Acc210 Test 1

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Prepaid Rent

Balance sheet - asset

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 6

Prepare and enter closing entries into the general journal and post to the general ledger.

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 5

Prepare year-end financial statements.

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Supplies

Balance sheet - Asset

Which of the following is not an objective of financial reporting? (check all which apply)

To prevent competitors from offering a similar product To minimize the amount of income tax the business must pay to the U.S. government To guarantee that a business will be profitable

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 3

Prepare and enter adjusting entries into the general journal and post to the general ledger

Wolfpack Inc. has the following information available at year-end: Total Assets =$900,000 Total Stockholders' Equity =$200,000 Question: What should be Wolfpack's total liabilities balance at year-end?

700,000

Journal entries are written in a certain format in the general journal. When writing a journal entry, which of the following is/are true? (check all that apply)

A reference, often a date, should be written along with the journal entry. The account to be credited is listed below and indented to the right of the debited account. In the United States, amounts written in the debit and credit columns represent dollar amounts. The account to be debited is listed first starting with the debited account name followed by the amount being debited.

When an expense has been incurred for which cash has not yet been paid, the company should record a(an)

Accrued expense

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Accounts Receivable

Asset

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Salaries Expense

Close with a credit

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Advertising Expense

Close with a credit

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Dividends

Close with a credit

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Supplies Expense

Close with a credit

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Utilities Expense

Close with a credit

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Service Revenue

Close with a debit

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company pays a dividend to its stockholders.

Financing

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Accounts Payable

Credit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Common Stock

Credit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Deferred (or Unearned) Revenue

Credit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Service Revenue

Credit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Accounts Receivable

Debit

On October 25, Wolfpack paid $400 for the supplies previously purchased on account on October 12th.

Debit: Accounts Payable Credit: Cash

Wolfpack performed $2,000 worth of services on account.

Debit: Accounts Receivable Credit: Service revenue

On October 20, Wolfpack collected $2,000 cash from the customer from the above October 10th transaction.

Debit: Cash Credit: Accounts recievable

On October 1, Wolfpack issued shares of common stock to investors in exchange for $45,000 in cash

Debit: Cash Credit: Common Stock

On October 2, Wolfpack borrowed $6,000 from First City Bank by signing a one-year, 10% note.

Debit: Cash Credit: Notes payable

On October 1, 20X1, Plyler Corp. received $18,000 for services it will provide evenly to a customer over the next six months beginning in October. Required: Assuming the October 1st transaction was properly recorded, prepare the adjusting entry Plyler should make at the end of its calendar year.

Debit: Deferred revenue for 9000 Credit: Service revenue for 9000

Wolfpack Inc. is going to prepare its adjusting entries for the year ending December 31, 20X4, and has the following information available: On June 1, 20X4, Wolfpack lent $4,000 cash to one of its employees. The employee signed a one-year, 12% promissory note. Interest calculations are rounded to the nearest whole month. No interest journal entries have been made thus far in 20X4. Question: What adjusting entry should Wolfpack make on 12/31/X4 related to the above?

Debit: Interest receivable for 280 Credit: Interest revenue for 280 Accrued Interest Revenue = $4,000 x .12 x 7/12 = $280

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 4

Prepare an Adjusted Trial Balance.

When cash is paid before the related expense has been incurred, the company should record a(an)

Deferred expense

When cash is received before the related revenue has been earned, the company should record

Deferred revenue

For each of the following steps, indicate its proper sequence in the accounting cycle: Step 2

Determine whether the transaction results in a debit or credit to the applicable account balances and record the transaction in the form of a journal entry in the general journal.

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 2

Prepare an Unadjusted Trial Balance.

True or False: Account balances are always increased with debits

False

At the end of 20X1, Potter Corp. recorded accrued salaries expense of $4,000 when the amount accrued should have been only $1,000. As a result of this error, which of the following is true regarding its financial statements for 20X1? (check all that apply)

Liabilities are too high (overstated) Net income is too low (understated)

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Retained Earnings

Not aplicable

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice' Accounts Payable

Not applicable

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 7

Prepare a Post-Closing Trial Balance.

When preparing financial statements, what is the correct order they should be prepared in? Second:

Statement of Stockholders' Equity (or Statement of Retained Earnings)

True or False An amount is considered to be material if its omission from or misstatement in a company's financial statements could influence a user's decision about a company.

True

True or False: The matching principle states a company should record expenses in the same accounting period as the revenues the expenses helped to generate.

