ACCT Exam 1

A company was recently formed with $50,000 cash contributed to the company by stockholders for common stock. The company then borrowed $20,000 from a bank and bought $10,000 of supplies on account. The company also purchased $50,000 of equipment by paying $20,000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet?

$110,000

Webby Corporation reported the following amounts on its income statement: service revenues, $32,500; utilities expense, $300; net income, $1,600; and income tax expense, $900. If the only other amount reported on the income statement was for selling expenses, what amount would it be?

$29,700

Which account is least likely to be debited when revenue is recorded?

Accounts Payable

Which of the following accounts would not appear in a closing journal entry?

Accumulated Depreciation

Which of the following trial balances is used as a source for preparing the income statement?

Adjusted trial balance

Which of the following statements describe transactions that would be recorded in the accounting system?

An exchange of an asset for a promise to pay

An adjusting journal entry to recognize accrued salaries payable would cause which of the following?

An increase in expenses and liabilities and a decrease in stockholders' equity.

Which account is least likely to appear in an adjusting journal entry?

Cash

Which of the following is not an asset account?

Common Stock

Which of the following is the entry to be recorded by a law firm when it receives a payment from a new client that will be earned when services are provided in the future?

Debit Cash; credit Unearned Revenue.

Assume a company receives a bill for $10,000 for advertising done during the current year. If this bill is not yet recorded at the end of the year, what will the adjusting journal entry include?

Debit to Advertising Expense of $10,000.

Assume the balance in Prepaid Insurance is $2,500 but it should be $1,500. The adjusting journal entry should include which of the following?

Debit to Insurance Expense for $1,000.

Company A has owned a building for several years. Which of the following statements regarding depreciation is false from an accounting perspective?

Depreciation Expense for the year will equal Accumulated Depreciation.

Which of the following describes how assets are listed on the balance sheet?

In the order they will be used up or turned into cash.

The T-account is used to summarize which of the following

Increases and decreases to a single account in the accounting system, Debits and credits to a single account in the accounting system, Changes in specific account balances over a time period.

If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to report too small a value for which of the following on its balance sheet?

Liabilities

Which of the following items is not a specific account in a company's accounting records?

Net Income

if a company incorrectly records a payment as an asset, rather than as an expense, how will this error affect net income in the current period?

Net income will be too high.

Which of the following accounts normally has a debit balance?

Rent expense

An adjusted trial balance

Shows the ending balances resulting from the adjusting journal entries in a debit-and-credit format.

When expenses exceed revenues in a given period

Stockholders' equity will be decreased.

Total assets on a balance sheet prepared on any date must agree with which of the following?

The sum of total liabilities and common stock and retained earnings

On December 31, an adjustment is made to reduce unearned revenue and report (earned) revenue. How many accounts will be included in this adjusting journal entry?

Two

When a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is recorded?

Unearned Revenue

The duality of effects can best be described as the following

When a transaction is recorded in the accounting system, at least two effects on the basic accounting equation will result

When should a company report the cost of an insurance policy as an expense?

When the company receives the benefits from the policy over its period of coverage.

When should companies that sell gift cards to customers report revenue?

When the gift card is used by the customer

The expense recognition principle ("matching") controls

when costs are recognized as expenses on the income statement.