Accounting Midterm

The statement of shareholders' equity reports the ______.

changes that occurred in shareholders' equity during the accounting period

Pizza Company sold $800 of pizzas on account. The journal entry to record the sale will include a ______. (Select all that apply.)

credit to Sales Revenue debit to Accounts Receivable

Determine the amounts missing from each financial statement:

income statement:Revenues - Expenses = Net Income Statement of shareholders' equity:Beginning Retained Earnings + Net Income (from the income statement) - Dividends = Ending Retained Earnings Balance sheet:Assets = Liabilities + Stock + Retained Earnings (from the statement of shareholders' equity)

The entry to record cash received in advance for services not yet performed causes a(n) _______.`

increase in Cash and increase in Deferred Revenue

Par for the Course pays $4,500 cash for T-shirts from a supplier. This transaction ______.

is an operating activity

if a company incorrectly records cash received for services to be provided in the future by increasing Cash and increasing Sales Revenue, how will this error affect the current period?

liabilities will be too low

The cost of a noncurrent asset, such as Equipment, is expensed ______.

over its useful life

Borrowing from a bank is a(n) ______.

financing activity

Sew Chic, Inc., purchased $500 of supplies on account during May. Sew Chic paid $200 of the $500 it owed for its supplies. At May 31, Sew Chic only had $50 of supplies left. Which of the following statements is true about the May financial statements?

statement of cashflows will equal (200)

The dollar amount shown on the Income Statement for Supplies Expense represents ______.

the cost of supplies used during the period

Morris Lest, Inc., purchased machinery for $10,000 cash. The effect of this transaction is to cause ______.

total assets to remain the same

Which of the following is the proper chronological order of the steps in the accounting cycle?

Record entries in the journal and post them to the ledger, prepare the unadjusted trial balance, record and post adjusting entries, prepare the adjusted trial balance, prepare the financial statements, close the temporary accounts into Retained Earnings and prepare a post-closing trial balance.

During September, WVU collected $8,000,000 in advance ticket sales for basketball games to be played in January. The games were played in January as scheduled. The $8,000,000 will be reported as ______.

Revenue on the Income Statement for the month ended January 31

Record the adjusting entry on December 31 for wages owed to employees that will be paid in January, the next accounting period. (Select all that apply.)

debit wages expense credit wages payable

The adjusting entry to record revenue earned but not yet billed to customers includes a credit to ______.

revenue

Which financial statement reports how much cash was paid for its inventory?

statement of cash flows

Proceeds means

cash collected

Wok 'n Roll began business by issuing $4,000 of stock to its owners in exchange for cash.

Assets 4,000 Cash Liabilities 0 No Effect Stock 4,000 Stock Retained Earnings 0 No Effect

Calculate the missing Cost of Goods Sold amount in the following multi-step income statement:

1300 Sales Revenue - Cost of Goods Sold = Gross Profit Gross Profit - Operating Expenses = Operating Income Operating Income - Interest Expense = Net income

John Dear, Inc. bought machinery at a cost of $680,000 on January 1, Year 1. Assuming its salvage value is $0 (i.e., it plans to dispose of the machinery and not try to sell it) and its useful life is 10 years, Accumulated Depreciation at December 31, Year 2 equals ______.

136000

Whistler Company had retained earnings of $470,000 at the end of Year 1. During Year 2, Whistler had net income of $118,000. Retained earnings were $385,000 at December 31, Year 2. The amount of dividends for Year 2 must have been:

203000 See Module 1 - LO 6.5 Connections Between the Financial Statements. Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings To solve for Dividends: Dividends = Beginning Retained Earnings + Net Income - Ending Retained Earnings

On November 1, Year 1, Pitts' Pits, Inc., paid $47,000 for a 4-month insurance policy beginning on that date. Prepaid Insurance at December 31, Year 1 equals ______.

23500

How many of the following accounts have a normal credit balance? Deferred Revenue Sales Revenue Accounts Receivable Accumulated Depreciation Cost of Goods Sold Inventory Prepaids

3

How many of the following line items are on the Balance Sheet? Supplies Expense Retained Earnings Notes Payable Depreciation Expense Accumulated Depreciation Interest Expense

3

How many of the following line items are on the Statement of Cash Flows? Supplies Expense Beginning Retained Earnings Notes Payable Dividends Paid Cash Collected from Customers Proceeds from Loans

3

If a company's total assets equals $60,000 and its shareholders' equity equals $30,000, then its liabilities must equal $______.

30000

During the year, Proffitts, Inc., had revenue of $67,000 and expenses of $29,000. During the year, it collected $8,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals ______.

