accounting 131 final

The interest on a 3 month, 12%, $6,000 note receivable is

$180

Which of the following is not included in cash and cash equivalents on a company's balance sheet

A bank certificate of deposit for one year

Proprietorship

A business by a single owner

Corporation

A business owned by stockholders

Under the allowance method, the entry to write-off a $1,425 uncollectable account includes

A debit to allowance for doubtful account for $1,425

The entry made to close service revenue would include:

A debit to service revenue and a credit to Income Summary

Balance sheet

A formal listing of accounting equation on a specific dates

Income Statement

A statement summarizing the revenues and expenses for a given period

Which of the following accounts are most likely to INCREASE as a result of adjusting entries?

Accounts Receivable

Which of the following statements is true regarding the 2 allowance procedures used to estimate bad debts

Aging of accounts receivable method takes into account the existing balance in the allowance for doubtful accounts account

What type of account is prepaid rent?

An asset

All of the following will affect retained earning except:

An equipment purchase

Accounts Payable

Balance Sheet

Equipment

Balance Sheet

Inventory

Balance Sheet

Prepaid insurance

Balance Sheet

Unearned revenue

Balance Sheet

In order for accounting information to be useful in making informed decisions, it must be:

Both relevant and faithful representation

Which of the following is NOT one of the activities on the Statemet of Cash Flow?

Business Activities

Current assets

Cash and other assets that are reasonably expected to be converted into cash within one year or one operating cycle, whichever is longer

Potential liabilities on short-term note payable is recorded by:

Contingent liabilities

Which of the following business structures offer limited liability to its owners?

Corporation

The book value or carrying value of an asset is defined as:

Cost less accumulated depreciation

Computing Magazine receives $90 in advance from a customer for 3 year subscription. Computing Magazine's entry to record the receipt of funds would include a:

Credit to unearned subscription revenue for $90

Retained earning

Cumulative earnings that have not been distributed to the stockholders

An asset that cost 24,000 and has accumulated depreciation of 18,000 is sold for 5,200. The entry to record the sale would include a

Debit to Loss on Sale of Asset for $800

Receiving a check from a customer on account would be:

Debit to cash and a credit to Accounts Receivable

The normal balance of Accounts Receivable is a ______ because it is a ______.

Debit; asset

The normal balance of a Expense account is a _______ because expenses decrease with_______.

Debit; stock holder's equity

Accrued interest on a short-term note payable is recorded by

Debiting Interest Expense and Crediting Interest Payable

Under the revenue recognition principle, a business should record revenue when the business:

Delivers goods or services to a customer

Which of the following statements regarding accounts is false?

Dividends are increased with credits and decreased with debits

Which of the following terms does not describe the interest rate printed on the bond certificate?

Effective Rate

Depreciation is normally associated with which asset on the balance sheet?

Equipment

Which of the following is irreverent in computing a machine's depreciation expense using the units-of- production method?

Estimated useful life in years

A revenue expenditure usually results in debit to a(n):

Expense account

GAAP requires that research and development costs to develop a new product be

Expense in the period incurred

The matching rule related to credit losses by stating the bad debt expense should be recorded

In the period of the sale

Salary expense

Income Statement

Service revenue

Income Statement

In what order are financial statements generally prepaired?

Income Statement, Statement of Retained Earnings, and Balance Sheet

Cost of goods sold

Income statement

If bonds were initially issued at a discount, the carrying value of the bond on the issuer's books will

Increase as the bonds approach their maturity date

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would

Increase cost of goods sold and decrease merchandise inventory

Stasia, Inc. has a weekly payroll of $8,000 for 5-day work week beginning each Monday and ending each Friday. Stasia's year-end is December 31 st. If December 31 st falls on a Wednesday, Stasia would make an adjustment entry to

Increase wages expense by 4,800

In a period of rising prices, which inventory method is best to use to reduce income taxes by refunding net income

LIFO

A traditional definition of internal control specifically includes all of the following features except

Maintenance of a clean and safe workplace

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

Matching

Which of the following does not represent a sales

Merchandise placed aside for a customer who plans to come in next week and pay with cash

Long-term debt generally includes:

Obligations that extend beyond one year

The depreciable cost of an asset is

Original cost minus accumulated depreciation

The process of transferring journal entry information from the journal to the general ledger is called:

Posting

When a business records revenue before it is earned, it has violated the measurement issue:

Recognition

The adjusting entry made to record repaid rent which as been expired during the period would include debit to:

Rent Expense

Assets

Resources which provide future economic benefits to a business

Beginning retained earnings

Retained Earnings

Dividends

Retained Earnings

Formal closing entries will ultimately affect what accounts?

