ACC 210 Exam 1 Review Questions

Adjusting entries: a. Always involve at least one income statement account and one balance sheet account. b. Often include the Cash account. c. Adjust the balance of revenue and expense accounts to zero. d. Usually are recorded at the beginning of the accounting period.

(a) Always involve at least one income statement account and one balance sheet account.

Childers Service Company provides services to customers totaling $3,000, on account. How would the transaction be recorded? a. Debit Accounts Receivable $3,000, credit Service Revenue $3,000. b. Debit Cash $3,000, credit Service Revenue $3,000. c. Debit Accounts Receivable $3,000, credit Cash $3,000. d. Debit Service Revenue $3,000, credit Accounts Receivable $3,000.

(a) Debit Accounts Receivable $3,000, credit Service Revenue $3,000.

the fundamental accounting equation is defined as: a. Assets = Liabilities + Stockholders' Equity b. Assets = Liabilities - Stockholders' Equity c. Net Income = Revenues - Expenses d. Liabilities + Revenues = Assets

(a) assets = liabilities + stockholders' equity

On July 1, 2018, Rents-A-Lot Inc. paid $72,000 for 36 months of advance rent on its warehouse. What would be the amount of rent expense in the 2018 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting? a. Cash-basis = $72,000; Accrual-basis = $12,000 b. Cash-basis = $0; Accrual-basis = $12,000 c. Cash-basis = $0; Accrual-basis = $24,000 d. Cash-basis = $24,000; Accrual-basis = $24,000

(a) cash-basis = $72,000; Accrual-basis = $12,000

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. Under accrual accounting, in which month should the company record salaries expense? a. December b. Evenly over the three months c. January d. November

(a) december

Which of the following is NOT possible for a business transaction? a. Increase liabilities and increase revenue. b. Increase liabilities and increase expense. c. Decrease assets and increase expense. d. Increase assets and decrease assets.

(a) increase liabilities and increase revenue

Consider the following accounts: Dividends Insurance Expense Cash Service Revenue Note Payable How many of these accounts are increased with credits? a. Two b. One c. Four d. Three

(a) two

DW has an ending retained earnings balance of $52,500. if during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning retained earnings balance? a. $300 b. $34,300 c. $32,900 d. $69,300

(b) $34,300

The adjusting entry required when amounts previously recorded as unearned (deferred) revenues are earned by providing goods or services to customers includes: a. A debit to an asset. b. A debit to a liability. c. A credit to an asset. d. A credit to a liability.

(b) A debit to a liability.

Which of the following regarding adjusting entries is correct? a. Adjusting entries are recorded for all external transactions. b. Adjusting entries are needed because we use accrual-basis accounting. c. After adjusting entries, all temporary accounts should have a balance of zero. d. Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.

(b) Adjusting entries are needed because we use accrual-basis accounting.

When cash payments are made to stockholders, what is the effect on the company's accounts? a. Cash decreases and common stock decreases. b. Cash decreases and dividends increases. c. Cash decreases and dividends decreases. d. Cash increases and common stock increases.

(b) Cash decreases and dividends increases.

Frosty Inc. has the following balances on December 31 prior to closing entries: Revenues $38,000 Retained Earnings, Jan. 1 10,000 Cash 7,000 Expenses 23,000 Accounts Payable 4,000 Dividends 1,000 Supplies 18,000 Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries? a. Increase of $12,000 b. Increase of $14,000 c. Increase of $11,000 d. Increase of $15,000

(b) Increase of $14,000

On December 1, 2018 Bulls Inc. signed a contract with a retailer to supply maintenance services for 2019. How should this transaction be recorded on December 1? a. Debit Cash, credit Service Revenue. b. No transaction should be recorded on December 1. c. Debit Cash, credit Accounts Receivable. d. Debit Accounts Receivable, credit Service Revenue.

(b) No transaction should be recorded on December 1.

The primary purpose of closing entries is to: a. Ensure that all assets and liabilities are recognized in the appropriate period. b. Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions. c. Assure that adjusting entries balance. d. Prove the equality of the debit and credit entries in the general journal.

(b) Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions.

the major underlying assumptions of financial accounting include all of the following except: a. Economic entity. b. Going concern. c. Monetary unit. d. Limited liability.

(b) going concern

limited liability means: a. companies are not allowed to borrow unless they are profitable. b. stockholders of a corporation are not obligated to pay the corporation's debts with personal assets. c. liabilities of a company cannot exceed its assets. d. companies are less likely to be sued if they are formed as a corporation.

