BA 211

ABC, Inc.'s income statement shows Service Revenue of $40000, Wages Expense of $25000 and Net Income of $1000. The other expenses of ABC's income statement must equal ______________.

$14000

Bijoux Company has sales of $40,000, beginning inventory of $5,000, purchases of $25,000, and ending inventory of $7,000. The cost of goods sold equals _______

$23000

Axis Company bought a piece of land for $25000. What a deal! the land next door was sold for $27000. Axis immediately put the land back on the market for $29000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of ___________.

$25000

Axis Company just bought a piece of land for $25,000. What a deal! The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on axis companies balance sheet at a value of ____.

$25000

If the company's accountant mistakenly recorded a $58 deposit as $85, the error would be shown on the bank reconciliation as a(n)____________.

$27 deduction from the book balance

On May 1, Cut Above, Inc. collected $3000 in advance from customers to mow their lawns in June. Under cash basis accounting revenues in May will equal ____________.

$3000

Melon-Cauli Grocers, Inc. had a $10,000 balance in Accounts Payable at the beginning of the month. During the month, it made $60,000 of purchases on account due within one month and paid $40,000 of the amounts owed. The Accounts Payable balance at the end of the month has a ______ balance.

$30000 credit

Boron Company has Net Sales of $60000; beginning inventory of $7000; Purchases of $35000 and an Ending Inventory of $5000. The Cost of Goods Sold is _____________.

$37000

Ace Electronics uses a perpetual inventory system. On May 1, beginning inventory was $100000. During May, Ace purchased $35000 of inventory and sold $71000 of inventory. After the store closed on May 31, employees counted the inventory of the store and found that $60000 of inventory remained unsold. What was Ace's inventory shrinkage?

$4000

Ace Electronics sold $5000 of goods to customers of which $3000 has been collected. Using accrual accounting, Ace Electronics should report revenues of __________

$5000

On July 1, 2018, a firm prepaid $200000 for 2 years' rent of an office building beginning on July 1. What amount will be shown for prepaid rent one-and-a-half years later on the December 31, 2019 balance sheet?

$50000

Over Armour inc., sold 5 shirts to it's customer for a price of $10 per shirt that cost $6 per shirt. total revenues is ________ and total expenses is _________

$50; $30

In its first month of business, Brewed Awakenings, Inc. purchased $1000 of supplies of which it had paid $700 and owes the rest. At the end of the month, it had $400 of supplies available for use. What is the amount of Supplies Expense on the income statement?

$600

If a company's adjusted income before income tax expense is $10000 and it's tax rate is 20%, what is net income?

$8000

A company has an $8000 cash balance per its books. The bank statement has a balance of $8450. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, EFTs of $1000 were received from customers, a $200 NSF check from a customer and a $50 bank service charge. Given the reconciling items, the up-to-ate cash balance equals _________

$8750

A company has $10000 cash balance per its books. The bank statement has a balance of $9580. The bank reconciliation includes $800 of deposits-in transits, $500 of checks outstanding, a $100 NSF check from a customer, and a $20 bank service charge. Given the above reconciling items, the up-to-date cash balance equals __________________________.

$9880

During its first month of business, noodlecake's cash increased by receiving $5000 from issuing common stock to it's owners, borrowing $2000 from the bank and collecting $3000 from its customers. Its cash decreased by paying $2000 to its employees and suppliers and $3000 for the purchase of equipment. On it's SOCF, Cash provided by Operating Activities equals $____________, Cash from Investing Activities equals $_________ Cash from Financing Activities equals $_________ and the change of cash is $_________. Be sure to us parentheses around the amount if it is a cash outflow, e.g. $(1000)

1000; (3000); 7000; 5000

Bristol, Inc. paid $800 for a 4 month insurance policy on August 1 of the current year. On August 31, Bristol, Inc. made an adjusting entry to account for the insurance that expired during the month of August. The adjusting entry contained a debit to insurance expense of $____________ and a credit to Prepaid Insurance of $________. The remaining balance in the prepaid insurance account after the adjustment was $_______.

200; 200; 600

on December 31, 2018, cash had a balance of $100000. During 2019, there were $1100000 debits and $950000 credits posted to cash. the December 31, 2019 balance must equal $____________.

250000

on december 31, 2018, Cash had a balance of $100000. During 2019, there were $1100000 debits and 950000 credits posted to Cash. The December 31, 2019 balance must equal $__________.

250000

At December 31, Aloe, Inc.'s assets equal $8000 and SE equal $5000. Liabilities must equal $__________.

3000

The annual depreciation taken on a vehicle totals $3000. The vehicle has been in service for 3 full years and the adjusting entries have been completed for the year. at the end of the 3rd year, he annual financial statements will report Depreciation Expense equal to $______ and Accumulated Depreciation equal to $______

3000; 9000

Given an asset has a cost of $100000 and accumulated depreciation of $40000, what portion of its usefulness has been used?

40%

Sterling Company paid $1200 for 3 months of rent on April 1 of the current year. On April 30, Sterling Company made an adjusting entry to account for the rent expired during the month of April. The adjusting entry contained a debit to Rent Expense in the amount of $_________ and a credit to Prepaid Rent in the amount of $_________. The remaining balance in the Prepaid Rent account after the adjustment was $________.

400; 400; 800

Total Revenues equals $80000 and Net Income equals $20000, then Total expenses equals $___________

60000

Shirts, Inc. sold 10 shirts that cost $7 each to it's customers for $10 each. Shirts should record a total of $_________ as an expense for the cost of the goods sold.

70

What does the gross profit percentage tell you?

A higher ratio means that more is available to cover operating expenses

WOTF are ways of expressing the basic accounting equation?

A=L+SE A-L=SE A-SE=L

Noodlecake purchased $2000 of equipment and promised to pay for it next month. Noodlecake will report a $2000 _________.

Account Payable

Which account is affected by the recording the buying of goods on credit?

Accounts Payable

WOTF statements is TRUE?

Accounts Payable is a liability

In may, Pasta Disasta, Inc. paid its suppliers $500 that it owed for the pizza pans purchased and received in April. Which accounts are affected?

Accounts Payable is decreased; cash is decreased

After posting the adjusting entry to record revenues earned but not yet collected, which account will be increased?

Accounts Receivable

What is the effect of the December 31 adjusting entry to record $400 of revenues earned from sales to customers but not yet collected?

Accounts Receivable should be increased by $400, and Sales Revenue should be increased by $400

a seller records an increase to an asset account called ____________ ___________ when it ssells to a customer on credit.

Accounts receivable

When AppGame Company delivers pizza to customers on account and bills its customer accounts, it should record a debit to ________ and a credit to _____________.

Accounts receivable; Sales Revenue

How can accrual adjustments for interest earned but not yet collected affect the balance sheet and the income statement?

Accrual adjustments can increase assets and increase revenues

Which two accounts are used to record the adjusting entry for the amortization of long-term assets that lack physical substance?

Accumulated Amortization; Amortization Expense

Which report is constructed immediately prior to preparing the financial statements with the purpose of demonstrating that the accounts balance?

Adjusted trial balance

If revenues equal $100000 and expenses equal $120000, then net income (loss) must equal ______________

$(20000)

if revenues equal $100000 and expenses equal $120000, then net income (loss) must equal _____________.

$(20000)

In May, Sea the World Cruises, Inc. collected $1000 cash from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?

$1000 of revenue should be recorded in June

Monster music company provided music lessons to customers and earned $10,000, receiving $6000 in cash and earning the rest on account. What is monster music company's revenue under the accrual basis of accounting?

$10000

On May 3, Botit inc. purchased merchandise on account for $1000, FOB shipping point, with terms 1/10,n/30 from Cellar, Inc. On May 6, Botit received the merchandise, along with an invoice for $1000. In addition, $100 in shipping costs was owed to We Deliver, Inc. On May 12, Botit paid all amounts owed which amounted to _______________.

$1090

which of the following types to transactions could be an accrual adjustment?

An increase to an asset account and an increase to revenue account.

