recognition principle matches

a. customers with businesses.
b. expenses with revenues.
c. assets with liabilities.
d. creditors with businesses.

Ans: b

9. Ron's Hot Rod Shop follows the revenue recognition principle. Ron
services a car on July 31. The customer picks up the vehicle on August 1
and mails the payment to Ron on August 5. Ron receives the check in the
mail on August 6. When should Ron show that the revenue was earned?
a. July 31
b. August 1
c. August 5
d. August 6

Ans: a

10. A company spends $10 million dollars for an office building. Over what
period should the cost be written off?
a. When the $10 million is expended in cash.
b. All in the first year.
c. Over the useful life of the building.
d. After $10 million in revenue is earned.

Ans: c , ‫المقام شنو نخليه ؟‬dep ‫قصدهم بالسؤال لمن بنحسب ال‬

11. The expense recognition principle states that expenses should be

matched with revenues. Another way of stating the principle is to say that
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a. assets should be matched with liabilities.

b. efforts should be matched with accomplishments.
c. dividends to shareholders should be matched with shareholders'
investments.
d. cash payments should be matched with cash receipts.

Ans: b

A flower shop makes a large sale for $1,000 on November 30. The
customer is sent a statement on December 5 and a check is received
on December 10. The flower shop follows IFRS and applies the
revenue recognition principle. When is the $1,000 considered to be
earned?
A. December 5.
B. December 10.
C. November 30.
D. December 1.

Ans: c ‫نسجل األرباح أو ما نبيع مو أول ما نحصل الفلوس‬

12. candy factory's employees work overtime to finish an order that is sold on
February 28. The office sends a statement to the customer in early March
and payment is received by mid-March. The overtime wages should be
expensed in
a. February.
b. March.
c. the period when the workers receive their checks.
d. either in February or March depending on when the pay period
ends.

Ans: a

13. Expenses sometimes make their contribution to revenue in a different

period than when the expense is paid. When wages are incurred in one
period and paid in the next period, this often leads to which account
appearing on the balance sheet at the end of the time period?
a. Due from Employees.
b. Due to Employer.
c. Wages Payable.
d. Wages Expense.

Ans: c ‫ تم شرح مثل هذا المثال في الدروس المسجله‬.

14. Under accrual-basis accounting

a. cash must be received before revenue is recognized.
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b. net income is calculated by matching cash outflows against cash

inflows.
c. events that change a company's financial statements are
recognized in the period they occur rather than in the period in
which cash is paid or received.
d. the ledger accounts must be adjusted to reflect a cash basis of
accounting before financial statements are prepared under IFRS.

Ans: c

15. Adjusting entries are required

a. yearly.
b. quarterly.
c. monthly.
d. every time financial statements are prepared.

Ans: d

16. Which is not an application of revenue recognition?

a. Recording revenue as an adjusting entry on the last day of the
accounting period.
b. Accepting cash from an established customer for services to be
performed over the next three months.
c. Billing customers on June 30 for services completed during June.
d. Receiving cash for services performed.

Ans: b

17. Which statement is correct?

a. As long as a company consistently uses the cash basis of
accounting, IFRS allow its use.
b. The use of the cash basis of accounting violates both the revenue
recognition and expense recognition principles.
c. The cash basis of accounting is objective because no one can be
certain of the amount of revenue until the cash is received.
d. As long as management is ethical, there are no problems with
using the cash basis of accounting.

Ans: b

18. The following is selected information from Alpha-Beta-Gamma

Corporation for the fiscal year ending October 31, 2011.
i. Cash received from customers $300,000
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ii. Revenue earned 350,000

iii. Cash paid for expenses 170,000
iv. Cash paid for computers on November 1, 2010 that 48,000
will be used
v. for 3 years (annual depreciation is $16,000)
vi. Expenses incurred, not including any depreciation 200,000
vii. Proceeds from a bank loan, part of which was used to pay
for the computers 100,000
Based on the accrual basis of accounting, what is Alpha-Beta-Gamma
Corporation’s net income for the year ending October 31, 2011?
A. $114,000.
B. $134,000.
C. $82,000. NI = Rev - Exp >> 350 - 216 = 134
D. $150,000. Rev = 350
Exp = 16 + 200
Ans: b

Use the following information for questions 19 and 20.

Ling Company had the following transactions during 2011:

Sales of ¥9,000 on account
Collected ¥4,000 for services to be performed in 2012
Paid ¥1,250 cash in salaries
Purchased airline tickets for ¥500 in December for a trip to take place in 2012

19. What is Ling’s 2011 net income using accrual accounting?

a. ¥7,750.
b. ¥11,750. NI = Rev - Exp >> 9000-1250 = 7750
c. ¥11,250. Rev = 9000
d. ¥7,250. Exp = 1250
‫ وال خذينا الثانيه الن‬,‫ما خذينا االخيره الن التذكرة شريناها حق سنه يديدة‬
‫ايضا لسنة يديدة‬
Ans: a

20. What is Ling’s 2011 net income using cash basis accounting?
a. ¥11,750.
b. ¥2,750. NI = Rev - Exp >>
c. ¥11,250. Rev = 4000
d. ¥2,250. Exp = 1250 + 500

Ans: d ‫نحسب كل شي خذينا عليه فلوس او دفعنا فيه فلوس النه‬

cash basis

21. Under International Financial Reporting Standards (IFRS)

a. The cash-basis method of accounting is accepted.
b. Events are recorded in the period in which the event occurs.
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c. Interim period financial statements are either a calendar year or a

fiscal year.
d. A fiscal year is an accounting time period encompassing less than
12 months.

Ans: b

22. The expense recognition principle refers to

a. Recognizing revenue in the period when it is earned.
b. Matching the revenue reported on the income statement with the
receivable reported on the statement of financial position.
c. Letting expenses follow revenues.
d. Dividing the life of the business into artificial time periods.

Ans: c

23. When companies record transactions in the period in which the events
occur,
______ is being applied.
a. Accrual-basis accounting.
b. The time period assumption.
c. The matching of the income statement with the statement of
financial position.
d. The expense recognition principle.

Ans: a

24. A company must make adjusting entries

a. To ensure that the revenue recognition and expense recognition
principles are followed.
b. Each time it prepares an income statement and a statement of
financial position.
c. To account for accruals or deferrals.
d. All of the choices are correct regarding adjusting entries.

Ans: d

25. Which of the following adjustments would require decreasing the liabilities
reported on the statement of financial position?
a. A company uses $400 worth of supplies during the year.
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b. A company records $400 worth of depreciation on equipment.

c. A company has earned $400 of revenue collected at the beginning
of the year.
d. A company records $400 of wages earned by employees that will
be paid next year.

Ans: c c : ‫تقولنا ان الشركة استحقت العوائد الي استلمت فلوسها مقدم من بداية السنه‬
‫يعني الشركة استلمت فلوس ولكن لي الحين ما قدمت بمقابلها خدمة أو منتج فتتسجل جذي‬
cash 400
unearned rev 400 ‫ هذا من ال‬liabilities
‫ فراح نقلل الدين الي علينا‬,‫الحين الشركة قدمت الخدمة او المنتج‬
unearned rev 400
revenue 400

26. Adjusting entries

a. Are often prepared after the statement of financial position date, but
dated as of the statement of financial position date.
b. Are necessary to enable the financial statements to conform to
international Financial Reporting Standard (IFRS).
c. Include both accruals and deferrals
d. All of the choices are correct regarding adjusting entries.

