Accounting Exam 1 Top 20 Missed Q

EXAM 1 TOP 20: A company reports the following balances before closing entries: - Cash: $12,000 - Supplies: $4,500 - Prepaid Rent: $2,000 - Salary Expense: $4,500 - Equipment: $65,000 - Service Revenue: $30,000 - Miscellaneous - Expenses: $20,000 - Dividends: $3,000 - Accounts Payable: $5,000 - Common Stock: $68,000 - Retained Earnings: $8,000 What amount will be reported for total assets? a. $83,500. b. $82,500. c. $77,000 d. $68,500. e. $81,500.

$83,500 $12,000 (cash) + $4,500 (supplies) + $2,000 (prepaid rent) + $65,000 (equipment) Assets: Resources owned by a company EX: Cash, accounts receivable, prepaid expenses, land, property, inventory, supplies, and equipment.

BACK EXAM: Crouch Company purchased a delivery truck on January 1, 2012, for $65,000. The truck has an estimated life of 10 years and an estimated residual value of $5,000. If Crouch Co. uses straight-line depreciation, what would be the book value after 4 years? A. $41,000 B. $36,000 C. $60,000 D. $24,000 E. None of the Above

A. $41,000

BACK EXAM: On October 1, 2012, Ingram Inc. borrows $50,000 from the bank by signing a 9-month note payable at 6% interest. The adjusting entry on December 31, 2012, includes a debit to Interest Expense for: A. $750 B. $2,250 C. $0 D. $1,500 E.$3,000

A. $750

BACK EXAM: Which of the following causes an increase in stockholders' equity? A. Sell a long-term asset for more than its book value B. Receive cash from customers for services previously provided C. Pay dividends to stockholders D. Receive cash from bank borrowing E. Receive cash in advance from customers

A. Sell a long-term asset for more than its book value. Book value: The cost of the asset minus accumulated depreciation up to the date of the sale.

BACK EXAM: Which of the following best explains the meaning of stockholders' equity? A. The amount of capital invested by stockholders plus profits retained over the life of the company B. All revenues, expenses, and dividends over the life of the company C. Total assets plus total liabilities of the company D. The amount of common stock less dividends of the life of the company E. The difference between total revenues and total expenses, less dividends for the year

A. The amount of capital invested by stockholders plus profits retained over the life of the company. For a corporation, the owners' claims to the resources of a company. The two sources of stockholders' equity are amounts: Paid in from shareholders AND earned by the corporation. The resources owned by the company minus the amounts owed.

BACK EXAM: Rent Expense of $42,000 is paid with cash during one month, and Inventory of $85,000 was purchased on account during the same month. Did stockholders' equity increase or decrease and by how much? A. No change B. $42,000 decrease C. $43,000 increase D. $85,000 increase E. $127,000 increase

B. $42,000 decrease

BACK EXAM: When preparing a bank reconciliation, a deposit outstanding would be _______ while a check outstanding would be ________: A. Subtracted from the bank"s cash balance; Added to the bank"s cash balance. B. Added to the bank"s cash balance; Subtracted from the bank"s cash balance. C. Added to the company"s cash balance; Subtracted from the company"s cash balance. D. Excluded from all reconciliation as this is a non-cash transaction. E. Subtracted from the company"s cash balance; Added to the company"s cash balance.

B. Added to the bank's cash balance; Subtracted from the bank"s cash balance. The bank does not know about checks outstanding. Add outstanding deposits (have not reached the bank yet). Deposits outstanding: Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank. Bank reconciliation: Report that explains the difference between the book balance of cash and the cash balance reported on the bank statement.

BACK EXAM: Which of the following is an example of a closing entry? A. Debit Supplies; Credit Accounts Payable B. Debit to Service Revenue; Credit to Retained Earnings C. Debit to Service Expense; Credit to Retained Earnings D. Debit to Retained Earnings; Credit to Prepaid Insurance E. Debit Dividends; Credit Cash

B. Debit to Service Revenue; Credit to Retained Earnings NO ASSETS OR LIABILITIES IN CLOSING ENTRIES.

BACK EXAM: Consider the following transactions: 1. The company uses supplies purchased in the previous period, $1,500. 2. The company pays cash for inventory, $6,000. 3. The company repays a loan to the bank, $10,000 (ignore any interest cost). The amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____. A. $6,000; $16,000 B. $7,500; $17,500 C. $1,500; $6,000 D. $6,000; 11,500 E. $1,500; 16,000