Place the steps in the adjustment process order. Drag the items to put them in the proper order with the first step on top

Analyze the accounts to determine the amount of the adjustment; Record the adjusting entry in the journal; Summarize the adjusting entries in the accounts

Why is the Unearned Revenue account reduced during the adjustment period?

As the revenue is earned, it is removed from Unearned Revenue and transferred into a revenue account

_______________ basis of accounting is not allowed by GAAP because it may distort a company's financial performance.

Cash

If a cashier rang up a sale totaling $4000, but had only $3997 to deposit, which journal entry would be recorded? A debit to ___________.

Cash of $3997 and Cash Shortage of $3 and a credit to Sales Revenue of $4000

Which of the following are elements of good internal control over cash receipts?

Cash receipts are summarized and their total is calculated; A different employee deposits the cash at the bank; Two employees cannot share the same cash drawer

Which of the following provisions of the Sarbanes-Oxley (SOX) Act aim to encourage honesty and the reporting of dishonest acts?

Code of ethics; Whistle-blower protection; Anonymous tip lines

Good internal control for cash receipts to be performed by the accounting department should include __________________.

Comparing cash register sales with the cash count sheets and bank deposit slip; Recording the cash receipts in the journal.

In a periodic system, for Cost of Goods Sold to be updated, which of the following must occur?

Compute Cost of Goods Sold by subtracting Ending Inventory from Goods Available for Sale; Take a physical count of Inventory

Match the following control components of the framework used when analyzing internal control systems with the appropriate description

Control Environment- refers to the attitude of the people in the organization and their commitment to integrity; Risk assessment- evaluate the potential for fraud; Control activities- work responsibilities and duties completed to reduce risks to an acceptable level; Monitoring activities- evaluating the internal control system to see if working as intended.

Which line item would be found on a merchandiser's income sheet and not on a service firm's?

Cost of Goods Sold; Sales Revenue

list the components of a classified balance sheet in the proper order in accordance with GAAP.

Current Assets Non-current Assets current liabilities non-current liabilities Stockholders equity

Assets have a normal ___ balance

Debit

$1000 is posted to the left side of the Logos and Trademarks T-account. WOTF might have been the entry that was recorded in the journal?

Debit Logo and Trademarks and credit cash

WOTF is the entry to record the receipt of supplies purchased on account?

Debit Supplies; Credit Accounts Payable

When using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a _____________.

Debit to Accounts Payable for the original cost; Credit to Inventory for the discount amount; Credit to Cash for the amount paid

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period?

Deferred revenue should be reduced for any portion the seller has fulfilled of its obligations during the current period; Revenues the seller has performed of its obligations but not yet billed to Accounts Receivable, should be recorded as revenue

Place the following in order (top down) of how they would appear in the heading of Deli Llama's annual income statement for the fiscal year ended March 31, 2017

Deli Llama, Inc.; Income Statement; for the year ended March 31, 2017

_______ is the process of allocating the cost of buildings, vehicles and equipment to expense over time as they are used.

Depreciation

___________ Expense should be recorded to recognize the use of and benefit received from long-lived assets, such as equipment, during the accounting period.

Depreciation

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

Depreciation expense only reflects the current period depreciation. Accumulated depreciation contains depreciation since the asset was purchased

Which financial statement reports the dividends during the current accounting period?

Dividends are reported on the statement of retained earnings

Which of the following statements is correct regarding Dividends?

Dividends have a normal debit balance; Dividends are closed into retained earnings by debiting Retained Earnings; Dividends are closed into retained earnings by crediting Dividends

How do banks help businesses control cash?

Documenting procedures; Restricting access to cash; Independently verifying

Match the internal control principle associated with each activity

Establish responsibility- Just one employee receives cash; Document procedures- cash receipts are summarized and their total is calculated; Segregate duties- A person different from whom receives the cash makes a deposit in the bank; Independently verifies- a company manager compares the cash count sheets with the bank deposit slip.

select all of the statement below that are true regarding revenues and expenses.

Expenses are the costs of doing business necessary to earn revenues; revenues and expenses are reported on the income statement; revenues equal the price times the quantity of goods or services delivered to the customer

A goal of the Sarbanes-Oxley Act is improving corporations' internal controls. Which of these may accomplish this goal?

External auditors must test the effectiveness of a company's internal controls; An audit committee of independent directors oversees the financial matters of the company; Marketing managers must determine whether the marketing team is submitting accurate sales and expense reports.

Assuming rising inventory prices, rank which inventory method results in the higher ending inventory value. List from top to bottom, in order of highest inventory to lowest ending inventory.

FIFO; Weighted Average; LIFO

WOTF characteristics are needed in order for information to be useful?

Faithful representation; relevance

T/F: Adjustments ensure that assets on the balance sheet are reported at amounts that have been used up or expired during the period.

False

T/F: Internal controls prevent and detect all errors and fraud.

False

T/F: Inventory and Supplies are interchangeable account titles and have the same meaning.

False

T/F: Since Retained Earnings is involved in the closing process, it is considered a temporary account.

False

T/F: The adjusting entry to record interest owed for the period will cause the balance in the Note Payable account to increase

False

T/F: The person who has custody of an asset should also account for the asset. A person who performs both duties will best know what the balance should be in the accounting records.

False

T/F: The three elements of the fraud triangle are incentive, theft, and embezzlement.

False

T/F: To calculate a company's income tax obligation, the income after tax is multiplied by the company's tax rate.

False

T/F: an exchange of a promise to deliver an asset in the future for a promise to pay in the future is a transaction

False

T/F: the adjusting entry to record interest owed for the period will cause the balance in the Note Payable account to increase.

False

which group is responsible for creating the US GAAP?

Financial Accounting Standards Board (FASB)

The first step in starting a business is to obtain cash from owners and/or creditors. is this activity an investing activity or a financing activity?

Financing

the underlying rules of accounting in the US are called ______________ _____________ ______________ principles

Generally Accepted Accounting

Which of the following income statement line items are affected by the inventory method chosen?

Gross profit; income tax expense; Income from operations; income before income tax expense; net income

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

in its first year of operation, Jetway Airlines paid Salaries Expense of $40 million. On December 31, it recorded an entry for additional Salaries Expense of $2 million that will be paid at the beginning of the 2nd year. What should Jetway report in the income statement and balance sheet for its first year ended December 31?

Income statement: Salaries expense $42 million; Balance sheet: Salaries Payable $2 million

WOTF types of transactions represent accrual adjustments?

Increase to interest payable and increase to interest expense; increase to income taxes payable and increase to income taxes expense

WOTF describes the acceptable methods that may be used to prepare the SOCF

Indirect method; direct method

the adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to _______.

Interest Expense and credit to Interest Payable

As of December 31, $2500 of interest expense has accrued on a $50000 note payable. The note payable and the accrued interest will become due and payable next year. How will the interest affect the adjustments at the end of the period?

Interest expense should be increased, because the cost of interest relates to the current period

If a company assumes that its inventory costs flow out in the opposite order from which of the goods were purchased, it uses _____ to value its inventory.

LIFO

complete the account equation: assets= ____________ +SE

Liabilities

LLC's stand for Limited _____________ Company.

Liability

Amortization is the expensing of _______.

Long-term assets that lack physical substance

Amortization is the expensing of _____________.

Long-term assets that lack physical substance

Which line item is reported on both the income statement and statement of retained earnings?

Net Income

Which of the following line items are found on a statement of retained earnings?

Net Income; Dividends

An incentive to commit fraud may be caused by managers who receive bonus payments based on the strength of the company's reported _____________.

Net income

Gross profit percentage is calculated as _____________.

Net sales minus Cost of Goods Sold, then divide by Net Sales, and multiply by 100

Place the line items found on Noddlecake Studios' income statement in the proper order from top to bottom

Noodlecake Studios, Inc.; Income Statement; For the month ended Sept 30, 2018; Total Revenues $12000; Total Expenses $10000 Net Income $2000

list the liability accounts in the same order in which they would appear on a company's balance sheet from top to bottom.