Ans: d

27. Adjusting entries are required

a. because some costs expire with the passage of time and have not
yet been journalized.
b. when the company's profits are below the budget.
c. when expenses are recorded in the period in which they are
incurred.
d. when revenues are recorded in the period in which they are earned.

Ans: a

28. A small company may be able to justify using a cash basis of accounting if
they have
a. sales under $1,000,000.
b. no accountants on staff.
c. few receivables and payables.
d. all sales and purchases on account.

Ans: c

29. Which one of the following is not a justification for adjusting entries?
a. Adjusting entries are necessary to ensure that revenue recognition
principles are followed.
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b. Adjusting entries are necessary to ensure that the expense

recognition principle is followed.
c. Adjusting entries are necessary to enable financial statements to be
in conformity with IFRS.
d. Adjusting entries are necessary to bring the general ledger
accounts in line with the budget.

Ans: d

30. An adjusting entry

a. affects two statement of financial position accounts.
b. affects two income statement accounts.
c. affects a statement of financial position account and an income
statement account.
d. is always a compound entry.

Ans: c

31. The preparation of adjusting entries is

a. straight forward because the accounts that need adjustment will be
out of balance.
b. often an involved process requiring the skills of a professional.
c. only required for accounts that do not have a normal balance.
d. optional when financial statements are prepared.

Ans: b

If a resource has been consumed but a bill has not been received at the end of
the accounting period, then
A. an expense should be recorded when the bill is received.
B. an expense should be recorded when the cash is paid out.
C. an adjusting entry should be made recognizing the expense.
D. it is optional whether to record the expense before the bill is received.

Ans: c accrual basis ‫مالنا شغل بالفلوس استلمناها وال الء الن نتبع ال‬

32. Accounts often need to be adjusted because

a. there are never enough accounts to record all the transactions.
b. many transactions affect more than one time period.
c. there are always errors made in recording transactions.
d. management can't decide what they want to report.

Ans: b

33. Adjusting entries are

a. not necessary if the accounting system is operating properly.
b. usually required before financial statements are prepared.
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c. made whenever management desires to change an account

balance.
d. made to statement of financial position accounts only.

Ans: b

34. Expenses incurred but not yet paid or recorded are called
a. prepaid expenses.
b. accrued expenses.
c. interim expenses.
d. unearned expenses.

Ans: b

35. A law firm received $2,000 cash for legal services to be rendered in the
future. The full amount was credited to the liability account Unearned
Legal Fees. If the legal services have been rendered at the end of the
accounting period and no adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

Ans: d

36. Adjusting entries can be classified as

a. postponements and advances.
b. accruals and deferrals.
c. deferrals and postponements.
d. accruals and advances.

Ans: b

37. Accrued revenues are

a. received and recorded as liabilities before they are earned.
b. earned and recorded as liabilities before they are received.
c. earned but not yet received or recorded.
d. earned and already received and recorded.

Ans: c

38. Prepaid expenses are

a. paid and recorded in an asset account before they are used or
consumed.
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b. paid and recorded in an asset account after they are used or

consumed.
c. incurred but not yet paid or recorded.
d. incurred and already paid or recorded.

Ans: a

39. Accrued expenses are

a. paid and recorded in an asset account before they are used or
consumed.
b. paid and recorded in an asset account after they are used or
consumed.
c. incurred but not yet paid or recorded.
d. incurred and already paid or recorded.

Ans: c

40. Unearned revenues are

a. received and recorded as liabilities before they are earned.
b. earned and recorded as liabilities before they are received.
c. earned but not yet received or recorded.
d. earned and already received and recorded.

Ans: a

41. A liability—revenue relationship exists with

cash xx
a. prepaid expense adjusting entries. unearned rev xx
b. accrued expense adjusting entries. adjusting:
c. unearned revenue adjusting entries. Unearned rev xx
d. accrued revenue adjusting entries. Revenue xx

unearned Rev is a liability.

Ans: c

42. Which of the following reflect the balances of prepayment accounts prior
to adjustment?
a. accounts are understated and income statement accounts are
understated.
b. accounts are overstated and income statement accounts are
overstated.
c. accounts are overstated and income statement accounts are
understated.
d. accounts are understated and income statement accounts are
overstated.

Ans: c ( prepayment accounts are prepaid accounts )

prepaid exp xx
cash xx
43. An asset—expense relationship exists with adjusting:
a. liability accounts. Exp xx
prepaid exp xx

prepaid exp is an asset.

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b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.

Ans: c

44. Bee-In-The-Bonnet Company purchased office supplies costing $8,000

and debited Office Supplies for the full amount. At the end of the
accounting period, a physical count of office supplies revealed $3,200 still
on hand. The appropriate adjusting journal entry to be made at the end of
the period would be
a. Debit Office Supplies Expense, $3,200;
Credit Office Supplies, $3,200. Supplies 8000
b. Debit Office Supplies, $4,800; cash 8000
Credit Office Supplies Expense, $4,800. adjusting:
Supplies exp 4800
c. Debit Office Supplies Expense,
supplies 4800
$4,800; Credit Office Supplies, $4,800.
d. Debit Office Supplies, $3,200; 8000 - 3200 = 4800 ( used )
Credit Office Supplies Expense, $3,200.

Ans: c

45. If an adjustment is needed for unearned revenues, the

a. liability and related revenue are overstated before adjustment.
b. liability and related revenue are understated before adjustment.
c. liability is overstated and the related revenue is understated before
adjustment.
d. liability is understated and the related revenue is overstated before
adjustment.

Ans: c

46. The balance in the office supplies account on June 1 was $5,200, supplies
purchased during June were $2,500, and the supplies on hand at June 30
were $2,000. The amount to be used for the appropriate adjusting entry is
a. $4,500.
b. $2,500. Supplies = 5200 + 2500 = 7700
c. $9,700.
d. $5,700. June 30 on hand : 2000

Used = 7700 - 2000 = 5700

Ans: d

47. Depreciation expense for a period is computed by taking the

a. original cost of an asset – accumulated depreciation.
b. depreciable cost ÷ depreciation rate.
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c. cost of the asset ÷ useful life.

d. market value of the asset ÷ useful life.

Ans: c

48. Accumulated Depreciation is

a. an expense account.
b. an equity account.
c. a liability account.
d. a contra asset account.

Ans: d

49. Hercules Company purchased a computer for $3,600 on December 1. It is

estimated that annual depreciation on the computer will be $720. If
financial statements are to be prepared on December 31, the company
should make the following adjusting entry:
a. Debit Depreciation Expense, $720; Credit Accumulated
Depreciation, $720.
b. Debit Depreciation Expense, $60; Credit Accumulated
Depreciation, $60.
c. Debit Depreciation Expense, $2,880; Credit Accumulated
Depreciation, $2,880.
d. Debit Office Equipment, $3,600; Credit Accumulated Depreciation,
$3,600.

Ans: b ( 720/12 ) = 60, only for one month Dec 1 to Dec 31.

