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Accounts Concepts Quiz

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Accounts Concepts Quiz 1. During the year 2009, Diego Company earned revenues of $45,000, had expenses of $25,000, purchased assets with a cost of $5,000 and had owner drawings of $3,000. Net income for the year is a. $45,000. b. $20,000. c. $17,000. d. $15,000. 2. Which one of the following represents the expanded basic accounting equation? a. Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenue – Expenses. b. Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenues. c. Assets – Liabilities – Owner’s Drawings = Owner’s Capital + Revenues – Expenses. d. Assets = Revenues + Expenses – Liabilities. 3. Taylor Industries purchased supplies for $1,000. They paid $500 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $500. Which of the following would be the correct way to complete the recording of the transaction? a. Credit an asset account for $500. b. Credit another liability account for $500. c. Credit the Taylor, Capital account for $500. d. Debit the Taylor, Capital account for $500. 4 Rusthe Company showed the following balances at the end of its first year: Cash $ 7,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Denton, Capital 1,400 Denton, Drawing 700 Revenues 21,000 Expenses 17,500 What did Rusthe Company show as total credits on its trial balance? a. $30,100 b. $29,400 c. $28,700 d. $30,800 5. At September 1, 2010, Crews Co. reported owner’s equity of $136,000. During the month, Crews generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and withdrew cash of $2,000. What is the amount of owner’s equity at September 30, 2010? a. $136,000 b. $8,000 c. $137,000 d. $142,000 6. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies of $4,500? a. Debit Insurance Expense, $4,500; Credit Prepaid Insurance, $4,500. b. Debit Insurance Expense, $15,500; Credit Prepaid Insurance, $15,500. c. Debit Prepaid Insurance, $11,000; Credit Insurance Expense, $11,000. d. Debit Insurance Expense, $11,000; Credit Prepaid Insurance, $11,000. 7. On January 2, 2010, National Credit and Cash purchased a general liability insurance policy for $2,400 for coverage for the calendar year. The entire $2,400 was charged to Insurance Expense on January 2, 2010. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2010, will be: a. Insurance Expense 2,200 Prepaid Insurance 2,200 b. Prepaid Insurance 2,200 Insurance Expense 2,200 c. Insurance Expense 200 Prepaid Insurance 200 d. Prepaid Insurance 200 Insurance Expense 200 8. A lawyer collected $830 of legal fees in advance. He erroneously debited Cash for $380 and credited Accounts Receivable for $380. The correcting entry is a. Cash 380 Accounts Receivable 450 Unearned Revenue 830 b. Cash 830 Service Revenue 830 c. Cash 450 Accounts Receivable 380 Unearned Revenue 830 d. Cash 450 Accounts Receivable 450 9. The following items are taken from the financial statements of Dinkel Company for the year ending December 31, 2010: Accounts payable $ 18,000 Accounts receivable 11,000 Accumulated depreciation – equipment 28,000 Advertising expense 21,000 Cash 15,000 Dinkel, Capital (1/1/10) 102,000 Dinkel, Drawing 14,000 Depreciation expense 12,000 Equipment 190,000 Insurance expense 3,000 Note payable, due 6/30/11 70,000 Patents 20,000 Prepaid insurance (12-month policy) 6,000 Rent expense 17,000 Salaries expense 32,000 Service revenue 133,000 Supplies 4,000 Supp

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