Note payable (due in 5 months) Note payable (due in 5 years) Mortgage payable (due in 25 years)

List these liability accounts in the order in which they would appear on a company's balance sheet from top to bottom

Note payable (due in 5 months); Note payable (due in 5 years); Mortgage payable (due in 25 years)

which of the following are true about note payable and accounts payable?

Notes payable are interest bearing, accounts payable are not; Both notes payable and Accounts payable are liabilities

An internal control system consists of actions taken to achieve objectives. Match the appropriate description with each objective of an internal control system.

Operations- Objective is to ensure efficient and effective completion of work and protection of assets; Reporting- Objective is to produce reliable and timely accounting information; Compliance- Objective is to focus on adhering to laws and regulation; Risk Abatement- this is not an objective

the SEC _____________.

Oversees US stock exchange; oversees financial reporting by US public companies

An amount owed to a supplier for prior purchases on an account is an Account ________ which is a(n) __________ account

Payable; liability

The entry to record the establishment of a petty cash fund is a debit to __________ and a credit to ______________.

Petty Cash; Cash

On June 30, Planet of the Crepes paid $12000 in advance for insurance coverage starting July 1 through Dec. 31. WOTF are correct regarding July financial statement?

Prepaid Insurance $10000 is on the balance sheet; Insurance expense of $2000 is on the income statement

When a company pays cash in advance for rent that is to be used over the next 2 years, the company records a debit to __________ and a credit to ______________.

Prepaid rent; cash

Under periodic inventory system, net purchases equal ____________.

Purchases+ Freight-in - purchase allowances- purchase discounts

Which of the following are the steps involved in a petty cash system?

Putting money into petty cash to establish a fund; Paying money out to reimburse others; Replenishing the petty cash fund

List the steps in the accounting cycle in chronological order

Record a journal entry. Summarize in the ledger (T-accounts) Prepare an unadjusted trial balance Adjust the accounts Prepare Financial Statements Close the books

Match the type of company with an example.

Retailer: Wal-Mart, Costco; Manufacturer: Mattel, Goodyear

Which line item on the adjusted trial balance reports its beginning balance but on the balance sheet reports its ending balance?

Retained Earnings

Which of the following statements are true?

Retained Earnings increases when a company earns and keeps it's profit

the closing entry for Dividends involves a debit to ____________ and a credit to _______________.

Retained Earnings; Dividends

dividends decrease ______.

Retained earnings; SE

When will Accounts Receivable be involved in an adjusting entry?

Revenue is earned, but not yet collected or recorded at the end of the period.

______ are earned by selling goods and services to customers and is the first line item on the income statement

Revenues

After all closing process, which accounts will have zero balances?

Revenues; all temporary accounts; expenses; dividends

WOTF is true about the adjusting entry to record the revenue for which the seller has performed of its obligations but not yet collected?

SE will increase; assets will increase

Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period what will be the effect on the accounts when the salaries and wages are paid?

Salaries and Wages Payable will decrease and Cash will decrease

Which of the following are reported on the income statement?

Sales Revenue; Gross Profit; Cost of Goods Sold

Place the income statement line items in the proper order from top to bottom.

Sales Revenues, gross; Sales returns, allowances, and discounts; Sales Revenue, net; Cost of goods sold; gross profit

SEC stands for the ______.

Securities and Exchange Commission

Match each of the five principles of internal control with its description.

Segregate duties- do not make one employee responsible for all parts of a process; Establish responsibilities- Assign each task to only one employee in order to allow one to determine who is at fault for an error or theft; Restrict access- do no provide access to assets or information unless it is needed to fulfill the assigned task; Document procedures- prepare documents to show activities that have occurred Independent verify- check others' work

Breyer Company bought inventory from Solar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 2. Which company should record these goods in the December 31 inventory?

Solar

What are the reports made available to the public?

Statement of Retained Earnings; Income Statement; Balance Sheet; notes to the financial statements; SOCF

The Sarbanes-Oxley Act contains measures aimed and reducing both opportunities and incentives to commit fraud. Which of the following are designed to reduce the opportunity for fraud?

Stronger oversight from directors; Internal control report from management; Internal control audit by external auditors

Match each financial statement line item with the appropriate description

Supplies Expense- Amount used and reported and used and reported on the income statement; Supplies- Amount remaining and reported on the balance sheet; Accounts Payable- Amount owed for supplies purchased on account

Which of the following account balances will typically be increased as a result of adjusting entries?

Supplies Expense; Interest Payable

The adjustment for supplies during the period will result in a debit to the _________ account and a credit to the ________ account.

Supplies Expense; Supplies

In its 1st year of business, Daily Grind, Inc. purchased $1000 of supplies of which it only has $300 left at the end of the period. WOTF will be found in the year-end financial statements?

Supplies on the balance sheet of $300; Supplies Expense on the Income statement of $700

On September 1, Taggert Company paid $1800 for a 6-month insurance premium, beginning Sept 1. WOTF statements are CORRECT regarding the accounting for this insurance over the 6 month period?

Taggert will debit Insurance Expense for $300 on Sept. 30; Taggert will debit Prepaid Insurance for $1800 on Sept. 1; Taggert will credit Prepaid Insurance for $300 on Sept. 30

What would causes a bank statement not to agree with the cask balance in the accounting records?

The bank paid interest that company has not recorded; The company made an error in recording a deposit; Deposits outstanding that have been recorded on the company's record, but not on the bank's; The bank made an error in recording a deposit made by the company.

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place?

The customer received a damaged product, but kept the product and asked for a reduction in the price.

Adjusting entries to adjust Supplies or Prepaid Rent have WOTF effects?

Total Assets is decreased on the balance sheet; the carrying value of the assets are decreased; Total expenses on the income statement are increased.

what are the effects on the accounting equation from the adjustment for depreciation?

Total Assets will decrease and total SE will decrease

Match the account title with the proper definition

Total Assets- Amount of the company's resources; Total Liabilities- Amount of creditors' claim to the company's resources; Total SE- Amount of Owners' claim to the company's resources

Revenue is the quantity sold times the price earned from selling goods or services to customers.

True

T/F Creditors would like a company that owes them money to have a large positive cash flow from operating activities

True

T/F The Sarbanes-Oxley Act (SOX) is a set of laws established to strengthen corporate reporting.

True

T/F a company generates Retained Earnings by operating profitably

True

T/F: After the closing entries have been posted the new balance in the retained earnings account will equal the retained earnings reported on the balance sheet.

True

T/F: Dividends paid are not reported on the Income Statement because they are not classified as expenses.

True

T/F: Expenses are the costs of operating a business that are incurred to generate revenues and are reported in the income statement.

True

T/F: Revenues appear above expenses on the income statement

True

T/F: Specific Identification is an inventory method specifically used when accounting for expensive and unique inventory items

True

T/F: Supplies is an asset account because it contains the value of supplies that have not been used, but still remain and economic resource for the company.

True

T/F: The adjusting entry to record depreciation does not directly reduce the long-lived asset accounts, such as Equipment, so that the original cost of the asset remains uncharged.

True

T/F: The balance in the "Interest Expense" account and the balance in the "Interest Payable" account may be different after the adjustments are posted

True

T/F: the accounting equation is Assets= Liabilities+ Stockholders' equity

True

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in ______.

US dollars

At the end of the accounting period, adjusting entries are required. Place the steps in the adjustment process in the correct order.

Use the unadjusted trial balance to determine the accounts requiring adjustment; Record and post adjusting entries; Prepare an adjusted trial balance to check the equality of debits and credits; Prepare financial statements; Record closing journal entries and post to the accounts; Prepare a post-closing trial balance

The adjusting entry to record wages incurred but not yet recorded includes a credit to

Wages Payable

Which of the following line items appear on an income statement?

Wages expense; Revenues

WOTF are expenses?