50. Action Real Estate received a check for $18,000 on July 1 which
represents a 6 month advance payment of rent on a building it rents to a
client. Unearned Rent was credited for the full $18,000. Financial
statements will be prepared on July 31. Action Real Estate should make
the following adjusting entry on July 31:
a. Debit Unearned Rent, $3,000; Credit Rental Revenue, $3,000.
b. Debit Rental Revenue, $3,000; Credit Unearned Rent, $3,000.
c. Debit Unearned Rent, $18,000; Credit Rental Revenue, $18,000.
d. Debit Cash, $18,000; Credit Rental Revenue, $18,000.

Ans: a ‫عند استالم المبلغ‬

Cash 18000
Unearned rev 18000
adjusting: ‫بنهاية شهر سبعة‬
Unearned rev 3000
Revenue 3000
(18000/6)= 3000 ‫الن حق شهر واحد فقط‬
‫ الي استحق اآلن شهر‬,‫ أشهر‬6 ‫و اهما دافعين ل‬
‫فقط و كل شهر نسوي نفس الحركه‬
51. As prepaid expenses expire with the passage of time, the correct adjusting
entry will be a
a. debit to an asset account and a credit to an expense account.
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b. debit to an expense account and a credit to an asset account.

c. debit to an asset account and a credit to an asset account.
d. debit to an expense account and a credit to an expense account.

Ans: b

52. A company usually determines the amount of supplies used during a

period by
a. adding the supplies on hand to the balance of the Supplies
account.
b. summing the amount of supplies purchased during the period.
c. taking the difference between the supplies purchased and the
supplies paid for during the period.
d. taking the difference between the balance of the Supplies account
and the cost of supplies on hand.

Ans: d

53. If a company fails to make an adjusting entry to record supplies expense,

then
a. equity will be understated.
b. expense will be understated.
c. assets will be understated.
d. net income will be understated.

Ans: b

54. What is the proper adjusting entry at June 30, the end of the fiscal year,
based on a prepaid insurance account balance before adjustment, €
20,500, and unexpired amounts per analysis of policies of € 6,000?
a. Debit Insurance Expense, € 6,000;
Credit Prepaid Insurance, € 6,000. prepaid insurance 20500
b. Debit Insurance Expense, € 20,500; cash 20500
Credit Prepaid Insurance, € 20,500. adjusting:
c. Debit Prepaid Insurance, € 14,500; insurance exp 14500
prepaid insurance 14500
Credit Insurance Expense, € 14,500. ‫ و بنهاية‬,20500 ‫يقول السؤال ان دافعين مقدم تأمين‬
d. Debit Insurance Expense, € 14,500; ‫ ما استحق لي الحين‬6000 ‫السنه شافو ان‬
Credit Prepaid Insurance, € 14,500. ‫للي استحق فقط‬Adj ‫احنا نسوي‬
20500 - 6000 = 14500
Ans: d

55. At December 31, 2011, before any year-end adjustments, Cable Car
Company's Insurance Expense account had a balance of $1,450 and its
Prepaid Insurance account had a balance of $3,800. It was determined
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that $3,000 of the Prepaid Insurance had expired. The adjusted balance
for Insurance Expense for the year would be
a. $3,000.
Insurance exp = 1450 + 3000 = 4450
b. $1,450. 1450 ‫فيه‬insurance exp ‫يقول السؤال ان اكاونت‬
c. $4,450. 3800 ‫ فيه‬prepaid insurance ‫و اكاونت‬
d. $2,250.
3000 prepaid insurance had expired
Ans: c exp ‫يعني بهالقيمة تحول لي‬
insurance exp ‫ألكاونت ال‬balance ‫الحين المطلوب شنو ال‬
3000 ‫ و نزيد عليه الي صار‬1450 ‫فنشوف جم كان فيه قبل الي اهوا‬

56. Depreciation is the process of

a. valuing an asset at its fair value.
b. increasing the value of an asset over its useful life in a rational and
systematic manner.
c. allocating the cost of an asset to expense over its useful life in a
rational and systematic manner.
d. writing down an asset to its real value each accounting period.

Ans: c

57. A new accountant working for Unitas Company records $800 Depreciation
Expense on store equipment as follows:
i. Depreciation Expense .................................. 800
1. Cash .................................................. 800
The effect of this entry is to
a. adjust the accounts to their proper amounts on December 31.
b. understate total assets on the statement of financial position as of
December 31.
c. overstate the book value of the depreciable assets at December 31.
d. understate the book value of the depreciable assets as of December
31.

Ans: c

58. From an accounting standpoint, the acquisition of productive facilities can

be thought of as a long-term
a. accrual of expense.
b. accrual of revenue.
c. accrual of unearned revenue.
d. prepayment for services.

Ans: d

59. The balance in the Prepaid Rent account before adjustment at the end of
the year is ¥12,000, which represents three months’ rent paid on
December 1. The adjusting entry required on December 31 is to
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a. debit Rent Expense, ¥4,000;

adj ‫ بنسوي‬12 ‫ الحين بنهاية شهر‬,‫ أشهر‬3 ‫ دفع مقدم ألجار ل‬12 ‫بشهر‬
credit Prepaid Rent, ¥4,000. ‫فراح نسويله لشهر واحد فقط ألن مر علينا شهر بس‬
b. debit Rent Expense, ¥8,000; 12000/3 = 4000
credit Prepaid Rent ¥8,000. Prepaid rent exp 12000
c. debit Prepaid Rent, ¥4,000; cash 12000
credit Rent Expense, ¥4,000. adjusting entries : ‫المطلوب‬
rent exp 4000
d. debit Prepaid Rent, ¥8,000; prepaid rent exp 4000
credit Rent Expense, ¥8,000.

Ans: a

60. An accumulated depreciation account

a. is a contra-liability account.
b. increases on the debit side.
c. is offset against total assets on the STATEMENT OF POSITION.
d. has a normal credit balance.

Ans: d

61. The difference between the cost of a depreciable asset and its related
accumulated depreciation is referred to as the
a. fair value of the asset.
b. blue book value of the asset.
c. book value of the asset.
d. depreciated difference of the asset.

Ans: c

62. If a business has several types of long-term assets such as equipment,

buildings, and trucks,
a. there should be only one accumulated depreciation account.
b. there should be a separate accumulated depreciation account for
each type of asset.
c. all the long-term asset accounts will be recorded in one general
ledger account.
d. there won't be a need for an accumulated depreciation account.

Ans: b

63. Which of the following would not result in unearned revenue?

a. Rent collected in advance from tenants
b. Services performed on account b:
c. Sale of season tickets to football games A/R XX
d. Sale of two-year magazine subscriptions Service revenue xx

Ans: b
‫ الشركة الثانيه شلون راح تسجل ؟‬, ‫ بزنز دفع مقدم ألجار لشركة ثانية‬,‫يقول السؤال‬
64. If business pays rent in advance and‫دفعت‬ ‫األولى الي‬
debits ‫الشركة‬
a Prepaid Rent account, the
Prepaid rent exp XX
company receiving the rent payment will credit
cash XX
a. cash. ) ‫الشركة الثانية الي استلمت ( المطلوب‬
Cash xx
unearned rent rev xx
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b. prepaid rent.
c. unearned rent revenue.
d. accrued rent revenue.

Ans: c

65. Unearned revenue is classified as

a. an asset account.
b. a revenue account.
c. a contra-revenue account.
d. a liability.

