Accounting

A payment of a portion of an accounts payable will a. not affect total assets. b. increase liabilities. c. not affect stockholders' equity. d. decrease net income.

c

Expense Recognition Principle

matches expenses with revenues in the period when the company makes efforts to generate those revenues

During February 2017, its first month of operations, the owner of Schwenn Enterprises invested cash of $100,000. Schwenn had cash sales of $20,000 and paid expenses of $35,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28? a. $15,000 b. $85,000 c. $120,000 d. $65,000

Ans: B Solution: $100,000 + $20,000 - $35,000 = $85,000 (Beg. cash + Sales - Exp.)

Crawford Company started the year with $60,000 in its Common Stock account and a balance in Retained Earnings of $44,000. During the year, the company earned net income of $48,000 and declared and paid $20,000 of dividends. In addition, the company sold additional common stock amounting to $28,000. As a result, the amount of its retained earnings at the end of the year would be a. $160,000. b. $72,000. c. $132,000. d. $100,000.

Ans: B Solution: $44,000 + $48,000 - $20,000 = $72,000 (Beg. ret. earn. + Net inc. - Div.)

Bluing Corporation issued a one-year 9% $400,000 note on April 30, 2017. Interest expense for the year ended December 31, 2017 was: a. $36,000. b. $27,000. c. $24,000. d. $21,000.

Ans: C Solution: $400,000 X .09 X 8/12 = $24,000 (Prin. X Int. rate X Fraction of yr.)

During 2017, its first year of operations, Jane's Bakery had revenues of $130,000 and expenses of $66,000. The business paid cash dividends of $36,000. What is the balance in Retained Earnings at December 31, 2017? a. $0 b. $36,000 c. $28,000 d. $64,000

Ans: C Solution: ($130,000 - $66,000) - $36,000 = $28,000 (Rev. - Exp. - Div.)

At October 1, 2020, Wright's Company's Accounts Receivable balance was $19,000. During December, Wright had credit sales of $56,000 and collected accounts receivable of $35,000. At October 31, 2020, the Accounts Receivable balance is a.$19,000 b. $40,000 c. $111,000 d. $21,000

Answer: b Solution: $19,000 + $56,000 - $35,000 = $40,000 (Beg. acc. rec. + Sales - Collect.)

If an individual asset is increased, then a. there could be an equal decrease in a specific liability. b. there could be an equal decrease in stockholders' equity. c. there could be an equal decrease in another asset. d. None of these answer choices are correct.

C

An account used for prepaid stuff

Expense recognition

Adjustments are required: a. because some costs expire with the passage of time and have not yet been recorded. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are earned. d. None of these answer choices are correct.

a

Adjustments for unearned revenue: a. decrease liabilities and increase revenues. b. increase liabilities and increase revenues. c. increase assets and increase revenues. d. decrease revenues and decrease assets.

a

One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.

a

The Mac Company has four plants nationwide that cost $350 million. The current fair value of the plants is $300 million. The plants will be reported as assets at a. $350 million. b. $700 million. c. $300 million. d. $600 million.

a

Which of the following is not generally an accounting time period? a. A week. b. A month. c. A quarter. d. A year.

a

A revenue generally a. increases assets and liabilities. b. increases assets and stockholders' equity. c. increases assets and decreases stockholders' equity. d. leaves total assets unchanged.

b

An expense a. decreases assets and liabilities. b. decreases stockholders' equity. c. leaves stockholders' equity unchanged. d. is basically the same as a liability.

b

The expense recognition principle matches: a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses.

b

Accounting information is relevant to business decisions when it a. has been verified by external audit. b. is prepared on an annual basis. c. confirms prior expectations. d. is neutral in its representations.

c

If services are rendered on account, then a. assets will decrease. b. liabilities will increase. c. stockholders' equity will increase. d. liabilities will decrease.

c

In a service-type business, revenue is recognized: a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received.

c

The sale of an asset on credit for what it cost a. increases assets and liabilities. b. decreases assets and liabilities. c. leaves total assets unchanged. d.decreases assets and increases liabilities

c

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was increased for the full amount. If financial statements are prepared on July 31, the adjustment to be made by the Fisher Shoe Store is: a. increase Rent Expense, $24,000; decrease Prepaid Rent, $4,000. b. increase Prepaid Rent, $4,000; decrease Rent Expense, $4,000. c. increase Rent Expense, $4,000; decrease Prepaid Rent, $4,000. d. increase Rent Expense, $24,000; decrease Prepaid Rent, $20,000.

c Solution: $24,000 X 1/6 = $4,000 (Rent pd. X 1/6)

Greese Company purchased office supplies costing $7,000 and increase 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 adjustment to be made at the end of the period would be: a. increase Supplies Expense, $2,500; decrease Supplies, $2,500. b. increase Supplies, $4,500; decrease Supplies Expense, $4,500. c. increase Supplies Expense, $4,500; decrease Supplies, $4,500. d. increase Supplies, $2,500; decrease Supplies Expense, $2,500.

c Solution: $7,000 - $2,500 = $4,500 (Supp. purch. - Supp. on hand)

Adjustments are made to ensure that: a. expenses are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an ac-counting period. d. All of these answer choices are correct.

d

Comstock Company provided consulting services and billed the client $2,500. As a result of this event a. assets remained unchanged. b. assets increased by $2,500. c. equity increased by $2,500 d. both assets and equity increased by $2,500.

d

If a company pays dividends of $10,000, a. stockholders' equity will be reduced by $10,000. b. net income will be reduced by $10,000. c. retained earnings will be reduced by $10,000. d. Both retained earnings and stockholders' equity will be reduced by $10,000.

d

The purchase of an asset for cash a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.

d

Materiality relates to whether an item is significant enough to likely influence the decision of an investor or creditor. T/F

true