C. $1,500; $6,000

BACK EXAM: In 2012, Tony estimates that warranty costs in the following year will be $25,000. Actual warranty costs in 2013 are only $20,000. What is the effect on the accounting equation when recording actual warranty costs in 2013? A. Stockholders' equity increases B. Assets increase C. Liabilities decrease D. Liabilities increase E. Stockholders" equity decreases

C. Liabilities decrease

BACK EXAM: Net Sales Revenue includes Total Sales Revenue less: A. Depreciation Expense B. Bad Debt Expense C. Sales Returns and Allowances D. Total expenses E. Total liabilities

C. Sales Returns and Allowances

BACK EXAM: Leinart Co. had the following inventory transactions for the period. Calculate the cost of goods sold using the average costs method (Do not round until final answer). BI: Beginning Inventory PC: Purchase Cost SP: Selling Price July 1 BI: 350 PC: $1 July 10 Sale: 150 SP: $5 July 14 Purchase: 400 PC: 2 July 17 Sale: 300 SP: $6 July 28 Purchase: 200 PC: $4 A. $1,123.69 B. $845.13 C. $1,026.32 D. $923.68 E. $1,050.00

D. $923.68

BACK EXAM: How many of the following transactions increase a company's liquidity? a. Provide services on account b. Pay workers' salaries in the current period c. Purchase office supplies with cash d. Pay dividends to stockholders A. 0 B. 4 C. 2 D. 1 E. 3

D. 1 Liquidity refers to having sufficient cash to pay currently maturing debts.

BACK EXAM: On June 8, Dayne Corp. purchased inventory on account for $15,000 with terms of 3/15. On June 10, Dayne Corp. returned $1,000 worth of inventory, and then paid the remaining balance on June 20. How would Dayne record the payment on June 20? A. Debit Accounts Payable $14,000; Credit Cash $14,000 B. Debit Accounts Payable $13,580; Debit Inventory $420; Credit Cash $14,000 C. Debit Accounts Payable $14,550; Debit Inventory $450; Credit Cash $15,000 D. Debit Accounts Payable $14,000; Credit Inventory $420; Credit Cash $13,580 E. Debit Accounts Payable $15,000; Credit Inventory $450; Credit Cash $14,550

D. Debit Accounts Payable $14,000; Credit Inventory $420; Credit Cash $13,580

BACK EXAM: On July 31, 2012, Smith Co. borrows from RavenBank by signing a note for $80,000. This transaction would be recorded by Smith Co. with a credit to: A. Interest Expense B. Loan Revenue C. Cash D. Notes Payable E. Accounts Payable

D. Notes Payable Debit cash

BACK EXAM: How many of the following would decrease net income? a. Estimated future uncollectible accounts receivable b. Probable future warranty costs c. Estimated selling price of inventory falling below its original cost d. Impairment of an asset e. Actual bad debt A. 1 B. 2 C. 5 D. 3 E. 4

E. 4

BACK EXAM: Which of the following would be recorded as an adjusting entry at the end of the year? A. Impairment of long-term assets B. Lower-of-cost-or-market inventory valuation C. Contingent liabilities D. Allowance for uncollectible accounts E. All of the above are included in adjusting entries at the end of the year

E. All of the above are included in adjusting entries at the end of the year

BACK EXAM: Panthers Inc. receives services on account from Newton Inc. on September 29. Panthers Inc. pays for the services on October 5. How would Panthers Inc. record the payment on October 5? A. Credit to Service Expense B. Debit to Cash C. Credit to Accounts Receivable D. Credit to Service Revenue E. Debit to Accounts Payable

E. Debit to Accounts Payable

BACK EXAM: Current liabilities are best described as: A. A small amount of debt B. A large amount of debt C. Debt due in more than one year D. Debt likely to be repaid E. Debt due within one year

E. Debt due within one year

BACK EXAM: What is the effect on the accounting equation when inventory is purchased on account? A. Decrease in liabilities B. Increase equities C. No change D. Decrease in assets E. Increase in liabilities

E. Increase in liabilities Assets increase from obtaining inventory. Liabilities increase from purchasing on account.

BACK EXAM: Which of the following accounts is considered to have a permanent balance? A. Sales Revenue B. Cost of Goods Sold C. Retained Earnings D. Prepaid Rent E. Two of the above have permanent balances

E. Two of the above have permanent balances Asset: Prepaid rent

EXAM 1 TOP 20: For the past three years, a company reported the following annual net income and dividend amounts: Net Income: NI Dividends: D - Year 1 NI: $130,000 D: $80,000 - Year 2 NI: $140,000 D: $80,000 - Year 3 NI: $150,000 D: $90,000 If the company had Retained Earnings of $200,000 at the end of Year 3, what was the company's Retained Earnings at the beginning of Year 1? a. $30,000. b. $60,000. c. $40,000. d. $70,000 e. $50,000.

