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Question 1
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Correcting journal entries are used to
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A
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Reverse some adjusting entries to make subsequent related transactions easier to record.
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B
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Rectify incorrect journal entries.
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C
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Determine if debits and credits are equal.
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D
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Adjust revenue and expense accounts to reflect accruals and deferrals.
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Question 2
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When making a journal entry for payroll this week, San Juan Company forgot to add $1,000 of overtime pay for several employees who worked on a special project. The regular payroll was $5,000. What is the correcting net journal entry San Juan should make to remedy this error?
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A
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Wage expense
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$1,000
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Cash
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$1,000
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B
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Cash
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$1,000
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Wage expense
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$1,000
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C
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Wage expense
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$6,000
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Cash
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$6,000
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D
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Cash
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$5,000
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Wage expense
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$5,000
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Question 3
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In the accrual basis of accounting, estimates of the future that affect accruals and deferrals
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A
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Are easily determined for any long-term asset.
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B
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Sometimes involve uncertainty about the future.
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C
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Are used to rectify incorrect journal entries.
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D
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Are used to allocate assets and liabilities from a single transaction over several accounting periods.
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Question 4
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Which of the following factors should NOT be considered when estimating the useful life of a long-term asset?
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A
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Innovations that may render the asset obsolete.
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B
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The amount of time the asset’s physical structure is expected to last.
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C
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The effect the asset’s useful life will have on the income statement.
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D
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The entity’s future plans and business strategy.
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Question 5
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The uncertainty of some estimates for accrual or deferral purposes
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A
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May have a significant effect on the determination of income.
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B
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Will only have a minimal effect on the financial statements.
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C
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Is more certain as useful lives of assets become longer.
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D
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Will be irrelevant for income tax purposes.
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Question 6
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An entity’s need to attract and retain financial capital
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A
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Does not create a bias.
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B
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Tends to create a bias against reporting positive results.
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C
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Tends to create a bias in favor of reporting positive results.
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D
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Tends to decrease the likelihood of positive results.
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Question 7
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For the purpose of income tax preparation, an entity
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A
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Should report only uncertain estimates.
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B
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Has an incentive to report the least income possible.
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C
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Will tend to report positive results.
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D
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Should write off the accounts payable.
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Question 8
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Auditing is
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A
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The process of compiling financial statements.
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B
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The process of determining whether financial statements are presented fairly.
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C
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The process of calculating a trial balance.
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D
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The process of certifying a public accountant.
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Question 9
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A compilation is
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A
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Another word for auditing.
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B
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The preparation of financial statements without any review or auditing.
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C
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A limited check of financial statements that does not constitute an audit.
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D
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An analysis of an entity’s financial statements.
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Question 10
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The right to perform an independent audit and perform the attest function on financial statements
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A
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Is reserved for Certified Public Accountants.
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B
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Belongs to any person with a degree in accounting.
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C
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Is reserved for an entity’s management.
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D
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Is held by state governments.
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