Accounting 2
An expense not yet incurred; paid in advance
prepaid expenses
Office supplies on hand that will be used in the next period
prepaid expenses
At December 31, 2017, before any year-end adjustments, Dallis Company's Prepaid Insurance account had a balance of $5,800. It was determined that $2,600 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expenses for the year would be:
A. $2,600
Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized?
A. August 31
Typically the chart of accounts begins with
A. asset accounts
Nacron Company borrowed $15,000 from the bank signing a 6%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be:
A. debit Interest Expense, $75; credit Interest Payable $900
Which of the following would not be classified as a contra account?
A. sales revenue
Barnes Company showed the following balances at the end of the year. Cash $14,000 Prepaid insurance $700 Accounts receivable $3,500 Accounts payable $2,800 Notes payable $4,200 Common stock $5,400 Dividends $700 Revenues $29,000 Expenses $17,500 What amount did Barnes Company show as total credits?
B. $41,400
A buyer borrows money at 6% interests to pay a $9,000 invoice with terms 1/10, n/30 on the 10th day of the discount period. The loan is repaid on the 30th day of the invoice. What is the buyer's net savings for this total event?
B. $60.00
Which of the following is a true statement about inventory systems?
B. Perpetual inventory systems require more detailed inventory records
Ratios are used as tools in financial analysis
B. because they can provide information that may not be apparent from inspection of the individual components of the financial statements
The asset turnover measures
B. how efficiently a company
Gross profit does NOT appear
B. on a single-step income statement
Sampson Company's accounting records show the following at the year ending on December 31, 2017 Purchase Discounts $11,200 Freight-In $15,600 Purchases $700,020 Beginning Inventory $47,000 Ending Inventory $57,600 Purchase Returns and Allowances $12,800 Using the periodic system, the cost of goods sold is:
C. $681,020
If a company has a current ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?
C. Decrease, Increase
Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
C. credit Supplies Expense, $4,500; credit Supplies $4,500
Borrowing money and issuing shares of stock are
C. financing activities
A post-closing trial balance will show:
C. only balance sheet accounts
The normal balance of any account is the
C. side which increases that account
Which of the following is the best definition of sustainable income?
D. Sustainable income is the most likely level of income to be obtained in the future
At September 1, 2017, Baxter Inc. reported Retained Earnings of $423,000. During the month, Baxter generated revenues of $60,000, incurred expenses of $36,000, purchased equipment for $15,000 and paid dividends of $6,000. What is the balance in Retained Earnings at September 30, 2017?
D. $441,000 credit
La More Company had the following transactions during 2016: -Sales of $9,000 on account -Collected $4,000 for services to be performed in 2017 -Paid $3,750 cash in salaries for 2016 -Purchased airline tickets for $500 in December for a trip to take place in 2017 What is La More's 2016 net income using accrual accounting?
D. $5,250
An accountant has debited an asset account for $800 and credited a liability account for $700. Which of the following would be an incorrect way to complete the recording of the transaction?
D. Debit a stockholder's equity account for $100
Interest expense incurred; not yet paid
accrued expenses
Rent not yet collected; already recognized
accrued revenues
A revenue recognized; not yet collected or recorded
accrued expenses
An expense incurred; not yet paid or recorded
accrued expenses
Failure to record accrued wages
no affect
Failure to record the recognized portion of unearned revenues
no affect
Failure to record depreciation
overstated
Failure to record expired prepaid rent
overstated
Failure to record accrued interest on the bank savings account
understated
Failure to record recognized revenue
understated
A revenue not yet recognized; collected in advance
unearned revenue