Reference no: EM131807474

1. On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?
Yes, the company is now obligated to pay the employee, thus that event must be recorded.
No, hiring an employee is an important event; however, it is not an economic event that should be recorded.
Yes, failure to record the event would cause the financial statements to be misleading.
No, the financial position of the company has been changed; however, the dollar amount of the transaction is not yet known.

2. If expenses are paid in cash, then
assets will increase.
liabilities will decrease.
stockholders' equity will increase.
assets will decrease.

3. Which of the following accounts is increased with a debit?
Dividends
Service Revenue
Interest payable
Common Stock

4. A company that receives money in advance of performing a service
debits cash and credits prepaid fees.
debits unearned fees and credits accounts payable.
debits cash and credits unearned fees.
debits cash and credits accounts receivable.

5. The Dividends account
appears on the income statement along with the expenses of the business.
must show transactions every accounting period.
is increased with debits and decreased with credits.
is not a proper subdivision of stockholders' equity.

6. Assets normally show
credit balances.
debit balances.
debit and credit balances.
debit or credit balances.

7. Which accounts normally have debit balances?
Assets, expenses, and revenues.
Assets, expense, and retained earnings.
Assets, liabilities, and dividends.
Assets, expenses, and dividends.

8. Prepaid expenses are:
paid and recorded in an asset account before they are used or consumed.
paid and recorded in an asset account after they are used or consumed.
incurred but not yet paid or recorded.
incurred and already paid or recorded.

9. On October 1, 2012, Metz Industries had an Accounts Payable balance of $60,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2012, the Accounts Payable balance is
$60,000 debit
$20,000 credit
$30,000 credit
$80,000 credit

10. An investment by the stockholders in a business increases

assets and stockholders' equity.
assets and liabilities.
liabilities and stockholders' equity.
assets only.