Retained Earnings

Net Income

Revenues less expense

Which internal control activity is followed when inventory storage areas are secured with limited access

Safeguarding of assets and records

Which of the following most likely would be classified as a current liability?

Salaries payable

Which of the accounts listed below are NOT a temporary (or normal) account?

Salary Payable

Jane manages the physical inventory in the warehouse and she also maintains the accounting records of the inventory held there. Which of the following internal control activities have been violated?

Segregation of duties

Statement of Cash Flow

Shows the net change in the cash account for a given period

Which of the following is a tax paid by the employee but not the employer?

State income tax

An expense incurred in 2010 is not paid until 2011. Using the accrual basis of accounting, the expense should appear on:

The 2010 income statement

Which one of the approaches for the allowance procedure emphasizes the net realizable value of accounts receivable on the balance sheet

The aging of accounts receivable method

A gain is recorded on the sale of a plant asset when:

The asset is sold for price greater than the asset's book value

A credit means:

The event had an effect on the right side of the T-account

If a company's bonds are callable,

The issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%

When the FIFO method is used, ending inventory is assumed to consist of..

The most recently purchased units

Which of the following is not an advantage of issuing long-term debt?

The risk of becoming bankrupt is reduced

When will bonds sell at discount?

The started rate of interest is less than yield/market rate of interest at the time of issue

A trial balance is a useful device because it provides a check on accuracy by showing whether:

Total debits equal total credits

A repair to an appliance under warranty occurs within the warranty period. What adjustment is made?

Warranty Liability is debited

An Accrual refers to an event:

Where cash has not yet been exchanged between the two parties

On the bank reconciliation, interests earned on a checking account should be

added to the balance per books

The term used for allocating the cost of an intangible asset to the periods it benefits is:

amortization

Which of the following items on a bank reconciliation would require a journal entry on the company's books?

bank service charge

The lower of cost or market method of accounting for inventories follows the convention of

conservatism

The account allowance for uncollectable accounts is classified as a(n)

contra-account to accounts receivable

The bondholder can convert the bond into common stock at a future time

convertible bond

The Collins Company sold $200,000 of 10-year bonds for $190,000. The stated rate on the bonds was 8% and interest is paid annually on Dec. 31. What entry would be made on Dec 31 when the interest is paid? (numbers are omitted)

debit interest expense credit discount on bonds payable

Which of the following journal entries is recorded as a result of the bank reconciliation process to record a NSF check for $250

debit to accounts receivable for 250 credit to cash receivable for 250

The collection of $1,000 account after the 2% discount. Would result in a(n)

decrease to accounts receivable for $1000

A contingent liability is recorded as a journal entry in the accounting records

if it is probable that is will become an actual liability and the amount can be reasonably estimated

The collection of a $400 account within the 2% discount period would result in a

increase to sales discounts for $8

Which of the following assets is not subject to depreciation, depletion, and amortization?

land

Obligations that will be satisfied within one year or operating cycle, whichever is longer

liabilities

helps produce an accurate measurement of a company's performance by recording an expense in the same period as the revenue it helped generate

matching principle

Which of the following would be deducted from the balance per bank

outstanding checks

All of the following are inventory costing methods except

periodic

Which of the following is not an internal control activity for cash?

record keeping and physical custody of cash should be performed by the same person

When applying the lower of cost or market rule to inventory valuation, market generally means

replacement cost

The accumulated net income of a company that has been distributed to owners in the form of dividends

retained earnings

Merchandise inventory becomes part of cost of goods sold when a company

sells the inventory

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement

the company must increase the balance per its records by $450