Wages expense; Supplies expense

The adjusting entry to record revenues for services the seller has performed but has not yet been billed the customer requires ______.

a debit to Accounts Receivable and a credit to service revenue

X company, which uses a perpetual inventory system, sold $2000 of merchandise on account with credit terms 2/10,n/30. The journal entry required to record the initial sale gross of any discounts will include _______________.

a debit to Accounts Receivable of $2000; a credit to Sales Revenue of $2000

X company which uses a perpetual inventory system, sold $2000 of merchandise on account with credit terms of 2/10,n/30, If the customer pays withing the discount period and takes the discount, X will record a journal entry that includes _________________.

a debit to Sales Discounts of $40; a debit to Cash of $1960; a credit to Accounts Receivable of $2000

Melon-Cauli Grocers, Inc. received $50000 worth of computers on account promising to pay next month. The journal entry to record the transaction would include ______________ of $50000

a debit to equipment; a credit to accounts payable

assets are increased with ___________ and liabilities and stockholders' equity are increased with ______________.

a debit; a credit

which statement is false

a trail balance is the same as a balance sheet

The current ratio measures the company's ___________.

ability to pay in the upcoming year; short-term liquidity

financial information needed to manage a company is provided by a(n) _________ system.

accounting

Individual expenses are accumulated in separate ________.

accounts

____ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together

accounts

______________ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together

accounts

individual expenses are accumulated in separate ________.

accounts

Noodlecake purchased $2000 of equipment and promised to pay for it next month. Noodlecake will report a $2000 ________________.

accounts payable

On July 19, WX company ordered $100 of supplies, promising to pay for them in August. the supplies were delivered and invoiced to WX on July 21, and WX paid $100 for them on August 10. the Journal entry that WX made on August 10 would include a debit to ___________.

accounts payable

Which of these is a current liability?

accounts payable

which of these is a current liability?

accounts payable

Which of the following statements is true?

accounts payable is a liability

The two categories of adjusting entries include __________ adjustments and ______________ adjustments.

accrual; deferral

Select all of the line-items found on a statement of retained earnings for the month ended September 30.

add: Net income; Retained Earnings, Sept 1; Retained Earnings, Sept 30; Subtract: dividends

A bank reconciliation, the Electronic Funds Transfer (EFT) received by a bank from a customer's note receivable owed to the company is ____________________.

added to the book balance.

An EFT cash receipt from a customer is __________.

added to the cash balance

When calculating net cash flow provided by operating activities, an increase in Accounts Payable is _____ net income because payments to suppliers are _______ than new purchases.

added to; less

A(n) ________ trial ___________ is prepared immediately ___________ the adjusting entries have been recorded and ____________ the financial statement are prepared.

adjusted; balance; after; before

WOTF accounts can be found on the income statement?

advertising expense; sales revenue

which of the following accounts will be found on the income statement?

advertising expense; sales revenue

the adjusting entry to record the amortization of a long-term asset that lacks physical substance includes a debit to _______ ________ and a credit to ________ ___________.

amortization; expense; accumulated; amortization

Revenue on the income statement for the year ended December 31, 2018, equals the ____________.

amount recognized by selling goods or services to customers during 2018

Retained Earnings represents ______________________.

amounts earned (revenues minus expenses) that have been kept by the company; Net income generated by the company through profitable operations that has not been distributed to its stockholders

Acme Enterprises, a consulting firm, bought 4 boxes of copy paper from an office supply store for $15 each. The copy paper would be reported as ________.

an asset, Supplies

Acme Enterprises, a consulting firm, bought 4 boxes of copy paper from an office supply store for $15 each. the copy paper would be reported as

an asset, supplies

if an adjusting entry decreased an asset on the balance sheet, then one can conclude that ________.

an expense was increased on the income statement

a transaction may be recorded with an increase in an asset and a decrease in a(n)

another asset

WOTF are similarities Notes Payable and Accounts Payable? They both ____________.

are amounts owed to creditors; are liabilities

The accrual adjustment recorded to adjust for revenues earned but not yet collected will cause ________________.

assets to increase

the balance sheet reports _____________

assets, liabilities and stockholders' equity at a specific point in time.

a balance sheet shows ________.

assets, liabilities, and stockholders' equity at a single point in time

Match the financial statement that reports each of the following.

assets- balance sheet Net income- income statement Investing activities- statement of cash flows

match the definition with each element of the accounting equation

assets- economic resources that will provide future benefit; liabilities- creditors' claim to economic resources; stockholder's equity- owners' claims to economic resources; revenues- amounts earned by selling goods and services; expenses- amounts used to generate profits

a classified balance sheet shows subtotals for current _________ and current ________________.

assets; liabilities

Which of the following are reported on a balance sheet?

assets; retained earnings; liabilities; cash; stockholder's equity

To provide additional assurance, all public companies hire independent ___________ to scrutinize their financial records and to write a report as to whether the financial statements, beyond reasonable doubt, represent what they claim to represent and comply with GAAP.

auditiors

If a new company calculates the average cost of its inventory by adding together the total costs of all purchases and then dividing it by the number of units purchased during the period, it is using the weighted ___________ cost method

average

After increases and decreases in an account are recorded, the amount remaining in the account is its ending ___________.

balance

After increases and decreases in an account are recorded, the amount remaining in the account is its ending ________________.

balance

Cash is reported on WOTF financial statements?

balance sheet and SOCF

Purchase transactions affect the ____________.

balance sheet and not the income statement

cash is reported on which of the following financial statements?

balance sheet and statement of cash flows

the _________ takes stock of what exists at a point in time. The ____________ depicts a flow of what happened during a period of time.

balance sheet; income statement

the ending retained earnings balance appears on the __________.

balance sheet; statement of retained earnings

the ending retained earnings balance appears on the ___________

balance sheet; statement of retained earnings

Goods Available for Sale will ____________ when sold.

become Cost of Goods Sold on the income statement

The adjusted trial balance should be prepared ___________ the financial statements are prepared to prove the ______ of the debits and credits.

before; equality

Additional mechanisms of internal control include _________.

bonding; Mandatory vacations; Anonymous hotlines

Which transactions are recorded in the accounting system?

both external and internal events

Cash Flows from (used in) Investing Activities on the SOCF reports the cash activity from ____________.

buying and selling of equipment

A company typically receives ____ an asset, when it issues stock to its owners.

cash

Accrual adjustments are needed when a company has earn revenue of incurred an expense but ___________ has not been exchanged

cash

Adjusting entries never affect the Asset account called _____________.

cash

WOTF is a current asset?

cash

What does a business receive when it issues stock to owners?

cash

which of the following is a current asset?

cash

Show the order in which these asset accounts would appear on a company's balance sheet.

cash supplies equipment

Shoe Fly, Inc. purchased software. It paid $100 and promised to pay the remainder next month. What did Shoe Fly receive and give in this transaction?

cash is given; software is received; a promise t pay is given

which of the following would be included in the operating activity section of the statement of cash flows?

cash paid to suppliers; cash received from customers; cash paid to employees

WOTF would be included in the operating activity section of the SOCF?

cash received from customers; cash paid to suppliers; cash paid to employees

a positive cash flow under Cash from Financing Activities is a result of which of the following?

cash received from owners for company stock; cash received on loan from bank

a positive cash flow under Cash from financing activities is a result of which of the following?

cash received from owners for company stock; cash received on loan from the bank

show the order in which these asset accounts would appear on a company's balance sheet

cash; supplies; equipment

An owner gives $5000 cash to his company in exchange for stock. This will increase the company's __________.

cash; common stock; Total SE

Place balance sheet line items in the proper order from top to bottom

cash; supplies; equipment; accounts payable; common stock; retained earnings

When a company receives cash from a customer in advance of performing the service, the company will debit _________ and credit _______ ________________.

cash; unearned revenue

When a check is presented to a bank for payment and the amount is deducted from the payer's account the check is said to have ________ the bank.

cleared

The step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts ins referred to as the ________ process.

closing

The step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts is referred to as the _____________ process.

closing

Two sources of equity financing which increase stockholders' equity are ___________.

common stock; retained earning

an owner gives $5000 cash to his company in exchange for stock. This will increase the company's _________.

