Test Bank & Solution Manual for Survey of Accounting 3rd Edition by Paul D. Kimmel – Pract, Exams of Financial Accounting

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TEST BANK

Survey of Accounting, 3rd Edition

by Kimmel, Weygandt, Mitchell

Chapters 1 to 18 with Appendix D, E, F, G & H

TABLE OF CONTENTS

CHAPTERS

1 Introduction to Financial Statements 2 A Further Look at The Balance Sheet 3 The Accounting Information System 4 Accrual Accounting Concepts 5 Fraud, Internal Control, and Cash 6 Merchandising Operations andthe Multiple-Step Income Statement 7 Reporting and Analyzing Inventory and Receivables 8 Reporting and Analyzing Long-Lived Assets 9 Reporting and Analyzing Liabilities and Stockholders ’ Equity 10 Financial Analysis: The Big Picture 11ManagerialAccounting 12 Job Order Costing 13 Cost-Volume-Profit 14 Incremental Analysis 15 Budgetary Planning 16 Budgetary Control and Responsibility Accounting 17 Standard Costs and Balanced Scorecard 18 Planning for Capital Investments

1. An account is often referred to as a T-account because of the way it is constructed. Answer: TRUE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. A debit to an account always indicates an increase in that account. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. If a revenue account is credited, the revenue account is increased. Answer: TRUE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. The normal balance of all accounts is a debit. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. Debit and credit can be interpreted to mean "bad" and "good", respectively. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. A credit means that an account has been increased. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. A decrease in a liability account is recorded by a debit. Answer: TRUE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. An increase in an asset is recorded by a debit. Answer: TRUE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. The double-entry system of accounting refers to the placement of a double line at the end of a column of figures. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. A credit balance in a liability account indicates that an error in recording has occurred. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Revenues are a subdivision of stockholders' equity. Answer: TRUE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. Under the double-entry system, revenues must always equal expenses. Answer: FALSE Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. Source documents can provide evidence that a transaction has occurred. Answer: TRUE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal. Answer: TRUE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Transactions are entered in the ledger accounts and then transferred to journals. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. All business transactions must be entered first in the general ledger. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. Transactions are recorded in alphabetical order in a journal. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. The journal is a chronological record of all transactions. Answer: TRUE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. The entire group of accounts maintained by a company is referred to collectively as the journal. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Prepaid expenses are assets. Answer: TRUE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. Salaries and wages payable is a type of expense. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. Dividends are classified as an expense. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. Unearned Service Revenue is classified as a liability on the balance sheet. Answer: TRUE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Posting is the process of proving the equality of debits and credits in the trial balance. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Entering transactions into the journal is called posting. Answer: FALSE Diff: 1 LO: 2 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. A trial balance is prepared at the beginning of an accounting period. Answer: FALSE Diff: 1 LO: 3 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
4. A trial balance does not prove that all transactions have been recorded or that the ledger is correct. Answer: TRUE Diff: 1 LO: 3 Bloom: C AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
5. In a trial balance, all debits are listed before all credits. Answer: FALSE Diff: 1 LO: 3 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Jamal Company began the year with $126,000 in its Common Stock account and a debit balance in Retained Earnings of $54,000. During the year, the company earned net income of $27,000 and declared and paid $9,000 of dividends. In addition, the company sold additional common stock amounting to $33,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders' equity accounts? A) $231, B) $249, C) $123, D) $165, Answer: C Explanation: $126,000 - $54,000 + $27,000 - $9,000 + $33,000 = $123, (Beg. com. st. - Beg. ret. earn. + Net inc. - Div. + Com. st. sold) Diff: 2 LO: 1 Bloom: AP AACSB / IMA: Analytic / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 3
2. Crawford Company started the year with $60,000 in its Common Stock account and a credit balance in Retained Earnings of $44,000. During the year, the company earned net income of $48,000 and declared and paid $20,000 of dividends. In addition, the company sold additional common stock amounting to $28,000. As a result, the amount of its retained earnings at the end of the year would be A) $160,000. B) $72,000. C) $132,000. D) $100,000. Answer: B Explanation: $44,000 + $48,000 - $20,000 = $72, (Beg. ret. earn. + Net inc. - Div.) Diff: 2 LO: 1 Bloom: AP AACSB / IMA: Analytic / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 3

1. The left side of an account is A) blank. B) a description of the account. C) the debit side. D) the balance of the account. Answer: C Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Which one of the following is not a part of an account? A) credit side B) trial balance C) debit side D) title Answer: B Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. An account is a part of the financial information system and is described by each one of the following except A) an account has a debit and credit side. B) an account is a source document. C) an account consists of three parts. D) an account has a title. Answer: B Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Which statement about an account is true? A) In its simplest form, an account consists of two parts. B) An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items. C) There are separate account for specific assets and liabilities but only one account for stockholders' equity items. D) The left side of an account is the credit or decrease side. Answer: B Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. In its simplest form, an account consists of all of the following except A) right (credit) side. B) account title. C) left side. D) explanationcolumn. Answer: D Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. A debit to an asset account indicates a(n) A) error. B) credit was made to a liability account. C) decrease in the asset. D) increase in the asset. Answer: D Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Debits A) increase both assets and liabilities. B) decrease both assets and liabilities. C) increase assets and decrease liabilities. D) decrease assets and increase liabilities. Answer: C Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. The normal balance of any account is the A) left side. B) right side. C) side which increases that account. D) side which decreases that account. Answer: C Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. The double-entry system requires that each transaction must be recorded A) in at least two different accounts. B) in two sets of books. C) in a journal and in a ledger. D) first as a revenue and then as an expense. Answer: A Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Which of the following describes the classification and normal balance of the Unearned Rent Revenueaccount? A) asset, debit B) liability,credit C) revenues, credit D) expense,debit Answer: B Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. A revenueaccount A) is increased by debits. B) is decreased by credits. C) has a normal balance of a debit. D) is increased by credits. Answer: D Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
3. Which one of the following represents the expanded basic accounting equation? A) Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses B) Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues C) Assets - Liabilities - Dividends = Common Stock + Revenues - Expenses D) Assets = Revenues + Expenses - Liabilities Answer: B Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1

1. Which of the following correctly identifies normal balances of accounts? A) Assets Debit Liabilities Common Stock Revenues Expenses Credit Credit Debit Credit B) Assets Debit Liabilities Common Stock Revenues Expenses Credit Credit Credit Credit C) Assets Credit Liabilities Common Stock Revenues Expenses D) Assets Liabilities Common Stock Revenues Expenses Answer: D Diff: 1 LO: 1 Bloom: K Debit Debit Credit Debit Debit Credit Credit Credit Debit AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1
2. Which accounts normally have debit balances? A) assets, expenses, and revenues B) assets, expense, and retained earnings C) assets, liabilities, and dividends D) assets, expenses, and dividends Answer: D Diff: 1 LO: 1 Bloom: K AACSB / IMA: None / Reporting AICPA: BB: None; FC: Reporting; PC: None Minutes: 1