Ans: d

66. 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 Cash.
b. debit Unearned Revenue and credit cash xx
Service Revenue. unearned rev xx
adjusting entries : ‫المطلوب‬
c. debit Unearned Revenue and
unearned rev xx
credit Prepaid Expense. revenue xx
d. debit Unearned Revenue and
credit Accounts Receivable.

Ans: b

67. Speedy Clean Laundry purchased € 6,500 worth of laundry supplies on

June 2 and recorded the purchase as an asset. On June 30, an inventory
of the laundry supplies indicated only € 1,500 on hand. The adjusting entry
that should be made by the company on June 30 is
a. Debit Laundry Supplies Expense, € 1,500;
supplies 6500
Credit Laundry Supplies, € 1,500.
cash 6500
b. Debit Laundry Supplies, € 1,500;
Credit Laundry Supplies Expense, € 1,500. adjusting:
c. Debit Laundry Supplies, € 5,000; supplies exp 5000
Credit Laundry Supplies Expense, € 5,000. supplies 500
d. Debit Laundry Supplies Expense, € 5,000;
6500 - 1500 = 5000
Credit Laundry Supplies, € 5,000.

Ans: d

68. On July 1, Runner’s Sports Store paid $8,000 to Acme Realty for 4
months rent beginning July 1. Prepaid Rent was debited for the full
PAGE 19 WWW.FOTAMAT-A.COM

amount. If financial statements are prepared on July 31, the adjusting

entry to be made by Runner’s Sports Store is
a. Debit Rent Expense, $8,000;
Credit Prepaid Rent, $2,000. prepaid exp 8000
cash 8000
b. Debit Prepaid Rent, $2,000;
Credit Rent Expense, $2,000. adjusting entries : ‫المطلوب‬
c. Debit Rent Expense, $2,000; exp 2000
Credit Prepaid Rent, $2,000. prepaid exp 2000
d. Debit Rent Expense, $8,000;
8000/4=2000
Credit Prepaid Rent, $8,000.

Ans: c

69. Southwestern City College sold season tickets for the 2011 football
season for $180,000. A total of 8 games will be played during September,
October and November. In September, three games were played. The
adjusting journal entry at September 30
a. is not required. No adjusting entries will cash 180,000
unearned rev 180,000
be made until the end of the season in November. this for 8 games ( each game
b. will include a debit to Cash and a 180,000/8 = 22,500 )
credit to Ticket Revenue for $45,000. Sep only 3 games ( 22,500*3
c. will include a debit to Unearned Ticket Revenue =67500)
and a credit to Ticket Revenue for $67,500. adjusting entries:
Unearned rev 67,500
d. will include a debit to Ticket Revenue and revenue 67,500
a credit to Unearned Ticket Revenue for $60,000.

Ans: c

70. Southwestern City College sold season tickets for the 2011 football
season for $180,000. A total of 8 games will be played during September,
October and November. In September, two games were played. In
October, three games were played. The balance in Unearned Revenue at
October 31 is
cash 180,000
a. $0.
unearned rev 180,000
b. $45,000. Sep 2 games ( 22,500*2 =45,000)
c. $67,500. adjusting entries end of Sep
d. $112,500. Unearned rev 45,000
revenue 45,000
Oct 3 games ( 22,500*3 =67,500)
Ans: c
Unearned rev 67,500
revenue 67,500

the balance of unearned rev is

180,000 - 45,000 - 67500 = 67500

71. Southwestern City College sold season tickets for the 2011 football
season for $180,000. A total of 8 games will be played during September,
October and November. Assuming all the games are played, the
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Unearned Revenue balance that will be reported on the December 31

STATEMENT OF FINANCIAL POSITION will be
a. $0.
b. $67,500.
c. $112,500.
d. $180,000.

Ans: a , because all the games that paid for were played

72. Henry-K Company purchased a computer system for $5,400 on January

1, 2011. The company expects to use the computer system for 3 years. It
has no residual value. Monthly depreciation expense on the asset is
a. $0.
b. $150. 5400 / 3 = 1,800 ( yearly)
c. $1,800.
d. $5,400. 1800/12= 150 ( monthly )

Ans: b

73. Hardwood Supplies Inc. purchased a 12-month insurance policy on March

1,2011 for
₤ 900. At March 31, 2011, the adjusting journal entry to record expiration
of this asset will include a

a. debit to Prepaid Insurance and a prepaid insurance 900

credit to Cash for ₤ 900. cash 900
b. debit to Prepaid Insurance and a adjusting
credit to Insurance Expense for ₤ 100. insurance exp 75
prepaid insurance 75
c. debit to Insurance Expense and a credit
to Prepaid Insurance for ₤ 75 900/12= 75
d. debit to Insurance Expense and a
credit to Cash for ₤ 75.

Ans: c

74. Daly Investments purchased an 18-month insurance policy on May 31,

2011 for $4,500. The December 31, 2011 statement of financial position
would report Prepaid Insurance of prepaid insurance 4500
a. $0 because Prepaid Insurance cash 4500
is reported on the Income Statement. adjusting
b. $1,750. insurance exp 1750
c. $2,750. prepaid insurance 1750
d. $4,500. 4500 / 18 = 250 monthly
250*7 = 1750
Ans: c 7 12 ‫ و الحين احنا بنهاية‬5 ‫ الن شراه بنهاية‬,‫أشهر‬
balance
75. At March 1, Progressive Auto Inc. reported a balance whenfor weprepaid
in Supplies
consumedinsurance‫ال‬
of we
800 ‫السؤال‬
$200. ‫الحين‬
have to adjust
During March, the company purchased supplies for 4500 - 1750 = 2750
it: $750 and consumed
supplies of $800. If no adjusting entry is made for supplies
supplies exp 800
a. equity will be overstated by $800. supplies 800
b. expenses will be understated by $750. there is no adjusting entry, exp understated,
equity overstated.
PAGE 21 WWW.FOTAMAT-A.COM

c. assets will be understated by $150.

d. net income will be understated by $800.

Ans: a

76. 140. Y-B-2 Inc. pays its rent of $90,000 annually on January 1. If the
February 28 monthly adjusting entry for prepaid rent is omitted, which of
the following will be true?
a. Failure to make the adjustment does Adj ‫ و كل شهر بسوون‬,‫تم دفع اجار مقدم لسنة كاملة‬
not affect the February financial statements. ‫فشنو راح يصير؟‬adj ‫ تم مسح ال‬2 ‫لكن في شهر‬
b. Expenses will be overstated by $7,500 and exp 7500
net income and equity will be understated by $7,500. prepaid exp 7500
c. Assets will be overstated by $15,000 and net ‫^ هذا القيد الي انمسح‬
income and equity will be understated by $15,000.
d. Assets will be overstated by $7,500 and net b : ‫مفروض العكس‬
income and equity will be overstated by $7,500. c : ‫المبلغ غلط‬
d: ‫صح الن ماراح نكون مقللين دفع االجار المقدم‬
‫ و الثاني ماراح نكون مسجلين‬,‫فاالست بكون زايد‬
Ans: d ‫مصاريف فااليكوتي و االنكم بكون زايد‬

77. On January 1, 2011, P.T. Scope Company purchased a computer system

for $3,240. The company expects to use the system for 3 years. The asset
has no salvage value. The book value of the system at December 31,
2012 is
a. $0. ‫بعد مرور سنتين بعرف جم قيمة الكمبيوتر• في‬
‫الدفاتر ؟‬
b. $1,080. dep : 3240/3 = 1080 ‫سنوي‬
c. $2,160.
d. $3,240. 2 years = 1080*2 = 2160

Ans: b Bv= 3240 - 2160 = 1080

78. On January 1, 2011, Grills and Grates Inc. purchased equipment for
$45,000. The company is depreciating the equipment at the rate of $600
per month. At January 31, 2012, the balance in Accumulated Depreciation
is
a. $600.
b. $7,200. ‫ الحين مر سنة‬, 600 ‫ شهر بقيمة‬13 ‫ و شهر يعني مر‬dep ‫كل شهر تسويله‬
c. $7,800. 600*13=7800
d. $37,200.