38,000 See Module 2, LO5. Net income equals Revenue minus Expenses. Revenue earned often differs from the Cash Collected from Customers because customers may pay later (Accounts Receivable) or pay in advance ( Deferred Revenue). Likewise, expenses incurred often differs from the Cash Paid because it may have been paid in advance (Prepaids) or still owed (Payable). Dividends is not an expense and is thus not subtracted in arriving at net income. Dividends is found on the statement of shareholders' equity, which reports the beginning retained earnings plus net income minus dividends to get ending retained earnings. The statement of shareholders' equity also reports the changes in stock during the period.

On January 1, Year 1, The Sweet Dairy Air, Inc., paid $52,000 for a 4-year advertising campaign beginning on that date and runs the same number of advertisements each month. Prepaid Advertising at December 31, Year 1 equals ______.

39,000

Cycle Path, Inc., sold 100 bikes to its customers at $400 each. The bikes cost $250. The entry to record this sale includes a ______. (Select all that apply.)

40,000 Sales Revenue 40,000 Cash (25,000) Cost of Goods Sold (25,000) Inventory

At December 31, Year 1, Sea the World Cruises, Inc.'s assets were $60,000 and liabilities were $40,000. At December 31, Year 2, its assets are $110,000 and liabilities are $50,000. During the year, it did not issue new stock, and it declared and paid $100 dividend. Calculate net income for Year 2.

40000 See Module 1 LO 6.5. First, determine the beginning and ending Shareholders' Equity (SE): Assets - Liabilities = SE Second, determine the change in SE. Remember REDS: R = Revenues (increase SE), E = Expenses (decrease SE), D = Dividends (decrease SE), and S = new Stock (increase SE). Beginning SE + R - E - D + S = Ending SE Third, Net Income (NI) = R - E Lastly, solve for NI: Beginning SE + NI - D + S = Ending SE; NI = Ending SE - Beginning SE + D - S Click on this youtube video link to see a similar example solved.

Use the following information for Equitable, Inc., for the year ended December 31, Year 2. Assume no new stock was issued during the year. Revenue for the year ended, December 31, Year 2 $44,000 Expenses for the year ended, December 31, Year 2 15,000 Total Assets at December 31, Year 1 35,000 Total Assets at December 31, Year 2 60,000 Total Shareholders' Equity at December 31, Year 1 25,000 Dividends for the year ended December 31, Year 2 7,000 What is total Shareholders' Equity at December 31, Year 2?

47000 Review Shareholders' Equity in Module 1, LO6.2. Shareholders' Equity is found on the balance sheet, which reports Assets = Liabilities + Shareholders' Equity. Since Liabilities is not given, you cannot determine Shareholders' Equity using the accounting equation on the balance sheet.Shareholders' Equity is also reported on the statement of shareholders' equity and equals the beginning shareholders' equity + Revenue - Expenses - Dividends + Stock (remember REDS). All of these amounts are given. Note: Stock is $0 because no new stock was issued.

Eel Electronics paid $4,000 of the $5,000 its employees had earned during the period. Eel Electronics should report Wages Expense of ______ on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles.

5,000 : 1000

Kincaid Company's Retained Earnings balance on January 1 was $6,000. During the current year, Kincaid earned $6,400 in revenues and incurred $4,200 in expenses. Kincaid paid $2,500 in dividends, all in cash. After the closing entries are made, Kincaid's Retained Earnings balance on December 31 will be ______.

5700

Land is purchased at a cost of $6,000. At year end, based on appraised values, the land's value increased to $26,000. At what amount should the land be reported on the year-end balance sheet? DO NOT INCLUDE $ IN ANSWER

6000

During the year, A Salt & Buttery, Inc., had revenue of $90,000 of which $16,000 was collected from customers. It also had expenses of $29,000 of which $3,000 was paid. The owners were paid $20,000 in dividends. Net income for the year equals ______.

61,000 See Module 2, LO5. Net income equals Revenue minus Expenses. Revenue earned often differs from the Cash Collected from Customers because customers may pay later (Accounts Receivable) or pay in advance ( Deferred Revenue). Likewise, expenses incurred often differs from the Cash Paid because it may have been paid in advance (Prepaids) or still owed (Payable). Dividends is not an expense and is thus not subtracted in arriving at net income. Dividends is found on the statement of shareholders' equity, which reports the beginning retained earnings plus net income minus dividends to get ending retained earnings. The statement of shareholders' equity also reports the changes in stock during the period.

At December 31, Year 1, Sea the World Cruises, Inc.'s assets were $60,000 and liabilities were $40,000. At December 31, Year 2, its assets are $140,000 and liabilities are $50,000. During the year, it did not issue new stock, and it declared and paid $100 dividend. Calculate net income for Year 2.