a. $30,000. Year 1: $130,000 - $80,000 = $50,000 Year 2: $140,000 - $80,000 = $60,000 Year 3: $130,000 - $80,000 = $60,000 $50,000 + $60,000 + $60,000 = $170,000 $200,000 - $170,000 = $30,000 Retained earnings represent the total net income earned over the life of the company that has not been distributed as dividends. beginning balance + net income - dividends = retained earnings

EXAM 1 TOP 20: The adjusting entry to record the expiration of rent over the year would include: a. A credit to Prepaid Rent. b. A debit to Prepaid Rent. c. A credit to Rent Payable. d. A credit to Cash e. A credit to Rent Expense.

a. A credit to Prepaid Rent (asset) A debit to Rent Expense (liability) If it involves an asset that is used/unused, debit an expense and credit an asset

EXAM 1 TOP 20: Which account measures amounts owed to suppliers? a. Accounts Payable b. Supplies Expense c. Retained Earnings d. Cash e. Supplies

a. Accounts Payable Current liability

EXAM 1 TOP 20: The Common Stock account records: a. Cash received by the company from its stockholders. b. The amounts owed to creditors. c. Total profits less dividends. d. The resources owned by the company. e. Cash payments by the company to its stockholders.

a. Cash received by the company from its stockholders.

EXAM 1 TOP 20: A credit to an asset account: a. Decreases its balance b. Has no effect on its balance c. Increases its balance d. Also increases stockholders' equity e. Two of the other answers are correct

a. Decreases its balance DEALOR Increase account with a credit: Liabilities, Stockholders' Equity, and Revenues. Increase account with a debit: Dividends, Expenses, and Assets

EXAM 1 TOP 20: Consider the following items: - Land - Accounts Receivable - Notes Payable (due in three years) - Accounts Payable - Retained Earnings - Supplies - Unearned Revenue - Buildings - Notes Payable (due in six months) - Equipment How many of the items listed above are generally reported as current assets? a. Two. b. Four. c. Five. d. Three.

a. Two. Accounts receivable (Cash's best friend) and notes payable due in 6 month.

EXAM 1 TOP 20: A company has the following balance sheet accounts: - Cash: $20,000 - Accounts Receivable: ? - Accounts Payable: $2,000 - Common Stock: $20,000 - Retained Earnings: $10,000 - Notes Payable: $5,000 What is the balance of Accounts Receivable? a. $7,000 b. $17,000 c. $22,000. d. Cannot be determined given the information provided. e. $15,000.

b. $17,000 Assets = Liabilities + Stockholders' Equity Assets: Cash and accounts receivable. Liabilities: Accounts payable and notes payable. SE: Common stock and retained earnings $20,000 + x = $2,000(L) + $5,000 (L) + $20,000 (SE) + $10,000 (SE)

EXAM 1 TOP 20: The beginning balance of the Cash account is $10,000. The following transactions occur during the year: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. What was the balance of the company's Cash account following these six transactions? a. $23,800 b. $37,800. c. $25,800. d. $22,800. e. $25,500.

b. $37,800 beginning balance ($10,000) + common stock issued ($15,000) - office equipment ($1,200) + cash service revenue ($14,000).

EXAM 1 TOP 20: Which of the following financial statements reports a company's retained earnings? a. Income statement. b. Balance sheet. c. Statement of cash flows. d. All of the other answers are correct. e. Statement of resources

b. Balance sheet. Retained earnings: All revenues, expenses, and dividends over the life of the company. The statement of stockholders' equity reports the ending balance retained earnings. Information contained on the balance sheet: Assets, liabilities, and stockholders equity.

EXAM 1 TOP 20: The closing process includes which of the following? a. Two of the other answers are correct. b. Closing the balances of revenue, expense and dividend accounts to zero. c. Closing the balances of asset and liability accounts to zero. d. Closing the balance of the retained earnings account to zero.

b. Closing the balances of revenue, expense and dividend accounts to zero. Purpose: To transfer the balance of temporary accounts to Retained Earnings.