Ans: c
79. On January 1, 2011, Masters and Masters Company purchased
equipment for € 30,000. The company is depreciating the equipment at
the rate of € 700 per month. The book value of the equipment at
December 31, 2011 is
a. € 0. dep = 700*12=8400
b. € 8,400. BV = 30,000 - 8400 = 21,600
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c. € 21,600.
d. € 30,000.

Ans: c

80. O.K.C. Company collected $11,200 in September of 2011 for 4 months of

service which would take place from October of 2011 through January of
2012. The revenue reported from this transaction during 2011 would be
a. 0.
b. $8,400. ‫ أشهر‬4 ‫ مقابل خدمة راح تسويها على مدى‬11,200 ‫ تم دفع للشركة‬9 ‫في شهر‬
c. $11,200. ‫اكتوبر‬ ‫ابتداء من شهر‬
d. $2,680. Cash 11,200
Unearned rev 11,200
‫ ؟‬2011 ‫شنو العوائد الي تم الحصول عليها في سنة‬
Ans: b ) ‫ اشهر‬3 ( ‫ عندنا شهر اكتوبر لي ديسمبر‬,2011 ‫في سنة‬
Unearned rev 8400
revenue 8400
11200/4 = 2800
2800 * 3 = 8400

Niagara Corporation purchased a one-year insurance policy in January

2011 for $54,000. The insurance policy is in effect from March 2011
through February 2012. If the company neglects to make the proper year-
end adjustment for the expired insurance
a. Net income and assets will be understated by $45,000.
b. Net income and assets will be overstated by $45,000.
c. Net income and assets will be understated by $9,000.
d. Net income and assets will be overstated by $9,000.

Ans: b prepaid insurance was not adjusted means:

asset was not decreased so it will be overstated.
expense was not recorded, so equity and NI is overstated.

this is the missing entry

Exp 45000
prepaid exp 45000

81. James Corporation purchased a one-year ‫هني يبون‬ ,‫سجلو وال شي‬policy
insurance ‫الي قبله ما‬in‫لكن‬January
,‫نفس السؤال الي قبله‬
‫هالسنة‬ ‫تخص‬ ‫الي‬ ‫االشهر‬ ‫بس‬ ‫يعني‬ ,
2011 for € 48,000. The insurance policy is in effect from May 2011 through 2011 ‫بنهاية سنة‬
April 2012. If the company neglects May to to Dec >> 8 months
make the proper year-end
adjustment for the expired insurance 48000/12= 4000 (monthly)
a. Net income and assets will be 4000*8= 32000
understated by € 32,000.
b. Net income and assets will be this is the missing entry
Exp 32000
prepaid exp 32000
PAGE 23 WWW.FOTAMAT-A.COM

overstated by € 32,000.
c. Net income and assets will be
understated by € 16,000.
d. Net income and assets will be
overstated by € 16,000.

Ans: b

82. Cara, Inc. purchased supplies costing ₤2,500 on January 1, 2011 and
recorded the transaction by increasing assets. At the end of the year
₤1,300 of the supplies are still on hand. How will the adjusting entry
impact Cara, Inc.’s statement of financial position at December 31, 2011?
a. Decreased Assets ₤ 1,300.
b. Increased Equity ₤ 1,300. Supplies = 2500
c. Increased Liabilities ₤ 1,200. on hand = 1300
d. Decreased Assets ₤ 1,200. used (exp) = 2500-1300= 1200

Ans: d Supplies exp 1200

supplies 1200

83. Cara, Inc. purchased supplies costing ₤2,500 on January 1, 2011 and
recorded the transaction by increasing assets. At the end of the year
₤1,300 of the supplies are still on hand. If Cara, Inc. does not make the
appropriate adjusting entry, what is the impact on its statement of financial
position at December 31, 2011?
a. Assets overstated by ₤ 1,200. ‫ بس اهني لو ما سوو القيد شنو راح‬,‫نفس السؤال الي قبله‬
b. Equity understated by ₤ 1,200. ‫يصير ؟‬
c. Equity overstated by ₤ 1,300. ‫االست ماراح نقلل فراح يكون زايد عندنا بالقيمة‬
d. Assets overstated by ₤ 1,300.

Ans: a

84. Cara, Inc. purchased a building on January 1, 2011 for ₤ 500,000. The
useful life of the building is 10 years. What impact will the appropriate
adjusting entry at December 31, 2011 have on its statement of financial
position at December 31, 2011? ‫السؤال يبي شنو تاثير األدجستنق على ال‬
a. Increased Equity ₤ 50,000. financial statement
b. Increased Liabilities ₤ 50,000. adj:
c. Decreased Assets ₤ 50,000. dep exp xx
accu dep xx
a: ‫بقل مو يزيد‬
b: ‫ماله شغل‬
c: ‫صح الن يقلل من قيمة االست‬
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d. Since the adjusting entry has

offsetting debits and credits, there is no
impact on the statement of financial position.

Ans: c

85. Cara, Inc. purchased a building on January 1, 2011 for ₤ 500,000. The
useful life of the building is 10 years. The asset is reported on the
December 31, 2011 statement of financial position at ₤ 450,000. What
was the impact of the adjusting entry recorded by Cara, Inc.?
a. Decreased Equity ₤ 50,000.
b. Increased Liabilities ₤ 50,000. ‫نفس الي فوق راح نسجل مصاريف‬
c. Increased Assets ₤ 50,000. ‫يقل‬ ‫فااليكوتي‬
d. All of the choices are correct
regarding the impact of Cara, Inc.’s adjusting entry at December
31, 2011.

Ans: a

86. Wave Inn is a resort located in Canada. Wave Inn collects cash when
guests make a reservation. During December 2011, Wave Inn collected
$60,000 of cash and recorded the receipt by recognizing unearned
revenue. By the end of the month Wave Inn had earned one third of this
amount, the other two third will be earned during January 2012. The
adjusting entry required at December 31, 2011 would impact the
statement of financial position by
a. Increased Equity $40,000.
‫السؤال يبي شنو تاثير األدجستنق على ال‬
b. Decreased Liabilities $20,000.
financial statement
c. Increased Assets $60,000. ‫قيد لمن نستلم الفلوس‬
d. Decreased Equity $20,000. cash 60,000
unearned rev 60,000
Ans: b ‫ من المصاريف استحقت فهذي الي راح‬3\1 ‫الحين‬
‫نسويلها ادجستنق‬
unearned rev 60,000
rev 60,000
60,000*1/3=20,000
a: 20,000 ‫الرقم الزم‬
b: ‫صح قللناه‬
c: ‫الكاش الي اهوا است زدناه بأول قيد مو باالدجستنق‬
d: ‫يزيد مو يقل‬

87. Wave Inn is a resort located in Canada. During December 2011 Wave Inn
collects $120,000 cash related to a conference booked by the Spin
Jammers. The conference is scheduled for February 12 and 13, 2012.
Which of the following is true regarding how this transaction is reported on
the December 31, 2011 statement of financial position?
a. Spin Jammers reports unearned revenue of $120,000.
b. Wave Inn reports a prepaid asset of $120,000.
PAGE 25 WWW.FOTAMAT-A.COM

c. Wave Inn reports unearned revenue of $120,000.

d. All of the choices are correct regarding this transaction.