common stock; total shareholders' equity; cash

a current ration that equals 2.0 suggests that a _____________.

company has the ability to pay its current liabilities; company's current assets are larger than its urrent liabilities

Good internal controls for cash receipts that should be performed by a supervisor include ___________.

comparing cash in registers with cash count sheets; Completing bank deposits; Restricting access to cash by locking it up

Sales Returns and Allowances is a ___________ account and is ______________ when goods are returned by customers for a refund.

contra-revenue; debited

A weak system of internal ______________ can lead to fraudulent financial statements. These procedures and policies help ensure that information entered into the accounting system and reported in the financial statements is accurate and complete.

controls

A weak system of internal _________ provides the _____________ to commit fraud.

controls; opportunity

The Sarbanes-Oxley (SOX) act provides increased regulations for ________.

corporate executives; internal controls; auditors

A(n) _________ is a separate legal entity whereby the owner's are not personally liable for the debts of the business

corporation

the ________ principle requires that assets and liabilities be recorded at the amounts that were measurable at the time transaction occurred

cost

the ________ principle requires that assets be recorded at the amount exchanged for them at the time of purchase

cost

the ________ principle requires that assets be recorded at the amount exchanged for them at the time of purchase.

cost

the __________ principle requires assets to be initially recorded at the amount paid or payable on the date of the transaction.

cost

the ____________ principle requires that assets and liabilities be recorded at the amounts that were measurable at the time transactions occured.

cost

After the adjustments have been completed, the balance in the Rent Expense account represents the _________.

cost of rent for the accounting period

Inventory consists of all ________________.

costs needed to get the inventory ready for sale

The Sarbanes-Oxley (SOX) Act aims to reduce fraud by ______________.

counteract incentives; encouraging honesty in employees; reducing opportunities

A loan __________ specifies terms of a loan agreement that, if broken, can allow the lender to renegotiate the terms of the loan or force repayment.

covenant

A company purchased land in exchange for a $25000, 10-year note payable. the increase in the Notes Payable account would be recorded with a __________________.

credit

During the closing process, the closing entries to individual expense accounts will be recorded with a ___________ to reduce the account balance to zero.

credit

If an asset account such as Equipment has a normal debit balance, the associated contra-account should have a normal __________ balance.

credit

In a periodic system, the end-of-period adjustment that adjusts cost of goods sold for the amount in ending inventory requires a _________ to Cost of Goods Sold

credit

a company purchased land in exchange for a $25000, 10-year note payable. the increase in the notes payable account would be recorded with a _____________________

credit

The beginning balance in Lucre's Notes Payable account was $50000. During the month, Lucre borrowed $60000 cash from Last National Bank and then paid First National Bank the $40000 it had borrowed 5 months prior. The balance in Lucre's notes payable is now a ________.

credit of $70000

Cash basis accounting does not measure financial performance very well when transactions are conducted using ____________.

credit rather than cash

Squid Roe, Inc., purchased equipment that cost $20000 by promising to pay $15000 next month and paying the remainder in cash. the journal entry to record this transaction includes a _____________.

credit to Accounts payable of $15000; debit to equipment of $20000; credit to cash of $5000

The adjusting entry to record depreciation on equipment includes a _________.

credit to Accumulated Depreciation; debit to Depreciation Expense

The entry used to record income tax accrued, but unpaid, at the end of the accounting period includes both a _________ and a ____________.

credit to Income Tax Payable; debit to Income Tax Expense

The adjusting entry to record the amount of interest earned but not yet received on investments includes a _____________.

credit to Interest Revenue; debit to Interest Receivable

In a perpetual system, the entry to record the sale of merchandise to a customer on account would include a ____________________.

credit to Inventory; Debit to Cost of Goods Sold

In a periodic system, the entry to transfer beginning inventory and purchases into cost of goods sold includes a ____________.

credit to Purchases; Credit to Inventory (beginning balance; debit to Cost of Goods Sold

The deferral adjustment to record the amount of unearned service revenue hat is now earned includes a _____________.

credit to Service Revenue; debit to Unearned Revenue

On June 1, Pizza Company paid $100 for advertisements to be run on June 1. Pizza Company's entry to record this payment will include a $100 _____________.

credit to cash; debit to Advertising Expense

Noodlecake pays $300 cash to create the company's logo. the journal entry to record this transaction would include a _____________ for $300

credit to cash; debit to Logos/Trademarks

Bank 'n' Roll, Inc., pays its employees once a month and records the expense at the time of payment. On May 31, Bank 'n' Roll, Inc., paid its employees $10,000 for work performed in May. The entry to record the payment includes a ______ for $10000.

credit to cash; debit to Wages Expense

Acme enterprises issued $20000 of stock in exchange for cash, the journal entry to record this transaction will include a _______________ of $20000.

credit to common stock; debit to cash

the closing entry to close Rent Expense requires Rent Expense to be _______ and retained earnings to be ______.

credited; debited

which of the following are external users of the company's financial statements?

creditors; Securities and Exchange Commission (SEC); stockholders

two sources of financing for a new business are __________.

creditors; stockholders

which groups have claims to a business's assets?

creditors; stockholders

Debits must always equal ______ in each journal entry.

credits

when recording a transaction, the debits must always equal the _______.

credits

Identify WOTF statements are true.

credits increase SE; Liabilities are on the right side of the accounting equation and have normal credit balances; assets are on the left side of the accounting equation and have normal debit balance; credits increase liabilities.

Assets that will be used up or converted to cash within 12 months are _________ assets

current

assets that will be used up or converted to cash within 12 months are __________ assets.

current

current assets divided by current liabilities is the ___________ ratio.

current

liabilities that will be paid or fulfilled within 12 months are ___________ liabilities.

current

Inventory is reported as a(n) ______.

current asset on the balance sheet

list the components of a classified balance sheet in the proper order in accordance with GAAP. list from top to bottom

current assets; non-current assets; current liabilities; non-current liabilities; SE

The current ratio equals ________ _________ divided by _____ ________.

current; assets; current; liabilities

_________ liabilities are obligations which will be paid or met withing 12 months of the balance sheet date, whereas _______ liabilities are not due withing 12 months of the balance sheet date.

current; noncurrent

A company paid $500 for supplies that it purchased last month. The decrease in liabilities would be recorded with a ______ to accounts Payable.

debit

The adjusting entry to record the amounts earned during the accounting period results in a(n) _____________ to the Unearned Revenue account.

debit

a company paid $500 for supplies that it purchased last month. the decrease in liabilities would be recorded with a ___________ to accounts payable.

debit

A service company receives a check from a customer as partial payment of his account balance. This transaction does not involve the sale of additional services. How should the entry be recorded?

debit Cash and credit Accounts Receivable

the entry to record the payment of wages incurred in the prior accounting period is recorded with ____________________.

debit Salaries and Wages Payable; credit cash

Identify the entries needed for the closing process

debit each revenue, credit each expense and record the difference in Retained Earnings; Credit Dividends and debit Retained Earnings

The beginning balance in Acme's Cash Account was $2400. During the month, acme issued $25000 of stock for cash and repaid a $15000 note payable. the balance in Acme's cash account is now a ______________.

debit of $12400

The beginning balance of Acme's cash account was $2400. During the month, Acme issued $25000 of stock for cash and repaid a $15000 note payable. The balance of Acme's cash account is now a ___________________.

debit of $12400

The beginning balance in Lucre's cash account was $1200. During the month, Lucre borrowed $5000 cash from last national bank and paid a supplier $500. The balance in Lucre's cash account is now a __________________.

debit of 5700

The journal entry to record the payment for merchandise previously purchased on account includes a __________.

debit to Accounts Payable; Credit to Cash

Using a perpetual inventory system, the entry to record the return of goods you previously purchased on account includes a _____________.

debit to Accounts Payable; Credit to Inventory

Using a perpetual inventory system, the journal entry to record a sale on account will include a ________________.

debit to Accounts Receivable; Credit to Sales Revenue; Credit to Inventory; Debit to Cost of Goods Sold

After performing a physical count for inventory at the end of the accounting period, it was discovered that the amount of inventory on hand was less than the accounting records reported. The entry to record this inventory shrinkage includes _______________.

debit to Cost of Goods Sold; Credit to Inventory

to record income tax accrued, but unpaid, at the end of the accounting period includes both a _______ and a _________.

debit to Income Tax Expense; credit to Income Tax Payable

A closing entry includes a ________.

debit to Sales Revenue

Acme Enterprises borrowed $20,000 from Last Bank on a 5-yr note payable. Acme's journal entry to record this transaction will include a ______ of $20000

debit to cash; credit to Notes Payable.

the entry to record the sale of services for cash includes a ___________________.

debit to cash; credit to Service Revenue

In May, Pizza Aroma ordered $1200 of supplies and promised to pay the supplier next month. As soon as it receives its supplies in may, Pizza Aroma should record a ____________ of $1200

debit to supplies; credit to accounts payable

The bank will show a customer's withdrawal as a _________.

debit, because a withdrawal decreases its liability from the bank's point of view.

