ACCT Exam 1
Net income equals $200,000
A company reports the following in its income statement: Total revenues of $500,000 and total expenses of $300,000. Which of the following is true?
Neutrality
A component/aspect of faithful representation of accounting information includes:
Predictive value
A component/aspect of relevant accounting information includes:
Cash
A credit is used to decrease which of the following accounts?
Service Revenue
A credit is used to increase which of the following accounts?
Utilities Expense
A debit is used to increase which of the following accounts?
Statement of Cash Flows
Which financial statement shows a company's inflows and outflows of cash?
Statement of Cash Flows.
Which financial statement shows a company's inflows and outflows of cash?
Balance sheet
Which financial statement shows that a company's resources equal claims to those resources?
Salaries Payable
Which of the following accounts is listed in a post-closing trial balance?
Salaries Expense
Which of the following accounts is not listed in a post-closing trial balance?
Service Revenue
Which of the following accounts is not listed in a post-closing trial balance?
Dividends
Which of the following describes distributions to stockholders?
Transfer the balances of temporary accounts (revenues, expenses, and dividends) to retained earnings
Which of the following describes the closing process?
Expenses
Which of the following describes the cost of selling to customers?
Net income for the period is calculated by subtracting expenses from revenues
Which of the following describes the information reported in the income statement?
Net cash flows from operating, investing, and financing activities
Which of the following describes the information reported in the statement of cash flows?
Change in stockholders' equity through changes in common stock and retained earnings.
Which of the following describes the information reported in the statement of stockholders' equity?
2 and 3
Which of the following describes the purpose(s) of closing entries? 1.Adjust the balances of asset and liability accounts for unrecorded activity during the period. 2.Transfer the balances of temporary accounts (revenues, expenses, and dividends) to Retained Earnings. 3.Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.
Assets = Liabilities + Stockholders' Equity
Which of the following equations correctly represents the fundamental accounting equation?
Allows for proper application of the revenue recognition principle (revenues) or expense recognition
Which of the following is a characteristic of adjusting entries?
Reduce the balances of revenue, expense, and dividend accounts to zero
Which of the following is not a characteristic of adjusting entries?
Decrease assets; decrease liabilities.
Which of the following is possible for a particular business transaction?
Total debit amounts should always equal total credit amounts.
Which of the following is true about a trial balance?
Asset
Which of the following represents a resource of the company?
Liabilities
Which of the following represents an obligation of the company?
The general journal
Which of the following shows a chronological record of all transactions?
Income Statement
Which of the following statements best explains the company's profits generated for owners during the period?
Repay amounts previously borrowed from the bank
Which of the following transactions causes a decrease in total liabilities?
Provide services to customers on account
Which of the following transactions causes an increase in stockholders' equity?
Issue common stock in exchange for cash
Which of the following transactions causes an increase in total assets?
Pay salaries for the current period
Which of the following transactions decreases stockholders' equity?
Pay dividends to stockholders
Which of the following transactions decreases total assets?
Purchase office supplies on account
Which of the following transactions increases total liabilities?
Total stockholders' equity equals $100,000
A company reports the following in its balance sheet: Total assets of $800,000 and total liabilities of $700,000. Which of the following is true?
Decrease stockholders' equity
A debit to Salaries Expense will:
Balance Sheet
The financial statement that shows the financial position of a company at a specific point in time is called the:
Insurance Expense 2,000 Prepaid Insurance 2,000
Ambassador Hotels purchases one year of fire insurance coverage on December 1 for $24,000 ($2,000 per month), debiting Prepaid Insurance. On December 31, Ambassador would record the following year-end adjusting entry:
Rent Expense 2,000 Prepaid Rent 2,000
Chan Sports purchases one year of rent on November 1 for $12,000 ($1,000 per month), debiting Prepaid Rent. On December 31, Chan Sports would record the following year-end adjusting entry:
Made to transfer the balances of temporary accounts to retained earnings
Closing entries are:
Costs of providing products or services to customers
Expenses represent:
Total assets decrease by $10,000
If a company has an increase in total expenses of $10,000, which of the following is possible?
one only
If a company has an increase in total revenues of $10,000, which of the following is possible? 1.Total assets increase by $10,000. 2.Total liabilities increase by $10,000. 3.Total stockholders' equity decreases by $10,000.
The length of time until the obligation is expected to be satisfied—less than one year versus more than one year
In a classified balance sheet, liabilities are separated into two categories based on
Left-hand side
In the language of accounting, the term "debit" always means
Income Statement
In which financial statement does a company report its expenses?
Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000
On November 1, a company receives cash of $6,000 from a customer for services to be provided evenly over the next six months. Deferred revenue is recorded at that time. Which of the following adjusting entries is needed on December 31 (two months later)?
Debit to Dividends
Paying dividends to stockholders would be recorded with a:
Transferring the debit and credit information from the journal to individual accounts in the general ledger
Posting is the process of
Transferring the debit and credit information from the journal to individual accounts in the general ledger.
Posting is the process of
Increase total assets and total stockholders' equity
Providing services to customers for cash would have what effect on the accounting equation?
Accounts Receivable 100 Service Revenue 100
Providing services to customers on account for $100 is recorded as
Supplies 100 Accounts Payable 100
Purchasing office supplies on account for $100 is recorded as:
Option a
Purchasing office supplies on account for $100 is recorded as: Transaction Account Title Debit Credita. Supplies100 Accounts Payable 100 b.Cash100 Supplies 100 c.Supplies100 Cash 100 d.Accounts Payable100 Supplies 100
Revenues
Sales of products or services are referred to as
Credit to Interest Revenue
The adjusting entry to record interest earned during the period includes a:
Debit to Supplies Expense
The adjusting entry to record supplies used during the period includes a:
The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.
The balance in retained earnings represents:
A debit to Retained Earnings
The entry to close the expense accounts includes:
Relevance, faithful representation
The fundamental qualitative characteristics of accounting information identified by the FASB are:
Debit Equipment; Credit Cash
The purchase of equipment with cash would be recorded as
Conceptual framework
The underlying foundation for the development of accounting standards and interpretation of accounting information is referred to as the:
Income statement
Which financial statement conveys a company's ability to generate profits in the current period?
Balance Sheet
Which financial statement reports a company's assets and liabilities?