Ans: c
cash 120,000
unearned rev 120,000

88. Bread Basket provides baking supplies to restaurants and grocery stores.
During December 2011, Bread Basket’s employees worked 2,400 hours at
an average rate of
€10 per hour. At December 31, 2011, Bread Basket has paid €11,000 of
salary expense. If Bread Basket fails to make the appropriate adjusting
entry, which of the following is true regarding its December 31, 2011
statement of financial position?
a. Equity is overstated by € 11,000.
b. Equity is understated by € 13,000.
c. Liabilities are understated by € 13,000.
d. Liabilities are overstated by € 11,000.

Ans: c

24000= 10*2400 ‫ و مجموع المعاش الي الزم يدفعه‬,‫ معاشات‬11,000 ‫اهوا دفع‬
13000 = 11000 - 24000 ‫فالي مو دافعه و بسويله ادجستنق‬
‫ بس اهوا ما سوا هذا القيد‬13,000 ‫الزم يسجل ادجستنق يبين فيه ان عليه دين دفع معاشات للعمال بقيمة‬

exp 13000
salaries payable 13000
a: 13000 ‫الرقم الزم‬
b: ‫مفروض تكون زايدة مو ناقصه الن ماسجلنا مصاريف‬
c : ‫صح‬
d: ‫الرقم غلط و تكون ناقصه مو زايدة‬

89. Bread Basket provides baking supplies to restaurants and grocery stores.
On November 1, 2011, Bread Basket signed a €500,000, 6-month note
payable. The note requires Bread Basket cash
to pay 500,000
interest at an annual rate
N/P
of 12%. Assuming Bread Basket makes the appropriate 500,000 adjusting entry,
Adj
what is the impact on its December 31, 2011 statement of financial
interest exp 10,000
position?
interest payable 10,000
a. An expense of € 30,000.
b. An expense of € 10,000. 500,000*12% = 60,000 annually
60,000/12 = 5000 monthly
2 months= 5000*2 = 10,000
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c. A liability of € 10,000.
d. Two of the choices are correct.

Ans: c

90. Bread Basket provides baking supplies to restaurants and grocery

stores. On November 1, 2011, Bread Basket signed a €500,000, 6-month
note payable. The note requires Bread Basket to pay interest at an annual
rate of 12%. Bread Basket’s accountant is a recent college graduate who
lacks practical experiences. Therefore, the appropriate adjusting entry is
not made. What is the impact on its December 31, 2011 statement of
financial position?
a. Assets are overstated by € 30,000.
b. Equity is overstated by € 30,000. ‫ ما سوينا ادجستنق يعني ماراح‬,‫نفس الي فوق‬
c. Liabilities are understated by € 30,000. ‫دين‬ ‫نكون مسجلين مصاريف وال‬
d. Liabilities are understated by € 10,000. 10,000 ‫فيكونون ناقصين عندنا بقيمة‬

Ans: d

91. Wave Inn is a resort located in Canada. During December 2011 Spin
Jammers held its annual conference at the resort. The charges related to
the conference total $340,000, of which 25% has been paid by Spin
Jammers. When Wave Inn makes the appropriate adjusting entry, which
of the following is part of the adjustment made to its December 31, 2011
statement of financial position?
a. Debit cash $255,000. ‫لمن دفع‬
b. Credit revenues $255,000. cash 85000
c. Credit cash $255,000. rev 85000
d. Two of the choices are correct. ‫اخر الشهر نسجل الي مادفعه‬
AR 255000
Ans: b Rev 25000
340,000-85000 = 255000

‫الزم نسجل العوائد في هذه الفترة النها مستحقه لهالفترة مو‬

‫شرط لمن نستلم مبلغها• نسجلها‬

Which of the following statements is false regarding adjusting entries?

e. Cash is neither debited nor credited as a result of adjusting entries.
f. Each adjusting entry affects one statement of financial position
account and one income statement account.
g. Each adjusting entry affects one revenue account and one expense
account.
h. Adjusting entries involve accruals or deferrals.
PAGE 27 WWW.FOTAMAT-A.COM

Ans: c

92. If an adjusting entry is not made for an accrued revenue,

a. assets will be overstated.
b. expenses will be understated.
c. equity will be understated.
d. revenues will be overstated.

Ans: c

93. If an adjusting entry is not made for an accrued expense,

a. expenses will be overstated.
b. liabilities will be understated.
c. net income will be understated.
d. equity will be understated.

Ans: b

94. Failure to prepare an adjusting entry at the end of the period to record an
accrued expense would cause
a. net income to be understated.
b. an overstatement of assets and an overstatement of liabilities.
c. an understatement of expenses and an understatement of
liabilities.
d. an overstatement of expenses and an overstatement of liabilities.

Ans: c

95. Failure to prepare an adjusting entry at the end of a period to record an

accrued revenue would cause
a. net income to be overstated.
b. an understatement of assets and an understatement of revenues.
c. an understatement of revenues and an understatement of liabilities.
d. an understatement of revenues and an overstatement of liabilities.

Ans: b

96. Betty Carson has performed $500 of accounting services for a client but
has not billed the client as of the end of the accounting period. What
adjusting entry must Betty make?
a. Debit Cash and credit Unearned Revenue
b. Debit Accounts Receivable and credit Unearned Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Revenue and credit Service Revenue

Ans: c
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97. Betty Carson, an accountant, has billed her clients for services performed.
She subsequently receives payments from her clients. What entry will
Betty make upon receipt of the payments?
a. Debit Unearned Revenue and credit Service Revenue
b. Debit Cash and credit Accounts Receivable
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Cash and credit Service Revenue

Ans: b we recorded the revenue once it earned.

98. Sherman Air Charter signed a four-month note payable in the amount of
$8,000 on September 1. The note requires interest at an annual rate of
6%. The amount of interest to be accrued at the end of September is
a. $160.
b. $40.
8000 * 6% = 480 annually
c. $480.
480 / 12 = 40 monthly
d. $120.