70,100 First, determine the beginning and ending Shareholders' Equity (SE): Assets - Liabilities = SE Second, determine the change in SE. Remember REDS: R = Revenues (increase SE), E = Expenses (decrease SE), D = Dividends (decrease SE), and S = new Stock (increase SE). Beginning SE + R - E - D + S = Ending SE Third, Net Income (NI) = R - E Lastly, solve for NI: Beginning SE + NI - D + S = Ending SE; NI = Ending SE - Beginning SE + D - S Click on this youtube video link to see a similar example solved.

Florist Gump, Inc. purchased land at a cost of $8,000 on February 2, 2000. At December 31, 2014, the land is worth $42,000 according to an appraiser. At what amount should the land be reported on Florist Gump's balance sheet at December 31, 2014? DO NOT INCLUDE $ IN ANSWER

8000 See Module 2, LO 3.2. The historical cost principle requires assets to be recorded at their original monetary value given in the exchange for the asset. Subjective increases in asset values are not allowed. However, if the asset value falls below cost, then the asset would be reduced to the lower value.

On November 1, Nim Com Soup, Inc., borrowed $41,000 by issuing a 7-month note at 12%. Interest Payable at December 31, equals ______.

820

Loco for Cocoa began May with $300 of supplies. It purchased $650 of supplies on account during May. It paid $430 of the amount it owed for its supplies in May. At May 31, it only has $120 of supplies left. Supplies Expense for the month ended May 31 equals _________.

830 See Module 2 LO5.2 Supplies Expense equals the supplies consumed (used) to generate revenue. To calculate Supplies Expense, add together the beginning supplies and the supplies purchased, then subtract the supplies left at the end of the period.

Which of the following are possible effects on the accounting equation when recording a transaction that increases an asset by $100? (Select all that apply.)

A liability account increases by $100. An asset decreases by $100. A shareholders' equity account increases by $100.

Wursthaus, Inc., sold 800 of its sausages that cost $6 each to customers for $8,000 cash. Record both the sale and cost of goods sold.

Assets 8,000 Cash; (4,800) Inventory Liabilities 0 No Effect Stock 0 No Effect Retained Earnings 8,000 Sales Revenue; (4,800) Cost of Goods Sold

Stockem, Inc., issued $80,000 of stock in exchange for cash. Show the effect on Stockem's accounting equation.

Assets $80,000 Cash liabilities $0 No Effect stock $80,000 retained earnings $0 No Effect

Miss Take, the company bookkeeper, recorded the $1,000 purchase of inventory by decreasing Cash and decreasing Shareholders' Equity. What is the effect of this error on the accounting equation?

Assets Too low Liabilities No effect Shareholders' Equity Too low

After posting all entries to the ledger, the Accounts Payable T-account will show which of the following? (Select all that apply.)

Payments made on the debit side. Beginning balance on the top of the credit side. Purchases on account on the credit side. Ending balance on the bottom of the credit side.

Haira Noia, Inc., issued $10,000 of stock to its owners for cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct? (Select all that apply.)

Shareholders' equity will be too low. Liabilities will be too high.

On December 1, Morris Lest, Inc., borrowed $34,000 by issuing a 3-month note at 12%. Interest Payable at December 31 equals ______.

The interest owed is one month's interest, which equals Notes Payable (P) x the annual interest rate (R) x 1/12 of a year (T) (=P x R x T). The adjusting entry includes a debit to Interest Expense (-SE) and a credit to Interest Payable (+L).

Liabilities are ______.

amounts that the company owes to creditors

Adjusting entries ______. (Select all that apply.)

are needed in order to measure the period's net income or loss update the accounts to their proper balances

indiana Bones, Inc., purchased $400 of supplies on account during May. Indiana bones paid $150 of the $400 it owed for its supplies. At May 31, Indiana Bones had $100 of supplies left. Which of the following statements is true about the May financial statements?

statement of cash flows will equal $(150) See Module 2, LO5.2, 3) Deferrals. Purchased supplies on account: got Supplies (+A) and gave a promise to pay, Supplies Payable (+L); Paid amounts owed: reduced its Supplies Payable (-L) and Cash (-A); Adjusting entry to record the supplies used: reduced Supplies (-A) and increased Supplies Expense (-SE) which equals Beginning Supplies + Purchases - Ending Supplies. -Income statement reports Supplies Expense (supplies used); -Statement of cash flows reports Cash Paid for Supplies; -Balance sheet reports Supplies (purchased but not yet used) and Supplies Payable (purchased on account that is still owed)