During the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account to be ____________ (debited or credited)

debited

on a trial balance, __________________.

debits should equal credits

The post-closing trial balance checks that total _______ equal total ___________ at the end of the period.

debits; credits

a difference between debt financing and equity financing is that _________.

debt financing must be repaid, while repayment of equity financing is not required

Balance sheet accounts, such as Supplies or Prepaid Rent, ___________ (increase/decrease) as a result of deferral adjustments.

decrease

The adjusting entry to record the revenue earned by the seller fulfilling its obligation results in a(n) __________ to the Deferred Revenue account.

decrease

The recording of a company's purchase returns and purchase allowances are similar in that both may result in a(n) ______________.

decrease in inventory

Which of the following types of transactions represent deferral adjustments that are recorded to adjust for amount expired or used during the period?

decrease to Prepaid Insurance and increase to Insurance Expense; decrease to Supplies and increase to Supplies Expense.

Prepaid expenses should be ___________ by the benefits that were used up during the accounting period.

decreased

Prepaid expenses, such as Prepaid Rent, should be _________ by the benefits that were used up during the accounting period.

decreased

Sales discounts should appear in the financial statements as ___________________.

deduction from sales

which balance sheet line item reports the amount collected in advance for which the seller has not yet fulfilled its obligation to the buyer?

deferred revenue

Which of the following reconciling items does not require a journal entry?

deposit in transit

_________ is the process of allocating the cost of vehicles, buildings and equipment to expense over time as they are used.

depreciation

After the adjustments have been completed for the fiscal year, the adjusted balance in the Depreciation Expense account represents ____________.

depreciation for the current fiscal year.

The seller of inventory pays for shipping if the shipping terms are FOB _________.

destination

To ensure the accuracy of inventory accounted for using a perpetual system, physical counts _______________.

detect bookkeeping errors; Detect theft; Detect shrinkage

A ____________ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts.

direct

most investors hope to get __________ from their investments in a company's stock in addition to a higher price for the stock

dividends

profits earned by a company that are paid to stockholders are called __________.

dividends

profits earned by a company that are paid to stockholders are called ____________.

dividends

Assigning sequential numbers to cash sales, so that the accounting staff can ensure that every sale has been recorded is required by the internal control principle of ________.

documenting procedures

WOTF accounting cycle steps describes the summarizing in LEDGER accounts?

dollar amounts from journal entries are copied (posted) to the appropriate accounts in the ledger, so that account balances can be totaled.

WOTF are true about the income statement?

each major caption has an underlined subtotal, such as Total Expenses; Revenues are listed before Expenses; A dollar sign appears only at the top and bottom of the column of numbers; Net Income as a double underline

Adjustments help to ensure that all revenues are recorded in the period in which they are __________.

earned

Adjustments help to ensure that all revenues are recorded in the period in which they are ______________.

earned

An asset is defined as _________.

economic resource expected to benefit the company in the future

the US Financial Accounting Standards Board is working with the International Accounting Standards Board to __________________________.

eliminate differences in financial reporting among countries; make financial statements more comparable

Adjusting entries are made at the ___________ of the accounting period, while daily transactions are made throughout the accounting period.

end

The main goal of both US GAAP and IFRS is to ______________.

ensure that companies produce useful information for capital providers

The trial balance is an internal report used to determine whether total debits _____________ total credits.

equal

a company's profits _________.

equals revenues minus expenses; belong to the owners; are called net income

WOTF have normal debit balances?

equipment; supplies; cash

which of the following have normal debit balances?

equipment; supplies; cash

SOX reduces the opportunities for fraud by requiring publicly-traded companies to _______________.

establish an audit committee of independent directors; Evaluate and report on its internal controls; Have external auditors evaluate the company's internal controls

Each cash drawer is assigned to only one employee in a supermarket. This is an example of the internal control principle of ______________________.

establishing responsibility

folllowing strong _____________ financial accounting practices is a key factor in business success and should result in good judgement in accounting principles for financial reporting purposes.

ethical

following strong _______ financial accounting practices is a key factor in business success and should result in good judgement in applying accounting principles for financial reporting purposes.

ethical

the order in which liabilities are reported on the balance sheet is based when the liability is

expected to be paid or settled

the order in which assets are reported on the balance sheet is based on when the asset is ____________________.

expected to be used or turned into cash

Adjustments made to expense accounts at the end of the accounting period adhere to the ____________ recognition (matching) principle.

expense

The ________ recognition principle requires an adjustment for income tax expenses owed attributable to the net income earned during the current peroid.

expense

The ____________ recognition principle requires an adjustment for income tax expenses owed attributable to the net income earned during the current period.

expense

under the accrual basis of accounting, the ____________ recognition (matching) principle requires that expenses be recognized in the same period as the related revenues

expense

The entry to record replenishment of the petty cash fund involves debiting _____________ and crediting ___________.

expense accounts; cash

Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records ______________.

expense in the period incurred, even though cash has not yet been paid; revenues in the period when revenue is earned, even though the cash has not yet been collected.

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "Interest _________" and a credit to "Interest ________."

expense; payable

In the closing process, ______________ are zeroed out by crediting each account and ___________ are zeroed out by debiting each account

expenses and dividends; revenues

Among the new requirements of SOX is those who willfully misrepresent financial results _____________.

face stiff fines and possible jail sentence

which of the following characteristics are needed in order for information to be useful?

faithful representation; relevance

T/F a company has developed an exceptional customer base. the company may include this as an asset on its balance sheet

false

T/F an exchange of promises is a transaction that affects the accounting equation.

false

The management of Acme, Inc. prepared a statement for Acme's external users that listed the company's assets, liabilities, and stockholders' equity as of the last day of the year. This statement must be a(n) ________..

financial statement

The 3 categories of employee fraud are ____________.

financial statement fraud; asset misappropriation; corruption

WOTF statements is CORRECT?

financial statements are prepared after the adjustments to ensure that all accounts have been brought to their correct balance

Cash flows provided by _______ Activities on the SOCF reports the cash activity with stockholders and creditors such as banks.

financing

Cash flows provided by _____________ Activities on the statement of cash flows reports the cash activity with stockholders and creditors such as banks.

financing

Issuing bonds payable is an example of a(n) ________ activity.

financing

the line item, Common Stock, on the balance sheet results from a(n) __________________ activity.

financing

how do financing activities differ from investing activities?

financing activities may involve an exchange of cash for the company's own stock - investing activities do not; financing activities may involve an exchange of cash for debt- investing activities do not

Which of the following are the main groups of external users of financial statement

government; investors; creditiors

If a company can pay its debts in the next year, then its current assets should be _________ its current liabilities

greater than

if a company determines that is has $1400 of supplies on hand at the end of the period, which of the following statements is correct? the company ___________.

has $1400 of supplies remaining at the end of the period

the duality of effects refers to the fact that each transaction _____________.

has at least two effects on the basic accounting equation.