True

True or False: Two principles that underlie the adjustment process are the revenue recognition and matching principles.

True

True or False: A classified balance sheet is one which separates assets and liabilities into current and long-term categories.

True

True or False: On an adjusted trial balance and starting from the top, account balances should be shown in the following order : assets liabilities owners' equity dividends revenues expenses

True

True or False: Revenues are the amounts earned from the sale of products or services to customers.

True

Beginning with what happens at the start of the accounting cycle (step 1), put the following actions in their correct order in the accounting cycle Step 1

Using source documents, prepare and enter transactions into the general journal and post to the general ledger.

When revenue has been earned but cash has not yet been received, the company should record

accrued revenue

In accounting, to "close" an account means to:

adjust the account balance to zero

Which underlying GAAP assumption is being violated if a company includes the personal liabilities of its owners on the company's balance sheet?

economic entity assumption

The set of accounting standards and rules that many U.S. corporations follow when preparing their financial statements are called:

generally accepted accounting principles (GAAP)

Complete the following sentence: The revenue recognition principle states that a company should record revenue:

in the accounting period in which it provides goods and/or services to a customer.

The "Dividends" account balance is reported on which financial statement?

statement of stockholders' equity (or statement of retained earnings)

The group attempting to develop a single set of high-quality, understandable global accounting standards is:

the International Accounting Standards Board (IASB).

Assume a company has been in business for several years. Which "Retained Earnings" account balance should not appear on its Adjusted Trial Balance?

the Retained Earnings balance at the end of the year

Measuring a company's business transactions and communicating those measurements for decision-making purposes in the form of financial statements are two key functions of financial accounting. The full set of procedures used to accomplish both of these key functions is called the:

Accounting Cycle

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Cash

Asset

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Inventory

Asset

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Land

Asset

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Paid $800 to employees for salaries.

Assets: Decrease Liability: No effect stockholders equity: Decrease

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Provided services to customers for $5,000 on account.

Assets: Increase Liability: No effect stockholders equity: Increase

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Received $50,000 in cash from the sale of its common stock to stockholders

Assets: Increase Liability: No effect stockholders equity: Increase

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Purchased supplies costing $1,400 on account

Assets: Increase Liability: increase stockholders equity: No effect

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Borrowed $20,000 from the local bank by signing a note promising to pay back the $20,000 loan plus interest in two years.

Assets: Increase Liability: Increase stockholders equity: No effect

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Paid $1,200 for one year's worth of insurance in advance.

Assets: No effect Liability: No effect stockholders equity: No effect

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Paid $8,000 for the purchase of equipment

Assets: No effect Liability: No effect stockholders equity: No effect

For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect for each area of the accounting equation Received $5,000 from the customers in "D" above

Assets: No effect Liability: No effect stockholders equity: No effect

When preparing financial statements, what is the correct order they should be prepared in? Third:

Balance Sheet

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Equipment

Balance sheet - Asset

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Prepaid Insurance

Balance sheet - Asset

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Accounts Payable

Balance sheet - Liability

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Deferred (or Unearned) Revenue

Balance sheet - Liability

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Notes Payable

Balance sheet - Liability

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Accounts Receivable

Balance sheet - asset

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Retained Earnings

Balance sheet - owners equity

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Interest Revenue

Close with a debit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Cash

Debit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Dividends

Debit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Equipment

Debit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Prepaid Rent

Debit

Indicate whether each of the following accounts has its account balance increased with a debit or a credit Utilities Expense

Debit

On October 31, Wolfpack paid stockholders a $1,000 dividend.

Debit: Dividends Credit: Cash

October 4, Wolfpack purchased equipment for $8,000 cash

Debit: Equipment Credit: Cash

On October 31, Wolfpack purchased a six-month insurance policy costing $600. The policy period will begin in November.

Debit: Prepaid insurance Credit: Cash

On October 12, Wolfpack purchased supplies costing $400 on account.

Debit: Supplies Credit: Accounts payable

Tarheel Corp. plans to prepare its adjusting entries for the year ending December 31, 20X1, and has the following information available: At the beginning of December, the "Supplies" account had a balance of $200. On December 10, supplies costing $400 were purchased. On December 31, 20X1, a physical count shows supplies costing $150 are still unused. Required: In the general journal below, prepare the adjusting entry needed on Dec 31, 20X1 related to the supplies. Assume the Dec 10 entry was correctly recorded.

