Chapter 2 Final Exam Study Flashcards Preview

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Flashcards in Chapter 2 Final Exam Study Deck (14):

The journal entry to record the borrowing of cash and the signing of a note payable involves:

A debit to cash and a credit to note payable.


Which of the following is most likely an accrued liability?
-Office supplies



A prepaid expense is an expense:

Paid but not yet incurred.


The Esquire Clothing Company borrowed a sum of cash on October 1, 2018, and signed a note payable. The annual interest rate was 12% and the company's year 2018 income statement reported interest expense of $1,260 related to this note. What was the amount borrowed?



Which of the following adjusting entries causes a decrease in assets?
-Recognizing the portion of revenue collected in advance.
-Recording depreciation expense.
-Accruing unrecorded salaries expense.
-Accruing unrecorded interest revenue.

Recording depreciation expense.


Which of the following adjusting entries causes an increase in liabilities?
-Accruing unrecorded interest expense.
-Recording the amount of expired prepaid insurance.
-Accruing unrecorded interest revenue.
-Recording depreciation expense.

Accruing unrecorded interest expense.


If the required adjusting entry for depreciation expense is omitted:

Assets will be overstated and income overstated.


The accumulated depreciation account is a contra (valuation) account to:

Asset account


The correct amount of prepaid insurance shown on a company's December 31, 2018, balance sheet was $900. On July 1, 2019, the company paid an additional insurance premium of $600. In the December 31, 2019, balance sheet, the amount of prepaid insurance was correctly shown as $500. The amount of insurance expense that should appear in the company's 2019 income statement is:



The Wazoo Times Newspaper Company reported an $11,200 liability in its 2018 balance sheet for subscription revenue received in advance. During 2019, $62,000 was received from customers for subscriptions and the 2019 income statement reported subscription revenue of $63,700. What is the liability amount for deferred subscription revenue that will appear in the 2019 balance sheet?

[11,200 (beg. bal.) + 62,000 (add. receipts) - 63,700 (subscription revenue recognized)]


In a classified balance sheet, supplies would be classified among:

Current assets


In a statement of cash flows, cash received from the issuance of common stock would be classified as a:

Financing Activity


The closing process involves:

Transferring revenue and expense balances to retained earnings.


If revenues exceed expenses for the accounting period, the income summary account:

Will have a credit balance prior to closing.