businesses earn profits by

having revenues greater than expenses; selling goods or services at more than the cost to deliver the goods or services

when faced with an ethical dilemma, you should follow a 3-step process that includes ______________.

identifying who will be affected by the situation; identifying and evaluating the alternative courses of action; choosing the alternative that is most ethical

An advantage of a classified balance sheet is that it is easy to see _________________.

if current assets are large enough to pay current liabilities

A(n) ______________ system controls the amount paid to others by limiting the total amount of money available for making payments.

imprest

On May 25, Dew Drop Inn purchased $500 of supplies on account. In June, $300 of supplies was used and $400 was paid to the supplier. Which of the following are true statements?

in May, the assets, Supplies, is increased by $500; in June, Supplies expense of $300 is recorded

the balance sheet reports the company's assets, liabilities, and stockholders' equity at a specific point in time. the __________ statement describes the revenue and expense items that affected net income over an interval of time.

income

Match the purpose with the appropriate financial statement

income statement- reports the financial of the business during the current accounting period; statement of retained earnings- reports the accumulation of profits kept by the business during the current accounting period with that of prior periods; balance sheet- reports the financial position of the business at a point in time; statement of cash flows- reports the operating, investing and financing activities effects on cash

A financial statement heading states that it was prepared for: "the year ended December 31, 2018" What kind of financial statements could this be?

income statement; SORE; SOCF

The adjustment for supplies used during the period will result in a(n) _____________ to the Supplies Expense account.

increase

net income, as opposed to a net loss, causes retained earnings to

increase

Company X receives $10000 from issuing common stock to it's owners. the effect on the accounting equation is a(n) ___________.

increase in assets; increase in SE

As of December 31, the end of the accounting period, $700 of salaries and wages owed to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, Salaries and Wages Payable will ___________ by $700 and Salaries and Wages ____________ will increase by $700.

increase; Expense

The purpose of recording an adjusting entry for salaries and wages is to record wages _________.

incurred but not yet paid

The purpose of recording an adjusting entry for salaries and wages is to record wages ___________.

incurred but not yet paid.

If a company hires an auditor to check that the work done by others within the company is supported by documentation, that is part of the internal procedure of _____________________.

independent verification

_______ Expense accumulates or accrues throughout the accounting period on Notes Payable

interest

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

interest on the note payable is classified as an expense since it is a cost of borrowing

WOTF statements is correct regarding the adjustment to record interest accrued on a note payable?

interest on the note payable is classified as an expense since it is the cost of borrowing

WOTF may require an accrual adjusting entry that is recorded with a deit to an expense and a credit to a liability?

interest owed on notes payable; utilities to be paid in later accounting period

WOTF accounts found on an unadjusted balance typically require adjusting entries?

interest payable; supplies; prepaid rent

After the adjustments have been completed, the adjusted balance in the Interest Payable account represents _____________.

interest that has accrued, but has not been paid, at the end of the period

In a perpetual system, the __________ account is debited when a company purchases merchandise on account.

inventory

In a perpetual system, the ____________ account is debited when a company purchases merchandise on account.

inventory

Which line item would be found on a merchandiser's balance sheet and not on a service firm's?

inventory

Cash flows from (used in) _______________ Activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings and equipment.

investing

the line item, Land, on the balance sheet results from a(n) ______________.

investing activities

which of these would be captured and reported by an accounting system?

investing activities; purchase of equipment on account; financing activities

the line item, Land, on the balance sheet results from a(n) ___________.

investing activity

WOTF are the correct terms for the 3 activities found on the statement of cash flows?

investing; operating; financing

which of the following are considered business documents?

invoices; stock certificates; bills

select the financing activities from the list below.

issuing stock; issuing a note payable

which of the following are true about an accounting system?

it captures information about the business and financing activities of a company; its purpose is to analyze, record and summarize business activities

Identify what a company gives and receives when it invests in equipment by paying cash and signing a 2 year note.

it gives cash; it receives equipment; it gives a promissory note

A company might report negative cash flows used by financing activities when ______________________.

it has paid a large cash dividend to it's stockholders

if a company reports a negative dollar amount under Cash Flows used by Investing activities on its statement of cash flows, a possible explanation is ____________________.

it has purchased a significant amount of equipment

A $250 bank deposit made on the last day of the month did not appear on this month's bank statement. How would this item be treated on the bank reconciliation?

it would be added to the bank balance

Entries are first recorded in the general ____ and then summarized in the ledger.

journal

Transactions are first entered in the __________.

journal

the formal document that lists all of the journal entries, but does not provide account balances, is the ____________.

journal

After each sale of merchandise to a customer, both Inventory and cost of goods are ______________.

kept up-to-date in a perpetual system

T-account represent a simplified version of the ________________.

ledger

The effect of journal entries on each account is summarized in the ______.

ledger

the effects of journal entries on each account is summarized in the ____________.

ledger

The Cash T-account is increased with an entry on the _________ side of the T-account.

left

The Land account is increased with an entry on the ________ side of the land T-account

left

An increase in Prepaid Expenses indicates that _______ was expensed than paid during the period. Thus the increase will be ________ net income on the SOCF prepared using the indirect method.

less; subtracted from

complete the accounting equation: Assets=______________+stockholders' equity

liabilities

Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debit to Cost of Goods Sold an a credit to Cash. As a result, ____________.

liabilities are understated; Assets are understated; Stockholders' equity is understated

when a company buys an asset on account ____________.

liabilities increase; assets increase

company X issued $10000 of common stock to its owners for cash. it recorded the transaction by increasing assets and increasing liabilities. which of the following statements are correct?

liabilities will be too high; Stockholders' equity will be too low

When a company borrows from a bank by signing a formal agreement, an ASSET titled CASH is increased and a ________ titled __________ ____________ is increased

liability; notes; payable

a chart of accounts is a ___________.

list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named

the primary goal of most companies is to _____________.

make a profit

The gross profit percentage measures the percentage of profit earned on each dollar of sales before deducting all expenses other than cost of goods sold. This ratio is used for:

make comparisons over time; Compare one company to another

Who has primary responsibility for preparing and making sure that a company's financial statements follow GAAP

management

financial statements_________.

may have a fiscal year end other than December 31; may be prepared more than once a year

the net profit margin ratio ________________.

means improved performance if it increases; indicates how well expenses are controlled

Liabilities are ________.

measurable amounts that the company owes to creditors

which of the following is correct?

measurement of net income involves estimations

Net Sales on an income statement equals Sales Revenue ______________

minus Sales Returns, Allowances and Discounts

Which of these are cash equivalents?

money market funds; Investments within 3 months to maturity

Financial statements can be prepared ___________________

monthly; quarterly; end of fiscal year

The starting point for preparing the operating activities section using the indirect method is _________.

net income

Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5000 sale on account, but forgot to record the related cost of the sale of $3000. As a result of this error, __________________.

net income will be too high; Total assets will be too high

Gross profit equals ______________.

net sales minus cost of goods sold

Noodlecake signs a contract with an independent developer for program code to be delivered and paid for in 2 months. What is the effect on the accounting equation?

no effect

What is the effect on TOTAL ASSETS when a company purchases a cash register for a cash payment of $1200

no effect

What is the effect on TOTAL ASSETS when a company purchases land for a cash payment of $10000

no effect

what is the effect on total assets when a company purchases a cash register for a cash payment of$1200

no effect

Buildings and equipment owned and used by a company are ________________.

non-current assets

if Cash is debited or credited in an entry, then one can concluded that it is _______.

not an adjusting entry

A difference between an imprest payroll account and petty cash is petty cash is ________________.

not held at the bank

On May 1, Lord of the Fries, Inc. hires an employee to begin work next month. On May 1, Lord of the Fries will ___________.

not record anything

Identify the account title that may be used to record borrowing cash in exchange for a promissory note.

note payable

the ____________ to the financial statements help users understand how financial statement amounts were derived and includes other information that may affect the users' decisions.

notes

which of the following are found on a balance sheet?

notes payable; accounts receivable; retained earnings; cash

The quality of financial reporting for publicly traded companies is improved through ________________.