Debit: Supplies expense for 450 Credit: supplies for 450

Which of the following types of accounts should find its account balance reported on a company's income statement? (check all that apply)

Expense accounts Revenue accounts

True or False: The cost constraint suggests that, even when the cost of providing accounting information exceeds its benefit, the financial accounting information should always be provided.

False

True or False: When preparing a journal entry for a transaction that affects retained earnings, the "Retained Earnings" account should be debited or credited directly rather than debiting or crediting the account which will ultimately cause retained earnings to change.

False

True or False: When total debits equal total credits on a trial balance, we can be assured that no errors of any sort occurred during the preceding steps in the accounting cycle.

False

True or False: Adjusting entries typically include an adjustment to only income statement accounts.

False

True or False: Dividends return back to the owners of a corporation a portion of their original contributions

False

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company borrows $40,000 from its local bank.

Financing

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company receives $10,000 cash from each of its owners to get started as a business.

Financing

When determining the account balance for a particular account (ex. Accounts Receivable) in order to prepare a trial balance, the best place to look to find the balance would be in the company's _____.

General ledger

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Service Revenue

Income Statement

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Supplies Expense

Income Statement

Each of the following accounts would find its balance reported on either the income statement or balance sheet. For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Utilities Expense

Income Statement

When preparing financial statements, what is the correct order they should be prepared in? First:

Income Statement

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company pays cash for the purchase of equipment to be used in its business. The equipment will be used for ten years

Investing

Which of the following is the best definition of a trial balance?

It is a listing of all accounts and their respective balances at a particular date.

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Accounts Payable

Liability

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Notes Payable

Liability

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Accumulated Depreciation

Not applicable

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Deferred (or Unearned) Revenue

Not applicable

Below is a list of common accounts that many companies have. If applicable, indicate the manner in which the account should be closed at year end. Important: If the account should not be closed at year-end, select the "not applicable" choice Prepaid Insurance

Not applicable

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company pays its employees their weekly wages.

Operating

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company pays the utilities costs to run its facilities

Operating

Classify each of the following business activities as either an operating activity, investing activity, or financing activity. A company receives cash for services performed to customers.

Operating

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Common Stock

Owners Equity

Indicate the location on the balance sheet of each of the following accounts and their respective balances: Retained Earnings

Owners Equity

For each of the following financial statements, indicate whether the financial statement reports account balances for a "period of time" (ex. for the year ended Dec 31, 2018) or reports account balances "at a point in time" (ex. at Dec 31, 2018). Income Statement

Period of time

For each of the following financial statements, indicate whether the financial statement reports account balances for a "period of time" (ex. for the year ended Dec 31, 2018) or reports account balances "at a point in time" (ex. at Dec 31, 2018). Statement of Stockholders' Equity

Period of time

For each of the following financial statements, indicate whether the financial statement reports account balances for a "period of time" (ex. for the year ended Dec 31, 2018) or reports account balances "at a point in time" (ex. at Dec 31, 2018). Balance Sheet

Point in time

For each of the following steps, indicate its proper sequence in the accounting cycle: Step 3

Post the journal entries to the general ledger (T-accounts) and compute account balances.

For each of the following steps, indicate its proper sequence in the accounting cycle: Step 4

Prepare a trial balance

A company purchased supplies for $600 cash; however, when the transaction was journalized, the accountant accidentally debited Cash and credited Supplies for $600 each. Assuming there were no other errors, which of the following statements is/are true? (check all that apply)

The balance sheet equation will be in balance The account balances for cash and supplies will be incorrect Total debits and total credits on the trial balance will still be equal

True or False: The primary overriding objective of financial reporting for U.S. based corporations is decision usefulness.

True

True or False: Accounting is the process of identifying, measuring, recording, and communicating financial information about a company's business activities in order for decision-makers to make better informed decisions about the company.

True

For each of the following steps, indicate its proper sequence in the accounting cycle: Step One

Using source documents, identify which accounts are affected by a transaction and identify the impact of the transaction on the accounting equation.

Information is said to possess the enhancing qualitative characteristic of ______ when independent parties can reach a consensus on the measurement of the activity.

Verifiability

Assume a company has been in business for several years. Which "Retained Earnings" account balance should appear on its post-closing trial balance?

the Retained Earnings account balance at the end of the year

The accuracy and reliability of nformation presented in a company's annual report, including its financial statements and their accompanying notes, is primarily the responsibility of:

the company's management.