(b) stockholders of a corporation are not obligated to pay the corporation's debts with personal assets

Allen Inc. took out a 1-year, 12%, $200,000 loan on March 31, 2018. Interest is due upon maturity of the loan. The loan and interest must be paid back on March 31, 2019. As of December 31, 2018, what amount, if any, should Allen Inc. report for interest payable? a. $24,000 b. $0 c. $18,000 d. $20,000

(c) $18,000

using the information below from the accounting records of thomas corporation, stockholders' claims to the company's resources amount to: assets... $1,200,000 liabilities... $900,000 net income... $100,000 retained earnings... $250,000 a. $400,000 b. $900,000 c. $300,000 d. $50,000

(c) $300,000

If the liabilities of a company decreased by $55,000 during a month and the stockholders' equity increased by $21,000 during that same month, did assets increase or decrease and by how much? a. $55,000 increase b. $34,000 increase c. $34,000 decrease d. $76,000 increase

(c) $34,000 decrease

At the beginning of December, Global Corporation had $3,000 in supplies on hand. During the month, supplies purchased amounted to $5,000, but by the end of the month the supplies balance was only $1,200. At the time of purchase, the Supplies account was debited. What is the appropriate month-end adjusting entry? a. Debit Supplies $1,200, credit Supplies Expense $1,200. b. Debit Supplies $6,800, credit Supplies Expense $6,800. c. Debit Supplies Expense $6,800, credit Supplies $6,800. d. Debit Supplies Expense $1,200, credit Supplies $1,200.

(c) Debit Supplies Expense $6,800, credit Supplies $6,800.

Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting? a. Received $300 from customers for services performed in March. b. Paid $700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun newspaper. c. Purchased $500 of office supplies on account (supplies were used in May and paid for in May). d. Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.

(c) Purchased $500 of office supplies on account (supplies were used in May and paid for in May).

WP company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true? a. WP company records nothing on October 15. b. WP company records service revenue on October 15. c. WP company records unearned (or deferred) revenue on October 15. d. WP company records cash collection on November 20.

(c) WP company records unearned (or deferred) revenue on October 15.

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the: a. Trial balance b. General ledger c. Accounting cycle d. Chart of accounts

(c) accounting cycle

fundamental qualitative characteristics of accounting information are: a. Comparability and consistency. b. Relevance and comparability. c. Faithful representation and relevance. d. Faithful representation and consistency.

(c) faithful representation and relevance

A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the accrual accounting revenue recognition principle, in which month should the company record revenue? a. Evenly over three months b. August c. July d. June

(c) july

financial accounting a. provides information primarily for a company's employees. b. is primarily used to compute a company's tax obligation. c. provides information primarily for external decision makers. d. provides information primarily for the use of managers of the company.

(c) provides information primarily for external decision makers.

On July 1, 2018, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2018 through December 2019. What adjusting entry should Charlie Co. record on December 31, 2019? a. Rent Expense...18,000 Cash.........18,000 b. Rent Expense...6,000 Prepaid Rent.........6,000 c. Prepaid Rent...6,000 Rent Expense.........6,000 d. Rent Expense...12,000 Prepaid Rent.........12,000

(d) Rent Expense...12,000 Prepaid Rent.........12,000

Which of the following is true about an income statement? a. It reports activity for a period of time. b. It does not include dividends paid to stockholders. c. It reports revenues and expenses. d. All of the other answers are true.

(d) All of the other answers are true.

Assume that $18,000 cash is paid today for insurance to cover the next two years. The appropriate debit and credit are: a. Debit Cash $18,000, credit Prepaid Insurance $18,000. b. Debit Insurance Expense $18,000, credit Prepaid Insurance $18,000. c. Debit Prepaid Insurance $18,000, credit Insurance Expense $18,000. d. Debit Prepaid Insurance $18,000, credit Cash $18,000.

(d) Debit Prepaid Insurance $18,000, credit Cash $18,000

which one of the following financial statements is correct? a. The balance sheet classifies all assets according to operating, investing, and financing activities. b. The income statement is used to show that a company's resources equal claims to those resources. c. The statement of cash flows shows cash inflows and outflows from operating activities only. d. The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.

(d) The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.

if a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? a. Net income for the year equals $60,000. b. The company has issued $60,000 of common stock. c. Total revenues during the year equal $60,000. d. The company's assets exceed liabilities by $60,000.

(d) the company's assets exceed liabilities by $60,000

Consider the following transactions for TH company: Issued common stock for cash. Purchased equipment by signing a note payable. Sold services to a customer on account. Paid rent for the current month. Collected cash from customers on account. How many of these five transactions increased TH company's total assets? a. Two b. Four c. One d. Three

(d) three

how many of the following transactions are classified as operating activities? borrowed $50,000 from the bank purchased $12,000 in office supplies provide services to customers for $27,000 paid the utility bill of $750 purchased a delivery truck for $12,000 received $25,000 from issuing common stock a. Four b. One c. Two d. Three

(d) three

How many of the following events would require an expense to be recorded at the time of the transaction (assume accrual accounting is employed)? Ordering office supplies Hiring a receptionist Paying employees' salaries for the current month Receiving but not paying a current utility bill Paying for insurance in advance a. Four b. One c. Three d. Two

(d) two