Question

1.

Which account is closed at the end of an accounting period?

Select one:

a. Prepaid Expense

b. Sales Discount

c. Unearned Revenue

d. Retained Earnings

2.

At the end of the current year, the Owners' Equity in LaRose Corporation is $188,000. During the year, the assets of the business had decreased by $90,000, and the liabilities had increased by $36,000. Owners' Equity at the beginning of the year must have been:

Select one:

a. $242,000

b. $314,000

c. $494,000

d. $134,000

e. $126,000

3.

Given the following information:



Gross Profit is:

Overstated Understated Sales Discounts Bad Debt Expense Freight-out

Select one:

a. Overstated $2

b. Understated $2

c. Overstated $7

d. Understated $7

e. Overstated $3

4.

Which item will not directly adjust Retained Earnings?

Select one:

a. Correction of Error

b. Change in accounting estimate

c. Change in accounting principle

d. Prior Period Adjustment

5.

The disclosure of income tax effects based on the item causing the tax effect is named:

Select one:

a. Cost Principle

b. Matching Principle

c. Intra-period tax allocation

d. Inter-period tax allocation

e. Full Disclosure Principle

Answer 1

1)	Correct Option:b. Sales Discount
Explanation: Sales discount account is a nominal account which are belongs to specific accounting period.
	Hence it neeed to be closed at each accounting period and amount is tranferred to the income statement.
2)	Onwers equity = assets - liability
	Closing Equity
	Add:
	Reverse of decreased in the assets
	Reverse of increase in the liabilities
	Beginning Equity
	Correct Option:b. $314,000
3)	Freight overstated
	Less:
	Sales discount understated
	Gross Profit Under stated
	Correct Option: d. Understated $7
4)	a. Correction of Error
5)	b. Matching Principle