ACCT 207 Midterm 1

Management could determine the amounts due from customers by examining which of the following ledger accounts? a.) Service Revenue b.) Accounts Payable c.) Accounts Receivable d.) Supplies

C

Mary Richardo has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make? a.) Debit cash and credit Unearned Service Revenue b.) Debit Accounts Receivable and credit Unearned Service Revenue c.) Debit Accounts Receivable and credit Service Revenue d.) Debit Unearned Service Revenue and credit Service Revenue

C

The final step in the accounting cycle is to prepare: a.) closing entries. b.) financial statements. c.) a post-closing trial balance. d.) adjusting entries.

C

A debit is not the normal balance for which account listed below? a.) Dividends b.) Cash c.) Accounts Receivable d.) Service Revenue

D

A journal provides a.) the balances for each account. b.) information about a transaction in several different places. c.) a list of all accounts used in the business. d.) a chronological record of transactions.

D

After transaction information has been recorded in the journal, it is transferred to the a.) trial balance. b.) income statement. c.) general journal. d.) ledger

D

The classification and normal balance of the Dividends account is a.) revenue with a credit balance. b.) an expense with a debit balance. c.) a liability with a credit balance. d.) stockholders' equity with a debit balance.

D

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

What's on an income statement?

Revenues Less: Expenses -------------------- Net Income

True or false: closing entries deal primarily with the balances of permanent accounts.

false

True or false: dividends are classified as an expense.

false

True or false: in the accounting cycle, closing entries are prepared before adjusting entries.

false

True or false: revenue increases stockholders' equity and should be recorded whenever cash is received from customers.

false

True or false: salaries and wages payable is a type of expense.

false

True or false: earnings per share measures the net income available on each share of common stock.

true

True or false: prepaid expenses are assets.

true

An accounting record that includes a list of accounts and their balance at a given time is called a a.) trial balance. b.) general journal. c.) general ledger. d.) chart of accounts.

A

An advantage of the corporate form of business is that a.) it has limited life. b.) it's owner's personal resources are at stake. c.) its ownership is easily transferable via the sale of shares of stock. d.) it is simple to establish.

C

Oakville Inc. purchased a 12-month insurance policy on March 1, 2022 for $2,400. At March 31, 2022, the adjusting journal entry to record expiration of this asset will include: a.) a debit to Prepaid Insurance and a credit to Cash for $2,400. b.) a debit to Prepaid Insurance and a credit to Insurance Expense for $240. c.) a debit to Insurance Expense and a credit to Prepaid Insurance for $200. d.) a debit to Insurance Expense and a credit to Cash for $200.

C

An accumulated depreciation account: a.) is a contra liability account. b.) increases on the debit side. c.) is offset against total assets on the balance sheet. d.) has a normal credit balance.

D

Accrued asset

then: assets up, equity up first: assets down/up

accrued liability

then: liability up, equity down first: assets down, liability down

True or false: financial statements can be prepared from the information provided by an adjusted trial bal-ance.

true

True or false: if a revenue account is credited, the revenue account is increased.

true

True or false: liquidity ratios measure the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash.

true

True or false: the accounting equation can be expressed as Assets - Stockholders' Equity = Liabilities.

true

True or false: the cash basis of accounting is not in accordance with generally accepted accounting princi-ples.

true

True or false: the revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.

true

True or false: two primary users of accounting information are investors and creditors.

true

A T-account is a.) a way of depicting the basic form of an account. b.) a special account used instead of a journal. c.) a special account used instead of a trial balance. d.) used for accounts that have both a debit and credit balance.

A

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in: a.) January. b.) February. c.) the period when the workers receive their checks. d.) either January or February depending on when the pay period ends.

A

A person who wants to determine the balance of a particular account should refer to the a.) ledger. b.) source document. c.) chart of accounts. d.) journal.

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

Before adjusting entries, unearned revenues are: a.) received and recorded as liabilities before they are recognized as revenue. b.) recognized as revenue and recorded as liabilities before they are received. c.) recognized as revenue but not yet received or recorded. d.) recognized as revenue and already received and recorded.

A

Budke Corporation paid dividends of $5,000. As a result of this event, the a.) Dividends account was increased by $5,000. b.) Dividends account was decreased by $5,000. c.) Cash account was increased by $5,000. d.) Cash account was increased and the Dividends account was decreased by $5,000.

A

Goods purchased for future use in the business, such as supplies, are called: a.) prepaid expenses. b.) revenues. c.) stockholders' equity. d.) liabilities.

