Acc. Exam Chapters 1-3

Which one of the following is a correct fundamental accounting equation?

c. Assets = Liabilities + Stockholders' Equity

Dividends are declared and paid to the company's stockholders. What effect does this transaction have on the company's accounting equation?

c. Assets and retained earnings decrease.

A question frequently asked by investors is, "How much debt does this company have?" Which financial statement answers this question?

c. Classified balance sheet

What is the name for a person who lends funds to a business entity and expects repayment with interest?

c. Creditor

Happy Heights Country Club Selected accounts at July 31 are provided below: CASH 7/1 bal. 12,000 7/3 1,000 7/5 3,600 7/7 1,800 UNEARNED TUITION REVENUE 7/3 1,000 ACCOUNTS RECEIVABLE 7/2 3,600 7/7 1,800 MEMBERSHIP REVENUE 7/2 3,600 7/5 3,600 Refer to Happy Heights Country Club. On which date did the country club collect golf lessons revenue in advance?

c. July 3rd

Failure to record accrued interest expense would result in which of the following?

c. Liabilities being understated

All of the following accounts have normal debit balances except

c. Service Revenue

Which one of the following is not an external user of financial statements?

c. The Company's President

Which of the following accounts is decreased by a debit entry?

a. Accounts Payable

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

a. Assets decrease and stockholders' equity decreases

A non-classified balance sheet typically does not have a distinction between which of the following items?

a. Current and Noncurrent items

Businesses engage in which of the following three main activity categories?

a. Financing, Investing, Operating

Which of the following statements is true?

a. If all transactions are correctly posted to the general ledger, the sum of the accounts with debit balances should be equal to the sum of the accounts with credit balances.

Which statement summarizes the results of the company's operations?

a. Income Statement

What is unearned revenue?

a. Liability

An entry made to the right side of an account is always a(n)

d. Credit

Which financial statement would you refer to in order to determine how much resources (assets) the company owned?

d. Balance Sheet

Which one of the following items is reported as a current stockholders' equity on a classified balance sheet?

d. Common Stock

What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?

a. Net income increases

External users of financial information

a. Rely on the financial statements to help make informed decisions.

Which of the following best describes the term "retained earnings" of a company?

a. The accumulated net income of a company that has not been distributed to owners in the form of dividends.

Hesson Properties, Inc. The following transactions occurred during June: June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days. June 8 Accepted $500 of advance payments from customers for services to be provided next month. June 15 Received the utility bill for $300. Payment is due in 30 days. June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier. Refer to Hesson Properties. What journal entry is required to record the purchase of the carts?

b. Equipment 1,500 Accounts Payable 1,500

Which one of the following equations represents the Statement of Retained Earnings activity?

b. Beginning retained earnings + net income - dividends = ending retained earnings

Which one of the following is the last step in the accounting cycle?

b. Closing the accounts

Which one of the following is an internal user of financial information?

b. Company management

A company's current ratio is 2.00. If the company makes a payment on account, what is the effect on the current ratio?

b. Increase

Failure to record the earned portion of unearned revenue would result in which of the following?

b. Net income being understated

Which of the following invests funds into a business and is considered an owner?

b. Stockholders

Which one of the following items is a classification on the Classified Balance Sheet?

b. Stockholders' Equity

Beaver Tree Service Beginning Retained Earnings $550,000 Ending Retained Earnings 700,000 Dividends Paid 100,000 Revenue 525,000 Refer to Beaver Tree Service. The company's expenses are:

d. $275,000

Expenses should be matched against revenue

b. in the same period as the revenue that they helped generate.

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company?

a. Liabilities decrease and Stockholders' equity increases.

Barnes Restaurant reports the following amounts: Cash $125,000 Inventory $215,000 Land 275,000 Unearned Revenue 117,000 Equipment 350,000 Common Stock 300,000 Calculate Current Assets.

c. $340,000

Which one of the following is not a proper method of recognizing assets as expenses in a particular accounting period?

d. Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays.

Balance sheet accounts are also known as which of the following?

d. Permanent accounts