Accounting 1000 Midterm Quiz 1-4
a way of depicting the basic form of accounting
A T-account is
Assets, Liabilities and Stockholders' Equity
A balance sheet shows
134.
A credit balance in a liability account indicates that an error in recording has occurred.
Dividends account
A credit is not the normal balance for which account listed below?
131.
A credit means that an account has been increased.
102.
A current asset is
137.
A debit means that an account has been decreased.
False
A debit to an account always indicates an increase in that account.
132.
A decrease in a liability account is recorded by a debit.
138.
A decrease in a liability is recorded by a debit.
170.
A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?
190.
A general ledger should be arranged in financial statement order beginning with the balance sheet accounts.
186.
A journal is an accounting record in which transactions are initially recorded.
True
A liability is classified as a current liability if it is to be paid within the coming year.
True
A material item is one that is likely to influence an investor's decision.
124.
A new account is opened for each transaction entered into by a business firm.
214.
A paid dividend
Not affect stockholders' equity
A payment of a portion of an accounts payable will
is increased by credits
A revenue account
213.
A revenue generally
199.
A trial balance does not prove that all transactions have been recorded or that the ledger is correct.
198.
A trial balance is prepared at the beginning of an accounting period.
156.
Accrued revenues are revenues that have been recognized but not yet recorded.
158.
Accumulated Depreciation is a liability account and has a credit normal account balance.
178.
Accumulated Depreciation is a(n):
151.
Adjusting entries are often made because some business events are not recorded as they occur.
175.
Adjusting entries are required:
174.
Adjusting entries are:
126.
An account consists of two parts: (1) a left or debit side and (2) a right or credit side.
127.
An account is often referred to as a T-account because of the way it is constructed.
180.
An accumulated depreciation account:
161.
An adjusted trial balance must be prepared before the adjusting entries can be recorded.
154.
An adjusting entry always involves a balance sheet account and an income statement account.
181.
An adjusting entry can include a:
153.
An adjusting entry to a prepaid expense is required to recognize expired expenses.
152.
An adjusting entry would be made to the revenue account only when cash is received.
True
An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a company.
216.
An expense
True
An increase in an asset is recorded by a debit.
104.
An intangible asset
208.
An investment by the stockholders in a business increases
True
Assets are decreased with a credit.
True
Assets are resources owned by a business and provide future services or benefits to the business.
47,000-42,000=5,000 5,000+11,000= 16,000 answer: net income $16,000
At the beginning of January, 2014, Wise Company had a balance in its Retained Earnings account totaling $42,000. At the end of the year, the balance totaled $47,000. If $11,000 of dividends were declared and paid during the year, how much was net income during 2014?
84.
Both investors and creditors have an interest in a company's ability to generate favorable cash flows.
True
Cash and supplies are both classified as current assets.
163.
Cash is a temporary account.
160.
Closing entries deal primarily with the balances of permanent accounts.
Increase an asset $600; and decreases an asset $600
Collection of a $600 Accounts Receivable
122.
Collection on an account receivable will increase both cash and accounts receivable.
87.
Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.
99.
Cost constraint weighs the cost that companies incur to provide a type of information against its benefit to financial statement users.
130.
Debit and credit can be interpreted to mean "bad" and "good", respectively.
194.
Dividends are classified as an expense.
143.
Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.
True
Earnings per share is calculated by dividing net income minus preferred stock dividends for the period by the average number of common shares outstanding during the period.
74.
Earnings per share measures the net income earned on each share of common stock.
121.
Economic events that require recording in the financial statements are called accounting transactions
Retained Earnings+Net Income-Dividends
Ending retained earnings for a period is equal to beginning
197.
Entering transactions into the journal is called posting.
109.
Equipment is classified on the balance sheet as
147.
Expense recognition is tied to revenue recognition.
167.
Expenses are recognized when:
False
Explanatory notes and supporting schedules are an optional part of an annual report.
182.
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause:
165.
Financial statements must be prepared before the closing entries are made.
203.
Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.
True
For a T account, an account balance is the difference in total dollars between total debit amounts and total credit amounts.
90.
For accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business.
To measure short-term ability of a company to pay it's obligations
For what purpose is the current ratio used?
94.
Full disclosure of all important facts aids in overcoming the limitations of accounting information.
False
GAAP stands for generally accepted accounting procedures.
86.
Generally accepted accounting principles are rules and practices that are recognized as a general guide for financial reporting purposes.
Ending stockholders' equity, 12/31/14 87,000 Beginning stockholders' equity, 1/1/14 (84,000) Increase in stockholder's equity 3,000 Dividends paid during 2014 36,000 39,000 Investments during 2014 (12,000) Net income in 2014 27,000
Given the following information, compute 2014 net income for SaraDyne Company.
A. Total assets, beginning of year = $55,000 + $36,000 = $91,000 B. Total liabilities, end of year = $110,000 - $81,000 = $29,000 C. Net income = $81,000 + $34,000 - $55,000 - $16,000 = $44,000 Revenue during the year = $44,000 + $168,000 = $212,000
Given the following information, determine the three missing amounts labeled as A, B, and C.