A

If the retained earnings account decreases from the beginning of the year to the end of the year, then a.) net income is less than dividends. b.) there was a net income and no dividends. c.) additional investments are less than net losses. d.) net income is greater than dividends.

A

Powers Corporation received a cash advance of $500 from a customer. As a result of this event, a.) assets increased by $500. b.) equity increased by $500. c.) liabilities decreased by $500. d.) both assets and equity increased by $500.

A

Prepaid expenses are: a.) paid and recorded in an asset account before they are used or consumed. b.) paid and recorded in an asset account after they are used or consumed. c.) incurred but not yet paid or recorded. d.) incurred and already paid or recorded.

A

The adjusting entry to an unearned revenue account will 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

Using accrual accounting, expenses are recorded and reported only: a.) when they are incurred whether or not cash is paid. b.) when they are incurred and paid at the same time. c.) if they are paid before they are incurred. d.) if they are paid after they are incurred.

A

Which of the following accounts is increased with a debit? a.) Dividends b.) Service Revenue c.) Interest Payable d.) Common Stock

A

Which of the following describes an accrued expense? a.) Incurred but not yet paid or recorded. b.) Paid and recorded in an asset account after they are used or consumed. c.) Paid and recorded in an asset account before they are used or consumed. d.) Incurred and already paid or recorded.

A

Which of the following financial statements is concerned with the company at a point in time? a.) balance sheet b.) income statement c.) retained earnings statement d.) statement of cash flows

A

Which of the following statements is not true? a.) Expenses increase stockholders' equity. b.) Expenses have normal debit balances. c.) Expenses decrease stockholders' equity. d.) Expenses are a negative factor in the computation of net income.

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

Adjusting entries are: a.) not necessary if the accounting system is operating properly. b.) usually required before financial statements are prepared. c.) made whenever management desires to change an account balance. d.) made to the balance sheet accounts only.

B

Adjusting entries can be classified as: a.) postponements and advances. b.) accruals and deferrals. c.) deferrals and postponements. d.) accruals and advances.

B

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a: a.) debit to an asset account and a credit to an expense account. b.) debit to an expense account and a credit to an asset account. c.) debit to an asset account and a credit to an asset account. d.) debit to an expense account and a credit to an expense account.

B

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause: a.) net income to be overstated. b.) an understatement of assets and an understatement of revenues. c.) an understatement of revenues and an understatement of liabilities. d.) an understatement of revenues an overstatement of liabilities.

B

If total liabilities decreased by $4,000, then a.) stockholders' equity must have decreased by $4,000. b.) assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. c.) assets and stockholders' equity each increased by $4,000. d.) assets must have increased by $4,000.

B

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was a.) $240,000. b.) $300,000. c.) $180,000. d.) $570,000.

B

The first step in the recording process is to a.) prepare financial statements. b.) analyze the transaction in terms of the effects on the accounts. c.) post to a journal. d.) prepare a trial balance.

B

The relationship between current assets and current liabilities is important in evaluating a company's a.) profitability. b.) liquidity. c.) market value. d.) solvency

B

The usual sequence of steps in the transaction recording process is a.) journalize, analyze, post to the ledger. b.) analyze, journalize, post to the ledger. c.) journalize, post to the ledger, analyze. d.) post to the ledger, journalize, analyze.

B

Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): a.) revenue. b.) liability. c.) expense. d.) prepaid revenue.

B

Which financial statement is prepared first? a.) balance sheet b.) income statement c.) retained earnings statement d.) statement of cash flows

B

Which is not an application of revenue recognition? a.) Recording revenue as an adjusting entry on the last day of the accounting period. b.) Accepting cash from an established customer for services to be performed over the next three months. c.) Billing customers on June 30 for services completed during June. d.) Receiving cash for services performed.

B

Which of the following accounts is adjusted but is not closed? a.) Supplies Expense b.) Supplies c.) Depreciation Expense d.) Service Revenue

B

Which of the following is not considered an asset? a.) Equipment b.) Dividends c.) Accounts receivable d.) Inventory

B

What's on the statement of retained earnings?

Beginning balance, retained earnings Add: Net Income Deduct: Cash Dividends ------------------------------------------------- Ending balance, retained earnings

A journal a.) contains only asset and liability accounts. b.) is the collection of the entire group of accounts maintained by a company. c.) provides a chronological record of transactions. d.) should show accounts in alphabetical order.

