If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect total assets for the current period?

A) Total assets will be too low.

B) Total assets will be correct.

C) Total assets will be too high.

D) Not possible to determine.

Answer: B

If a company incorrectly records Service Revenue too high, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Providing services to customers on account would affect the balances reported in which financial statement(s)?

A) Income statement.

B) Statement of stockholders' equity.

C) Balance sheet.

D) All of the financial statements in the other answers would be affected.

Answer: D

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: C

If a company incorrectly records a payment as an expense instead of an asset, how will this error affect net income in the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: A

The statement of stockholders' equity includes which of the following for the period?

A) Details of a company's profitability that represents stockholders' claims.

B) Changes in stockholders' equity accounts.

C) Inflows and outflows of cash that benefit stockholders.

D) Current assets available to pay current liabilities to reduce risk to stockholders.

Answer: B

Door Company estimated manufacturing overhead costs for 2009 at $378,000. The predetermined manufacturing overhead rate was based on 105,000

Door Company estimated manufacturing overhead costs for 2009 at $378,000. The predetermined manufacturing overhead rate was based on 105,000 estimated direct labor hours. Actual direct labor hours for 2009 totaled 110,000. The manufacturing overhead account showed debit entries totaling $394,000. For the year, was overhead over or underallocated and by how much?

A) $16,000 underallocated
B) $2,000 overallocated
C) $2,000 underallocated
D) $16,000 overallocated


Answer: B

Actual manufacturing overhead for the current period is $19,600 while allocated manufacturing overhead for the current period is $18,700. What is the proper entry to dispose of the manufacturing overhead balance?

A) debit cost of goods sold and credit manufacturing overhead for $900
B) debit cost of goods sold and credit finished goods inventory for $900
C) debit manufacturing overhead and credit cost of goods sold for $900
D) debit manufacturing overhead and credit work in process inventory for $900


Answer: A

Manufacturing overhead is overallocated $1,000 at the end of the current period. The journal entry to dispose of the overallocated overhead balance involves a debit to:

A) manufacturing overhead and a credit to cost of goods sold for $1,000
B) cost of goods sold and a credit to manufacturing overhead for $1,000
C) manufacturing overhead and a credit to work in process inventory for $1,000
D) cost of goods sold and a credit to finished goods inventory for $1,000


Answer: A