Revenue - Expenses- Dividends (330,000+500,000)-380,000-40,000= answer- 410,000
Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?
89.
If a building is offered for sale at $100,000 and the buyer pays $95,000 cash for it, the buyer would record the building at $100,000.
both retained earnings and stockholders' equity will be reduced by $10,000.
If a company pays dividends of $10,000,
128.
If a revenue account is credited, the revenue account is increased.
205.
If an individual asset is increased, then
207.
If expenses are paid in cash, then
157.
If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.
Assets will increase
If services are rendered for cash, then
206.
If services are rendered on account, then
123.
If total assets are increased, there must be a corresponding increase in liabilities or a decrease in stockholders' equity.
204.
If total liabilities decreased by $4,000, then
Current Assets; Long-Term Investments; Property, Plant and Equipment; Intangable Assets
In a classified balance sheet, assets are usually classified as
200.
In a trial balance, all debits are listed before all credits.
100.
In general, the FASB indicates that most assets must follow the fair value principle.
149.
Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.
113.
Intangible assets are
110.
It is not true that current assets are resources that are expected to be
Current Liabilities and Long-Term Liabilities
Liabilities are generally classified on a balance sheet as
139.
Liabilities are increased with debits and decreased with credits.
False
Long-term investments appear in the property, plant, and equipment section of the balance sheet.
69.
Match the account titles given below with the appropriate balance sheet classification. An individual classification may be used more than once, or not at all. An account may also not appear in the balance sheet.
1. Solvency 2. Dividends 3. Debt to asset ratio 4. Working capital 5. Current ratio 6. Profitability 7. Earnings per share 8. Liquidity
Match the terms given below with the definitions or descriptions that follow by placing the appropriate letter in the space provided.
96.
Materiality is a company-specific aspect of faithful representation.
98.
Materiality relates to whether an item is large enough to likely influence the decision of an investor or creditor.
1,745,000
N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained earnings of $475,000. What are the creditors' claims on their assets? ( A=L+SE; liabilities are not listed you must calculate A-SE= L)
83.
Net cash provided by operating activities takes into account that a company must invest in capital expenditures just to maintain its current level of operations.
Revenues > Expenses
Net income results when
112.
On a classified balance sheet, companies usually list current assets
101.
On a classified balance sheet, short-term investments are classified as
202.
Operating activities are the types of activities the company performs to generate profits.
True
Operating activities involve putting the resources of the business into action to generate a profit.
68.
Place an 'X' in the appropriate column to designate whether each of the following accounts is an asset, a liability, stockholders' equity, revenue or expense account.
196.
Posting is the process of proving the equality of debits and credits in the trial balance.
192.
Prepaid expenses are assets.
73.
Profitability means having enough funds on hand to pay debts when they fall due.
117.
Ratios that measure the income or operating success of a company for a given period of time are
215.
Receiving payment of a portion of an accounts receivable will
148.
Recognizing when an expense contributes to the production of revenue is critical.
97.
Relevance and cost are two constraints in accounting.
True
Revenue increases stockholders' equity and should be recorded whenever cash is received from customers.
155.
Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as liabilities.
True
Revenues are a subdivision of stockholders' equity.
77.
Revenues have the effect of increasing retained earnings.
193.
Salaries and wages payable is a type of expense.
70.
Selected information from the financial statements of Joe's Coffee Brewers for the year ended December 31, 2014, appears below:
82.
Solvency is a company's ability to pay interest as it comes due and to repay the balance of a debt due at its maturity.
80.
Solvency ratios measure the short-term ability of the company to pay its maturing obligations.
True
Source documents can provide evidence that a transaction has occurred.
71.
Stockholders' equity is divided into two parts: common stock and retained earnings.
$23,000 decrease
Tatum Enterprises' total assets decreased by $11,000 during the year. Its stockholders' equity increased by $12,000 during the same period. Net income totaled $8,000 during the year. What occurred to the company's total liabilities during the year? (A=L+SE, -11,000-(12,000)=?)
164.
The Dividends account is closed to the Income Summary account at the end of each year.
188.
The account titles used in journalizing transactions need not be identical to the account titles in the ledger.
True
The accounting equation can be expressed as Assets - Stockholders' Equity = Liabilities.
159.
The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.
150.
The cash basis of accounting is not in accordance with generally accepted accounting principles.
189.
The chart of accounts is a special ledger used in accounting systems.
187.
The complete effect of a transaction on the accounts is disclosed in the journal.
88.
The convention of consistency pertains to the use of the same accounting principles by firms in the same industry.
79.
The current ratio takes into account the composition of current assets.
81.
The debt to assets ratio measures the percentage of assets financed by creditors.
179.
The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:
140.
The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.
133.
The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.
95.
The economic entity assumption is that a company will remain in operations for the foreseeable future.
91.
The economic entity assumption states that assets should be recorded at their cost.