Ans: b

99. Joyce’s Gifts signs a three-month note payable to help finance

increases in inventory for the Christmas shopping season. The note is
signed on November 1 in the amount of $50,000 with annual interest of
12%. What is the adjusting entry to be made on December 31 for the
interest expense accrued to that date, if no entries have been made
previously for the interest?
a. Interest Expense...................................................... 1,000
i. Interest Payable............................................ 1,000
b. Interest Expense...................................................... 1,500
i. Interest Payable............................................ 1,500
c. . Interest Expense................................................... 1,000
i. Cash.............................................................. 1,000
d. Interest Expense...................................................... 1,000
i. Note Payable................................................. 1,000

Ans: a 50000*12%=6000 annually

6000/12= 500 per month
100. Cindi’s Candies paid employee
2 months = 2*500 =wages
1000 on and through Friday, January
26, and the next payroll will be paid in February. There are three more
working days in January (29–31). Employees work 5 days a week and the
company pays $700 a day in wages. What will be the adjusting entry to
accrue wages expense at the end of January?
a. Wages Expense.................................................... 700
i. Wages Payable............................................. 700
b. Wages Expense.................................................... 3,500
i. Wages Payable............................................. 3,500
c. Wages Expense.................................................... 2,100
PAGE 29 WWW.FOTAMAT-A.COM

i. Wages Payable............................................. 2,100

d. No adjusting entry is required.
700 * 3 = 2100
Ans: c

101. A company shows a balance in Salaries Payable of ¥40,000 at the end

of the month. The next payroll amounting to ¥45,000 is to be paid in the
following month. What will be the journal entry to record the payment of
salaries?
a. Salaries Expense.................................................. 45,000
i. Salaries Payable...........................................
......................................................................45,000
b. Salaries Expense.................................................. 45,000
i. Cash..............................................................
......................................................................45,000
c. Salaries Expense.................................................. 5,000
i. Cash.............................................................. 5,000
d. Salaries Expense.................................................. 5,000
Salaries Payable...................................................... 40,000
i. Cash..............................................................
......................................................................45,000

Ans: d

102. A business pays weekly salaries of $25,000 on Friday for a five-day

week ending on that day. The adjusting entry necessary at the end of the
fiscal period ending on a Thursday is
a. debit Salaries Payable, $20,000; credit Cash, $20,000.
b. debit Salaries Expense, $20,000; credit Cash, $20,000.
c. debit Salaries Expense, $20,000; credit Salaries Payable, $20,000.
d. debit Salaries Expense, $5,000; credit Salaries Payable, $5,000.

Ans: c
‫اثنين \ ثالثه \ اربعا \ خميس‬
‫ و يوم‬,‫يخصون الفترة الماليه الي راح تنتهي فالزم نسجل المصاريف عليها‬
‫اليمعه لمن يحل وقت الدفع ندفع كاش‬
25000/5 = 5000 per day
5000 * 4 = 20,000

103. Jenni’s Music Store borrowed $12,000 from the bank signing a 9%, 3-
month note on September 1. Principal and interest are payable to the
bank on December 1. If the company prepares monthly financial
statements, the adjusting entry that the company should make for interest
on September 30, would be

a. Debit Interest Expense, $1,080; Credit Interest Payable, $1,080.

b. Debit Interest Expense, $90; Credit Interest Payable, $90.
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c. Debit Note Payable, $1,080; Credit Cash, $1,080.

d. Debit Cash, $270; Credit Interest Payable, $270.

Ans: b 12,000 * 9% = 1080 annually

1080/12 = 90 per month

104. Becki Jean Corporation issued a one-year, 6%, $200,000 note on

April 30, 2011. Interest expense for the year ended December 31, 2011
was
a. $12,000. 200,000 * 6% = 12000 annually
b. $9,000. 12000/12 = 1000 per month
c. $8,000. I have 8 months May to Dec
d. $7,000. 1000*8 = 8000

Ans: c

Employees at Julian Corporation are paid $10,000 cash every Friday

for working Monday through Friday. The calendar year accounting
period ends on Wednesday, December 31. How much salary expense
should be recorded two days later on January 2?
a. $10,000
b. $6,000
c. None, matching requires the weekly salary to be accrued on December
31.
d. $4,000 10,000 / 5 = 2000 per day
record for 2 days = 2*2000=4000
Ans: d

105. Can financial statements be prepared directly from the adjusted trial
balance?
a. They cannot. The general ledger must be used.
b. Yes, adjusting entries have been recorded in the general journal
and posted to the ledger accounts.
c. No, the adjusted trial balance merely proves the equality of the total
debit and total credit balances in the ledger after adjustments are
posted. It has no other purpose.
d. They can because that is the only reason that an adjusted trial
balance is prepared.

Ans: b

106. The adjusted trial balance is prepared

a. after financial statements are prepared.
b. before the trial balance.
c. to prove the equality of total assets and total liabilities.
d. after adjusting entries have been journalized and posted.

Ans: d
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107. An adjusted trial balance

a. is prepared after the financial statements are completed.
b. proves the equality of the total debit balances and total credit
balances of ledger accounts after all adjustments have been made.
c. is a required financial statement under IFRS.
d. cannot be used to prepare financial statements.

Ans: b

108. Which of the statements below is not true?

a. An adjusted trial balance should show ledger account balances.
b. An adjusted trial balance can be used to prepare financial
statements.
c. An adjusted trial balance proves the mathematical equality of debits
and credits in the ledger.
d. An adjusted trial balance is prepared before all transactions have
been journalized.

Ans: d

109. A document prepared to prove the equality of debits and credits after
all adjustments have been prepared is the
a. Adjusted statement of financial position.
b. Adjusted trial balance.
c. Adjusted financial statements.
d. Post-closing trial balance.
Ans: b

110. Similarities between International Financial Reporting Standards

(IFRS) and U.S. GAAP include all of the following except
a. Cash-basis accounting is not in accordance with either IFRS or
U.S. GAAP.
b. Both IFRS and U.S. GAAP allow revaluation of item such as land
and building to fair value.
c. Both IFRS and U.S. GAAP divide the economic life of companies
into artificial time periods.
d. The form and content of financial statements are very similar under
IFRS and U.S. GAAP.

Ans: b
111. Cara, Inc. purchased supplies costing $2,500 on January 1, 2011 and
recorded the transaction by debiting an expense. At the end of the year
$1,300 of the supplies are still on hand. If Cara, Inc. does not make the
appropriate adjusting entry, what is the impact on its statement of financial
position at December 31, 2011?
a. Assets understated by $1,200. salaries exp 2500
b. Equity understated by $1,200. cash 2500
‫مفروض تسجلهم است و بنهاية الفترة تشوف شكثر استخدمت و‬
c. Equity overstated by $1,300. ‫ ولكن‬,‫ بس اهيا من االساس سجلته مصروف‬,‫تسجله كمصروف‬
‫ ما استخدمتهم يعني است و‬1300 ‫بنهاية الفترة شافت ان عندها‬
‫ فيكون‬,‫اهيا مو مسجله است وال سوت ادجستنق• عشان تعدل‬
‫االست عندها قال‬
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d. Assets understated by $1,300.

