Accounting 310 Exam 1 Study Guide with Detailed Study Questions with Correct Answers

Accounting 310 Exam 1 Study Guide with Detailed Study Questions with Correct Answers 1. The process of transferring figures from the book of original entry to the ledger accounts is called - ANSWER posting 2. Factors that shape an accounting information system include - ANSWER nature of the business, size of the firm, and volume of data to be handled 3. The double-entry accounting system means that - ANSWER the dual effect of each transaction is recorded with a debit and a credit. 4. An accrued revenue can best be described as an amount - ANSWER not collected and currently matched with expenses 5. An unearned revenue can best be described as an amount - ANSWER collected and not currently matched with expenses 6. An adjusted trial balance - ANSWER proves the equality of the debit balances and credit balances of ledger accounts after all adjustments have been made 7. Which of the following is a real (permanent) account? - ANSWER goodwill and accounts receivable 8. A journal entry to record a receipt of rent in advance will include a - ANSWER credit to unearned revenue 9. Which of the following errors will cause an imbalance in the trial balance? - ANSWER listing the balance of an account with a debit balance in the credit column of the trial balance 10. Debit always means - ANSWER the left side of an account 11. The accounting equation must remain in balance - ANSWER throughout each step in the accounting cycle 12. When a corporation pays a note payable and interest, - ANSWER notes payable and interest expense will be debited 13. A trial balance may prove that debits and credits are equal, but - ANSWER all answers are correct (amount in wrong account, transaction entered twice, transaction omitted) 14. A trial balance - ANSWER all answers are correct (proves debits and credits are equal in ledger, listing of open accounts used in financial statements, prepared three times in accounting cycle) 15. Which of the following is an example of an accrued expense? - ANSWER property taxes incurred during the year, to be paid in the first quarter of the subsequent year 16. The journal entry to record a payment on account will include a - ANSWER debit to accounts payable 17. To compute interest expense on a note for an adjusting entry, the formula is (principal x annual rate x a fraction). The numerator and denominator of the fraction are: - ANSWER Numerator - length of time the note has been outstanding, Denominator - 12 months 18. When an expense is paid in cash before it is used, it is called a - ANSWER prepaid expense 19. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles? - ANSWER to match the costs of production with revenues as recognized 20. An accrued expense can be best described as an amount - ANSWER not paid and currently matched with earnings 21. When revenue or expense has been recognized or incurred but not yet collected or paid, it is normally called an __________ revenue or expense - ANSWER accrued 22. When revenue is collected and recorded in advance, it is normally accounted for as an _________ revenue - ANSWER unearned 23. Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries? - ANSWER All the choices are correct 24. expiration of prepaid insurance, depreciation of fixed assets, use of supplies 25. A prepaid expense can best be described as an amount - ANSWER paid and not currently matched with revenues 26. An adjusting entry to record an accrued expense involves a debit to a(n) - ANSWER expense account and credit to a liability account 27. The failure to properly record an adjusting entry to accrue an expense will result in an - ANSWER understatement of expenses and an understatement of liabilities 28. The omission of the adjusting entry to record depreciation expense will result in an - ANSWER overstatement of assets and an overstatement of stockholders' equity 29. Adjustments are often prepared - ANSWER after the balance sheet date, but dated as of the balance sheet date. 30. If a company prepays an expense - ANSWER it debits an asset account to show the service or benefit it will receive in the future 31. Olsen Company problem - The interest revenue reported on the income statement for 2025 was - ANSWER $71,000 32. Olsen Company problem - Salaries and wages expense reported on the income statement for 2025 was - ANSWER $283,800 33. A company receives interest on a $90,000, 8%, 5-year note receivable each April 1. At December 31, 2025, the following adjusting entry was made to accrue interest receivable: debit interest receivable and credit interest revenue, $5400