True
The economic entity assumption states that economic events can be identified with a particular unit of accountability.
191.
The entire group of accounts maintained by a company is referred to collectively as the journal.
78.
The excess of current assets over current liabilities is called working capital.
169.
The expense recognition principle matches:
183.
The following ledger accounts are used by the Heartland Race Track:
True
The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.
185.
The journal is a chronological record of all transactions.
the debit side
The left side of an account is
Account Payable
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
True
The liability of corporate stockholders is limited to the amount of their investment.
72.
The main difference between intangible assets and property, plant and equipment is the length of the asset's life.
92.
The monetary unit assumption has led to an increase in the notes to financial statements.
True
The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.
False
The most generally accepted value used in accounting is market value.
129.
The normal balance of all accounts is a debit.
135.
The normal balance of an asset is a credit.
136.
The normal balance of the dividend account is a credit.
111.
The operating cycle of a company is the average time that is required to go from cash to
210.
The payment of a liability
True
The payment of a liability decreases both cash and accounts payable.
False
The periodicity assumption states that the business will remain in operation for the foreseeable future.
145.
The periodicity assumption states that the economic life of a business entity can be divided into artificial time periods.
166.
The periodicity assumption states that:
85.
The primary accounting standard-setting body in the United States is the Securities and Exchange Commission.
173.
The primary difference between accrued revenues and unearned revenues is that accrued revenues have:
172.
The primary difference between prepaid and accrued expenses is that prepaid expenses have:
209.
The purchase of an asset for cash
Increases assets and liabilities
The purchase of an asset on credit
False
The purchase of equipment is an example of a financing activity.
125.
The recording process becomes more efficient and informative if all transactions are recorded in one account.
75.
The retained earnings statement describes the changes in retained earnings during the period.
76.
The retained earnings statement is more comprehensive than the statement of stockholders' equity.
146.
The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.
168.
The revenue recognition principle dictates that revenue should be recognized in the accounting records:
Account Receivable
The right to receive money in the future is called a(n)
211.
The sale of an asset on credit for what it cost
115.
These are selected account balances on December 31, 2014.
it must be capable of making a difference in a decision
To be relevant, what characteristic must accounting information exhibit?
106.
Trademarks would appear in which balance sheet section?
144.
Transactions are entered in the ledger accounts and then transferred to journals.
142.
Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.
184.
Transactions are recorded in alphabetical order in a journal.
True
Two primary external users of accounting information are investors and creditors.
171.
Under the accrual basis of accounting:
141.
Under the double-entry system, revenues must always equal expenses.
195.
Unearned Service Revenue is classified as a liability on the balance sheet.
177.
Unearned revenue is classified as a(n):
176.
Unearned revenues are:
2.50:1
Use the following data to calculate the current ratio. (Current Ration equation is Current Assest / Current Liabilities)
120.
Use the following data to determine the total amount of working capital
400,000
Use the following data to determine the total dollar amount of assets to be classified as current assets. (Current Assets are: Cash, Accounts Receivable, Inventory, and Prepaid Insurance)
119.
Use the following data to determine the total dollar amount of assets to be classified as investments.
118.
Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment.
116.
What is the order in which assets are generally listed on a classified balance sheet?
to establish accounting standards in the U.S
What is the role of the FASB?
162.
When closing entries are prepared, each income statement account is closed directly to retained earnings.
212.
When collection is made on Accounts Receivable,
93.
When preparing financial statements, the accountant assumes that the business will stay in business for the foreseeable future.
201.
When the columns of the trial balance equal each other, it means that no errors have occurred in the recording and posting the transactions.
Corporation
Which of the following has the advantage of enabling a business to raise funds most easily?
Creditors
Which of the following is a primary user of accounting information with a direct financial interest in the business?
Intercompany comparisons of earnings per share for a two-year period
Which of the following is meaningful comparison to assess a company's profitability?
108.
Which of the following is not a current liability?
Favorable Tax Treatment
Which of the following is not an advantage of the corporate form of business organization?
103.
Which of the following is not classified properly as a current asset?
105.
Which of the following is not considered an asset?
Finance directors
Which of the following is not considered an external user of accounting information?
Amounts earned by a company but not distributed as dividends
Which of the following items will be reported on the statement of retained earnings?
107.
Which of the following would not be classified as a long-term liability?
A statement of retained earnings as of May 31, 2014
Which one of the following is not the correct date format for the respective financial statement?
Current assets are assets that a company expects to convert to cash or use up within the longer of one year or it's operating cycle
Which one of the following is true?
What average pay raise is affordable for employees this year?
Which one of the following questions is most likely asked by an internal human resources director for the company?
Financing, investing, operating
Which one of the following represents the correct order of the three business activities for a new company?
the amount of net income on the income statement is added to the beginning retained earnings balance on the statement of retained earnings
Which one of the following statements is true concerning the interrelationships of financial statements?
114.
Which statement about long-term investments is not true?
The life of a business can be divided into artificial times periods for which useful reports can be prepared
Which statement describes the periodicity assumption?