Ans: d

112. Wave Inn is a resort located in Canada. Wave Inn collects cash when
guests make a reservation. During December 2011, Wave Inn collected
$60,000 of cash and recorded the receipt by recognizing revenue. By the
end of the month Wave Inn had earned one third of this amount, the other
two third will be earned during January 2012. The adjusting entry required
at December 31, 2011 would impact the statement of financial position by
a. Decreased Equity $40,000.
b. Decreased Liabilities $40,000. Cash 60000
c. Increased Assets $60,000. Revenue 60000
d. Increased Equity $20,000. ‫ الحين اهيا بس‬unearned rev ‫المفروض تسجله‬
‫ فراح تسوي‬,‫ من المبلغ الي مفروض يكون عوائد‬3\1 ‫استحقت‬
Ans: a ‫ادجستنق تقلل من الريفنيو• و تسجله دين‬
‫تقليل الريفنيو يقلل االيكويتي‬
60,000*1/3 = 20000 ( rev )
60,000 - 20,000 = 40,000 ( lia)

113. Myron is a barber who does his own accounting for his shop. When he
buys supplies he routinely debits Supplies Expense. Myron purchased
$1,500 of supplies in January and his inventory at the end of January
shows $600 of supplies remaining. What adjusting entry should Myron
make on January 31?
a. Supplies Expense................................................. 600
i. Supplies........................................................ 600
b. Supplies Expense................................................. 1,500
i. Cash.............................................................. 1,500
c. Supplies................................................................. 600
i. Supplies Expense......................................... 600
d. Supplies Expense................................................. 900
i. Supplies........................................................ 900

Ans: c

114. Alternative adjusting entries do not apply to

a. accrued revenues and accrued expenses.
b. prepaid expenses.
c. unearned revenues.
d. prepaid expenses and unearned revenues.

Ans: a
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115. . Mike Conway is a lawyer who requires that his clients pay him in
advance of legal services rendered. Mike routinely credits Legal Service
Revenue when his clients pay him in advance. In June Mike collected
$12,000 in advance fees and completed 75% of the work related to these
fees. What adjusting entry is required by Mike's firm at the end of June?
a. Unearned Revenue .............................................. 9,000
i. Legal Service Revenue ................................ 9,000
b. Unearned Revenue .............................................. 3,000
i. Legal Service Revenue ................................ 3,000
c. Cash ..................................................................... 12,000
i. Legal Service Revenue ................................
......................................................................12,000
d. Legal Service Revenue ........................................ 3,000
i. Unearned Revenue ...................................... 3,000

Ans: d Cash 12,000

Revenue 12,000
‫ الحين‬unearned rev ‫المفروض يسجله‬
‫ فراح تسوي‬,‫ من المبلغ الي مفروض يكون عوائد‬%75 ‫استحق‬
‫ادجستنق تقلل من الريفنيو• و تسجله دين‬
12,000 *75%=9000 ( rev)
12,000- 9,000 = 3000 ( liabilities)

116. If prepaid expenses are initially recorded in expense accounts and

have not all been used at the end of the accounting period, then failure to
make an adjusting entry will cause
a. assets to be understated.
we should record the unused amount as
b. assets to be overstated.
an assets, but we didn't.
c. expenses to be understated.
d. contra-expenses to be overstated.

Ans: a

117. If unearned revenues are initially recorded in revenue accounts and

have not all been earned at the end of the accounting period, then failure
to make an adjusting entry will cause
a. liabilities to be overstated.
b. revenues to be understated.
c. revenues to be overstated.
d. accounts receivable to be overstated.

Ans: c

118. On January 2, 2011, National Credit and Cash purchased a general

liability insurance policy for ₤3,600 for coverage for the calendar year. The
entire ₤3,600 was charged to Insurance Expense on January 2, 2011. If
the firm prepares monthly financial statements, the proper adjusting entry
on January 31, 2011, will be:
a. Insurance Expense............................................... 3,300
i. Prepaid Insurance......................................... 3,300
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b. Prepaid Insurance................................................. 3,300

i. Insurance Expense....................................... 3,300
c. Insurance Expense............................................... 300
i. Prepaid Insurance......................................... 300
d. Prepaid Insurance................................................. 300
i. Insurance Expense....................................... 300

Ans: b ‫ التأمين حل فقط لشهر واحد‬,‫الزم نسجل االشهر الي ما حل عليهم التأمين‬
3600/12= 300 each month
300 * 11 = 3300

119. For prepaid expense adjusting entries

a. an expense—liability account relationship exists.
b. prior to adjustment, expenses are overstated and assets are
understated.
c. the adjusting entry results in a debit to an expense account and a
credit to an asset account.
d. none of these.

Ans: c

120. Expenses paid and recorded as assets before they are used are called
a. accrued expenses.
b. interim expenses.
c. prepaid expenses.
d. unearned expenses.

Ans: c

121. Sail & Surf Cruises purchased a five-year insurance policy for its ships
on April 1, 2011 for $100,000. Assuming that April 1 is the effective date of
the policy, the adjusting entry on December 31, 2011 is
a. Prepaid Insurance.................................................. 15,000
i. Insurance Expense.......................................
...........................................................15,000
b. Insurance Expense................................................. 15,000
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i. Prepaid Insurance.........................................
...........................................................15,000
c. Insurance Expense................................................. 20,000
i. Prepaid Insurance.........................................
...........................................................20,000
d. Insurance Expense................................................. 5,000
i. Prepaid Insurance......................................... 5,000

Ans: b 100,000 for 5 years

100,000 / 5 = 20,000 annually
20,000 / 12 = 1666 monthly

April to Dec = 9 months

1666*9= 15,000

122. CHS Company purchased a truck from JLS Corp. by issuing a 6-

month, 8% note payable for $37,500 on November 1. On December 31,
the accrued expense adjusting entry is
a. No entry is required.
b. Interest Expense...................................................... 3,000
i. Interest Payable............................................ 3,000
c. Interest Expense..................................................... 6,000
i. Interest Payable............................................ 6,000
d. Interest Expense..................................................... 500
i. Interest Payable............................................ 500

Ans: d 37500*8%= 3000 annually

3000 / 12 = 250 monthly

Nov to Dec = 2 months

250*2 = 500

123. If the adjusting entry for depreciation is not made,

a. assets will be understated.
b. equity will be understated. a: accumulated dep‫العكس الن ماراح يكون في‬
c. net income will be understated. ‫الي يقلل من االستست‬
d. expenses will be understated. b: ‫بتكون زايدة الن مافي دبرشيشن فماكو اكسبنس‬
c : •‫حالها من حال االيكوتي‬
Ans: d d: ‫صح الن ماكو دبرشيشن‬
124.
125. BJ, an employee of Walker Corp., will not receive her paycheck until
April 2. Based on services performed from March 15 to March 30, her
salary was $800. The adjusting entry for Walker Corp. on March 31 is
a. Salaries Expense..................................................... 800
i. Salaries Payable............................................ 800
b. No entry is required.
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c. Salaries Expense..................................................... 800

i. Cash............................................................... 800
d. Salaries Payable...................................................... 800
i. Cash............................................................... 800

Ans: a ,4 ‫ و بندش شهر‬3 ‫الموظفة ما استلمت معاشها المستحق لشهر‬

‫ و تسجل ان‬3 ‫فالشركة تسجل مصروف معاشها المستحق في شهر‬
‫عليها دين ان الزم تدفع معاش لها‬

126. Which of the following statements related to the adjusted trial balance
is incorrect?
a. It shows the balances of all accounts at the end of the accounting
period.
b. It is prepared before adjusting entries have been made.
c. It proves the equality of the total debit balances and the total credit
balances in the ledger.
d. Financial statements can be prepared directly from the adjusted
trial balance.

Ans: b

127. Financial statements are prepared directly from the

a. general journal.
b. ledger.
c. trial balance.
d. adjusted trial balance.

Ans: d