Learning Objective 3-4
1) Which financial statement shows Revenues?
A) income statement
B) statement of changes in shareholders’ equity
C) statement of cash flows
D) balance sheet
2) Which financial statement shows Cash collected from customers?
A) income statement
B) statement of changes in shareholders’ equity
C) statement of cash flows
D) balance sheet
3) On January 1, Needem, Inc. borrows $10,000 and agrees to repay the loan plus 8% interest in two years. If the proper adjustment is
not
made at the end of the first year, what will be wrong with the financial statements?
A) Nothing will be wrong with the financial statements.
B) Cash will be overstated on the balance sheet.
C) Expenses will be overstated on the income statement.
D) Liabilities will be understated on the balance sheet.
4) Which financial statement shows accumulated depreciation?
A) income statement
B) balance sheet
C) statement of cash flows
D) statement of changes in shareholders’ equity
5) The bookkeeper of Dew Drop Inn forgets to record the adjusting entry for salaries earned but not yet paid. As a result of this mistake ________.
A) total liabilities are too high
B) net income is too high
C) net income is too low
D) shareholders’ equity is too low
6) Miss Happ of Ace Electronics forgot to make the adjusting entry for depreciation on the company’s equipment. As a result of this mistake ________.
A) total liabilities are too low
B) net income is too high
C) net income is too low
D) shareholders’ equity is too low
7) Miss Happ of Ace Electronics forgot to make the adjusting entry for supplies used during the accounting period. As a result of this mistake ________.
A) total liabilities are too low
B) net income is too high
C) net income is too low
D) shareholders’ equity is too low
8) Miss Happ of Ace Electronics forgot to make the adjusting entry for prepaid insurance that expired during the accounting period. As a result of this mistake ________.
A) total liabilities are too low
B) net income is too high
C) net income is too low
D) shareholders’ equity is too low
9) Which of the following accounts typically needs to be adjusted?
A) Cash
B) Land
C) Unearned revenue
D) Common stock
10) Adjustments are usually made ________.
A) in the accounting period during which deferrals are discovered
B) at the end of the accounting period after the financial statements are prepared
C) in the accounting period when accruals get too large
D) at the end of the accounting period before financial statements are prepared