C

A measure of profitability is a.) the current ratio. b.) the debt to assets ratio. c.) earnings per share. d.) working capital.

C

A revenue account: a.) is increased with a debit. b.) is decreased with a credit. c.) is increased with a credit. d.) has a normal balance of debit.

C

An account consists of a.) a title, a debit balance, and a credit balance. b.) a title, a left side, and a debit balance. c.) a title, a debit side, and a credit side. d.) a title, a right side, and a debit balance.

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

In recording an accounting transaction in a double-entry system, a.) the number of debit accounts must equal the number or credit accounts. b.) there must always be entries made on both sides of the accounting equation. c.) the amount of the debits must equal the amount of the credits. d.) there must only be two accounts affected by any transaction.

C

On a classified balance sheet, companies usually list current assets a.) in alphabetical order. b.) with the largest dollar amounts first. c.) in the order in which they are expected to be converted to cash. d.) in the order of acquisition.

C

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the ad-justing entry is for the amount of supplies: a.) remaining. b.) purchased. c.) used. d.) either used or remaining.

C

The best interpretation of the word "credit" is the a.) offset side of an account. b.) increase side of an account. c.) right side of an account. d.) decrease side of an account.

C

The debt to assets ratio is computed by dividing a.) long-term liabilities by current assets. b.) long-term liabilities by average assets. c.) total liabilities by total assets. d.) total liabilities by average assets.

C

The left side of an account is a.) blank. b.) a description of the account. c.) the debit side. d.) the balance of the account.

C

Under the accrual basis of accounting: a.) cash must be received before revenue is recognized. b.) net income is calculated by matching cash outflows against cash inflows. c.) events that change a company's financial statements are recognized in the period they occur rather than in the period in which the cash is paid or received. d.) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

C

Which of the following accounts has a normal credit balance? a.) Prepaid Rent b.) Notes Receivable c.) Rent Revenue d.) Rent Expense

C

Which of the following external groups uses accounting information to determine whether the company can pay its obligations? a.) investors in common stock b.) marketing managers c.) creditors d.) chief financial officer

C

Which of the following is not a liability? a.) Unearned Service Revenue b.) Accounts Payable c.) Accounts Receivable d.) Interest Payable

C

Adjusting entries 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 accounting period. d.) All of these answer choices are correct.

D

Common stock is reported on the a.) statement of cash flows. b.) retained earnings statement. c.) income statement. d.) balance sheet.

D

It is not true that current assets are resources that are expected to be a.) realized in cash within one year. b.) sold within one year. c.) consumed within one year. d.) acquired within one year.

D

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: a.) contra asset b.) prepayment c.) asset d.) accrued.

D

The payment of a liability a.) decreases assets and stockholders' equity. b.) increases assets and decreases liabilities. c.) decreases assets and increases liabilities. d.) decreases assets and liabilities.

D

What organization issues U.S. accounting standards? a.) Securities and Exchange Commission b.) International Accounting Standards Committee c.) International Auditing Standards Committee d.) Financial Accounting Standards Board

D

Which of the following is an asset? a.) Service Revenue b.) Notes Payable c.) Supplies Expense d.) Prepaid Rent

D

Which of the statements below is not true? a.) An adjusted trial balance should show ledger account balances. b.) An adjusted trial balance can be used to prepare financial statements. c.) An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. d.) An adjusted trial balance is prepared before all transactions have been journalized.

D

What's on a balance sheet?

assets, liabilities, equity

True or false: a credit means that an account has been increased.

false

True or false: accrued revenues are revenues that have been recorded but cash has been received before financial statements have been prepared.

false

True or false: accrued revenues that have been received but not yet recognized.

false

True or false: accumulated depreciation is a liability account and has a credit normal account balance.

false

True or false: adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

false

True or false: entering transactions into the journal is called posting.

false

True or false: if prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

false

True or false: the adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable.

false

True or false: the adjusting entry for unearned revenue results in an increase (a debit) to an asset account and an increase (a credit) to a revenue account.

false

True or false: the adjusting entry for unearned service revenue results in an increase (a debit) to an asset account and an increase (a credit) to a revenue account.

false

True or false: the current ratio is computed by total liabilities divided by current assets.

false

True or false: the dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

false

True or false: the normal balance of all accounts is a debit.

false

True or false: transactions are entered in the ledger accounts and then transferred to journals.

false

deferred revenue

first: assets up, liability up then: liability down, equity up

deferred expense

first: assets up/down then: assets down, equity down