EXAM 1 TOP 20: Which of the following is a possible closing entry? a. Debit Cash;, credit Service Revenue. b. Debit Service Revenue; credit Retained Earnings. c. Debit Cash; credit Retained Earnings. d. Debit Dividends; credit Retained Earnings.

b. Debit Service Revenue; credit Retained Earnings. Expenses and dividends are zeroed out by crediting each account and revenues are zeroed out by debiting each account. Assets and liabilities are permanent accounts so they will never be "closed". EX: Debit Retained Earnings; Credit Supplies Expense

EXAM 1 TOP 20: Providing services on account would be recorded with a: a. Debit to Service Revenue. b. Debit to Accounts Receivable. c. Debit to Accounts Payable d. Credit to Accounts Payable. e. Credit to Cash.

b. Debit to Accounts Receivable. Increase equities Also increases assets Revenues earned but no cash, so use cash's "best friend" of accounts receivable. Accounts receivable goes up, revenue account goes up meaning stockholders' equity goes up.

EXAM 1 TOP 20: Consider the following list of accounts: - Cash - Salaries Expense - Common Stock - Utilities Expense - Accounts Receivable - Accounts Payable - Service Revenue - Buildings How many of these accounts will increase with a debit? a. Three b. Five c. Four d. Six e. Seven

b. Five 1. Cash 2. Salaries Expense 3. Utilities Expense 4. Accounts receivable 5. Buildings Increase with a debit: Dividends, Expenses, and Assets Increase with a credit: Liabilities, owners' equity, and revenues.

EXAM 1 TOP 20: The sale of land for cash is considered a(n): a. Financing cash flow. b. Investing cash flow. c. Not a cash flow. d. Operating cash flow.

b. Investing cash flow. Involves the buying and selling of land, buildings, and equipment used in the business. EX: Transactions involving the purchase and sale of productive assets, long term asset, selling equipment for cash, and purchasing a delivery truck.

EXAM 1 TOP 20: When a company incurs a cost used in current operations but has not yet paid cash for that cost in the current period, the accounting equation would be affected as follows: a. Assets decrease and liabilities increase. b. Liabilities increase and stockholders' equity decreases. c. The accounting equation would not be affected. d. Assets decrease and liabilities decrease. e. Liabilities decrease and stockholders' equity increases.

b. Liabilities increase and stockholders' equity decreases. Balance out the accounting equation. Accrued expense: Incurred but not yet paid.

EXAM 1 TOP 20: Given the information below, what was the amount of dividends the company paid in the current period? Beginning Retained Earnings = $120,000 Decrease in Cash = $10,000 Ending Retained Earnings = $140,000 Net Income = $50,000 a. $80,000. b. $10,000 c. $30,000. d. $140,000. e. $20,000.

c. $30,000 (Beginning Retained Earnings) $120,000 - (Decrease in Cash) $10,000 + (Dividends) x = (Ending Retained Earnings) $140,000

EXAM 1 TOP 20: A company's balance of cash in its own records is $10,000. The following information is determined after comparing the company's cash records with the bank statement: - Bank's balance: $13,000 - Notes collected: $1,600 - Deposits Outstanding: $1,000 - Checks Outstanding: $3,000 - Bank service fees: $100 - NSF checks: $500 What is the company's correct amount of cash? a. $12,000 b. $10,100 c. $12,500 d. $11,000 e. $11,600

d. $12,000 Beginning cash balance of $13,000 + notes receivable collected of $1,600 - bank fee of $100 - NSF of $500 = $ Note receivable collected by the bank (Co knows) Checks outstanding: BANK KNOWS Bank service fees (Co knows) Non-sufficient funds (NSF) checks (Co knows) Deposits Outstanding: Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank

EXAM 1 TOP 20: Payment of cash dividends to stockholders is considered a(n): a. Not a cash flow. b. Operating cash flow. c. Investing cash flow. d. Financing cash flow.

d. Financing cash flow. Includes cash transactions resulting from the external financing of a business. Effecting stockholders' equity/liabilities EX: Notes payable, borrowing money from the bank, selling stock to an investor, and paying dividends

EXAM 1 TOP 20: An example of an adjusting entry would not include: a. Recording the interest cost incurred during the year. b. Recording the expiration of prepaid insurance over the year. c. Recording the salaries owed at the end of the year. d. Recording supplies used during the year. e. Recording the cash received in advance from customers during the year.

e. Recording the cash received in advance from customers during the year. Adjusting: Never have CASH in debit/credit adjusting entries. Prepayments (deferred revenue prepaid expenses) and accruals (accrued revenue and accrued expenses). Generally adjust revenue or expenses that have not been recorded yet, OR adjust deferred revenue that was earned/ that was previously a liability, OR adjust an unused asset (future economic benefit).