ACCOUNTING 242 FINAL

Ann began the Innosiceht Company by investing $75,000 of cash in the business. The compnay recorded revenues of $545,000, expenses of $400,000, and had owner drawings of $30,000 What was the net income of the company? $115,000 $145,000 $175,000 $190,000

$145,000

A T-account is a. a way of depicting the basic form of an account b. what the computer uses to organize bytes of information c. a special account used instead of a trial balanced d. used for accounts that have a debit balance but never a credit balance

A

Debts owed by a business are referred to as: a. accounts receivable b. liabilities c. owner's equity d. expenses

B

The chart of accounts is: a. a group of accounts for a business b. a list of the accounts in the ledger c. a list of all income and expense accounts d. a list of all the accounts with their balances

B

The historical cost principle requires that when assets are acquired, they be recorded at appraisal value cost market price book value

B

Accountants first record transactions in the: Chart of accounts Trial Balance Journal Ledger

C

Accountants refer to an economic event as a a. purchase b. sale c. transaction d. change in ownership

C

All of the following are characteristics of accounting information except: a. relevance b. comparability c. flexibility d faithful representation

C

An accounting time period that is one year in length, but does not begin on January 1, is referred to as: a. a reporting period b. the time period assumption c. a fiscal year d.a calendar year

C

Assets are: a. rights of creditors over the business b. rights of owners over the business. c. resources owned by the business d. personal property of the owners

C

Each financial statement includes a heading giving three pieces of data. Which of the following items is NOT included in these headings? a. Name of Financial Statement b. Date or time period covered c. Name of the preparer d. Name of the business

C

All of the following assets will be included as intangible assets on the balance sheet except: a. copyrights b. goodwill c. patents d. investments

D

In general, adjusting entries are required each time financial statements are prepared.

TRUE

T/F :::: The cash basis of accounting is not in accordance with Generally Accepted Accounting Principles.

TRUE

Accumulated Depreciation is a contra-asset account and has a normal __________ account balance.

credit

Adjusting entries are: a. needed to bring accounts up to date and match revenue and expense b. the same as correcting entries c. rarely needed in large companies d. optional under generally accepted accounting principles

A

Owners have no personal liability under which legal business structure? A. a corporation B. a partnership C. a sole proprietorship D. There is liability in every legal business structure.

A

The process of initially recording a business transaction is called: a. journalizing b. balancing c. posting d. closing

A

The purpose of the adjusted trial balance is to verify: a. the equality of the total debit balances and the total credit balances after adjustments have been recorded b. that all of the accounts are correct c. the equality of the total debit balances and the total credit balances before adjustments have been recorded d. that the net income reported is accurate

A

The statement that provides the financial position of a company, listing assets, liabilities and owner's equity, as of a specific date is the: a. balance sheet b. statement of owner's equity c. statement of cash flows d. income statement

A

When a bond sells at a discount, the carrying value ________ after each amortization entry. increases decreases stays the same cannot be determined

A

An accelerated depreciation method that takes more expense in the first few years of the asset's life is ________. units-of-production depreciation double-declining-balance depreciation accumulated depreciation straight-line depreciation

B

An adjusting entry always affects a. and asset account and a revenue account b. an income statement account and a balance sheet account c. an expense and revenue account d an asset and liability account

B

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called: a. allocation b. depreciation c. accumulation d. matching

B

Expenses incurred but not yet paid or recorded are called: a. prepaid expenses b. accrued expenses c. interim expenses d. unearned expenses

B

Financial statements combining the operations of Sears and JC Penney would biolate the monetary unit assumption economic entity assumption cost principle both the monetary unit and the cost principle

B

Prepaid insurance is a. a liability account b. an asset account c. an expense account d. a revenue account

B

The trial balance will include: a. only the debits of each account b. the ending balance of each account c. only the credits of each account d. only balance sheet accounts

B

Which of the following is the correct order of preparing the financial statements? A. income statement, statement of cash flows, balance sheet, statement of owner's equity B. income statement, statement of owner's equity, balance sheet, statement of cash flows C. income statement, balance sheet, statement of owner's equity, statement of cash flows D. income statement, balance sheet, statement of cash flows, statement of owner's equity

B

The ________ states that everything the company owns or controls (assets) must be recorded at their value at the date of acquisition. A. revenue recognition principle B. expense recognition (matching) principle C. cost principle D. full disclosure principle

C

The information for preparing a trial balance is obtained from a. business and source documents b. worksheets c. general ledger accounts d. general journal entries

C

The legal protection that provides a company exclusive rights to produce and sell a unique product is known as which of the following? trademark copyright patent goodwill

C

The primary ledger containing all the balance sheet and income statement accounts is the: a. customer's ledger b. creditor's ledger c. general ledger d. subsidiary ledger

C

Which of the following is the correct sequence of steps in the recording process? a.Posting, journalizing, analyzing b. Journalizing, analyzing, posting c. Analyzing, journalizing, posting d. Analyzing, posting, jouranlizing

C

Which of the following statements about capitalizing costs is correct? a. Capitalizing costs refers to the process of converting assets to expenses. b. Only the purchase price of the asset is capitalized. c. Capitalizing a cost means to record it as an asset. d. Capitalizing costs results in an immediate decrease in net income.

C

Which one of the following is the authoritative body in the United States having the primary responsibility for developing accounting principles? a. IRS b. SEC c. FASB d. AICPA

C

Regardless how careful a company is in granting credit, some credit sales will be uncollectible. The operating expense recorded as a result of uncollectible receivables is called: a. sales returns and allowances b. credit expense c. net realizable value d. bad debt expense

D

The accounting concept which relates to separating the reporting of business economic transactions and personal economic transactions is: a. cost concept b. unit of measure concept c. objectivity concept d. business entity concept

D

The estimated economic life of an asset is also known as ________. residual value book value salvage life useful life

D

The ledger should be arranged in alphabetical order chronological order dollar amount order account number order

D

The matching concept: a. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance b. addresses the relationship between the journal and the balance sheet c. determines whether the normal balance of an account is a debit or credit d. states that the revenues and related expenses should be reported in the same period.

D

The principal of a bond is ________. the person who sold the bond for the company the person who bought the bond the interest rate printed on the front of the bond the face amount of the bond that will be paid back at maturity

D

The statement that is a summary of the revenue and expenses for a specific period of time is the: a. balance sheet b. statement of owner's equity c. statement of cash flows d. income statement

D

Unearned revenue is classified a. a revenue account. b. a contra-revenue account. c. a liability account. d. an asset account.

D

Which of the following is not a characteristic of a short-term note payable? a. Payment is due in less than a year. b. It bears interest. c. It can result from an accounts payable conversion. d. It is reported on the balance sheet under noncurrent liabilities.

D