obtaining and external audit; evaluating and reporting on the effectiveness of internal controls

FIFO uses the ____ cost for cost of goods sold on income statement and ____ cost for inventory on the balance sheet

oldest; newest

financial statements can be prepared ____________.

on a monthly basis; on a fiscal year basis; on a quarterly basis

Businesses typically buy good or services from others' _____________.

on account

net income is reported ______________

on both the income statement and statement of retained earnings

After the adjustments have been completed, the Supplies account on the balance sheet represents the cost of supplies _________.

on hand at the end of the accounting period

the financial statement line item, Net Income, is typically found ________________________.

on the statement of Retained Earnings; on the bottom of an income statement

which of the following are possible effects on the accounting equation when recording a transaction that affects 2 accounts?

one asset account increases and one asset account decreases; one asset account increases and one stockholders' equity account increases

In a perpetual inventory system, the journal entry to record the payment of cash for the shipping cost of purchased merchandise will cause __________________.

one asset to increase and another asset to decrease

Inventory shrinkage as result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory _____________.

only in a perpetual system

Permanent accounts are found on ______________.

only the balance sheet

The _________ cycle is a series of activities that the company undertakes to generate sales and ultimately cash.

operating

The __________ activities section on the statement of cash flows reports the activities directly related to running the business to earn profit.

operating

The primary source of Revenues and Expenses comes from _________ activities

operating

collecting cash from customers for services provided is a(n) ____________ activity

operating

Place these items in the order in which they appear on the statement of cash flows

operating; investing; financing

Which of the following is subtracted from a bank balance on a bank reconciliation?

outstanding checks

Bank reconciliations are need to reconcile for ______________.

outstanding checks; deposits in transit

After the adjustments have been completed, the adjusted balance in Income Tax Payable represents the amount ________ to the government at the end of the accounting period.

owed

After the adjustments have been completed, the adjusted balance in the Income Tax Payable account represents the amount ________ to the government at the end of the accounting period.

owed

After the adjustments have been completed, the adjusted balance in the "Salaries and wages payable" account represents wages incurred, but not yet _______ by the company

paid

which of the following are key characteristics of a partnership?

partnerships have more than one owner; owners are legally responsible for debts of the partnership, even if the debts are more than the amount owners have invested in the business.

match each characteristic with the appropriate business organization

partnerships- legal liability is the responsibility of two or more owners partnerships and sole proprietorships- owners have unlimited liability corporations- income is taxed twice

Accounts _______ is a liability account and represents amounts owed to suppliers.

payable

When a company pays it's supplier for amounts owed, it's Cash and Accounts ___________ and accounts are decreased

payable

which activities are part of the operating cycle?

paying cash to suppliers; buying goods and services; collecting cash from customers

If a company records a debit to Salaries and Wages Payable and a credit to Cash, What has occurred? The company is _________.

paying for salaries and wages that had been accrued earlier

cash basis accounting may distort net income when a company _____________.

pays for expenses in advance of when the resources are used; collects cash in advance of providing services to customers; makes credit sales; pays for expenses in a later accounting period than when the resources are used.

The _____________ inventory system requires that the inventory account be updated only at the end of the accounting period.

periodic

Under the _____ inventory system, inventory records are updated only at the end of the accounting period.

periodic

Under the __________ inventory system, the inventory account is updated every time inventory is bought, sold, or returned.

perpetual

Which inventory system requires that the inventory account be updated when merchandise is purchased?

perpetual system

The ____________ inventory system records all inventory-related actions in the inventory account (e.g. transportation, purchase returns and allowances, purchase discounts) and reduces inventory at the time of sale. The ___________________ inventory system uses separate accounts for these items and record cost of goods sold at the end of the accounting period.

perpetual; periodic

Inventory consists of the purchase price ____________.

plus freight-in

Preparing a _______ trial balance is the last step in the accounting cycle.

post-closing

In accrual accounting, to defer means to ___________ recording the other side of the cash transaction as a revenue or expense. instead the other side of the cash entry is recorded as liability or prepaid.

postpone

which of the following financial statement line items is not an expense?

prepaid rent

place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order

prepare the adjusting entries; prepare an adjusted trial balance; prepare the financial statements

the main reason companies exist is to maximize their ______________

profits; owner's wealth

The purpose of an independent auditor's report is to _________________.

provide assurance that the financial statement represent what they claim to represent; provide assurance that the financial statements comply with Generally Accepted Accounting Principles (GAAP)

differentiate between the different types of accountants by matching each with the appropriate description

public accountant- is contracted by a variety of different companies for advice and other services private accountant- is hired by a business as an employee and provides accounting services for that particular business

Which of the following would be found on the credit side of the T-account?

purchase discounts; Purchase returns

Cost of goods sold equals beginning inventory plus _______________ minus ending inventory.

purchases

After posting all entries to the ledger, the Accounts Payable T-account will show which of the following?

purchases on account on the credit side; payments made on the debit side; ending balance on the bottom of the credit side; beginning balance on the top of the credit side.

select the investing activities from the list below

purchasing a company logo; purchasing equipment; purchasing land

Accounts ___ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit

receivable

All accounting systems _______.

record and summarize financial effects of transactions; follow the accounting cycle; combine beginning balances with the activity during the accounting cycle to yield the ending balances for each account

The closing entry for dividends involves a debit to Retained Earnings and a credit to Dividends. The debit to Retained Earnings causes a(n) ______________ in the balance of the account.

reduction

Physically locking up assets and electronically securing access to other assets and information is required by the internal control principle of __________________.

restricting access

The unit-of-measurement assumption states that _____________.

results of business activities should be reported in appropriate monetary unit

Profits earned by a company that have NOT been paid to stockholders at the end of an accounting period are called _____ earnings.

retained

Under the expanded accounting equation, assets equal liabilities plus common stock and ___ earnings.

retained

which line item on the adjusted trial balance reports its beginning balance but on the balance sheet reports its ending balance?

retained earnings

Prepare a statement of retained earnings for the month of September from top to bottom

retained earnings, September 1 net income dividends retained earnings, September 30

two sources of equity financing which increase stockholders' equity are ________________.

retained earnings; common stock

In accrual accounting, according to the ______________ recognition principle, revenues should be recognized when they are earned, not necessarily when cash is received.

revenue

Net Income (or loss) is recorded in the retained earnings account when _____ and ________ accounts are closed and transferred into retained earnings.

revenue; expense

WOTF would be increased because of recording a required accrual adjustment?

revenue; interest receivable; accounts receivable

Accounts Receivable should be increased for ___________.

revenues earned during the period but not yet collected

profit is equal to ____________.

revenues minus expenses

An income statement reports which of the following?

revenues, expenses; net income

WOTF are temporary accounts that will be closed at the end of the accounting period during the closing process?

revenues; dividends; expenses

Net Income (or loss) is recorded in the Retained Earnings account when ___________ and ___________ accounts are closed and transferred into Retained Earnings.

revenues; expenses

Net income equals total ______ minus total __________.

revenues; expenses

the income statement is the financial statement that reports the amount of __________ and ____________ during the accounting period.

revenues; expenses

the equation for the income statement is ____________-__________=_________ _____________

revenues; expenses; net; income

Accounts Payable is increased with an entry on the _________ side of the T-account.

right

Increases to Stockholders' equity are recorded on the _______ side of the T-account

right

The Common Stock account is increased with an entry on the ___________ side of the T-account

right

The Mortgage Payable account is increased with an entry on the ___________ Side of the T-account.

right

The Retained Earnings account is increased with an entry on the ______ side of the account.

right

The retained earnings account is increased with an entry on the ________ side of the account.

right

if the company issues $100000 common stock, the Common Stock T-account will have $100000 posted on the ________ side.

right; credit

If a company Debits Cash and credits Sales Revenue, It is recording the ___________.

sales of goods to a customer for cash

the net profit margin ratio is calculated by dividing net income by ____________.

sales revenue

Restricted cash is reported ___________________.

separately as an asset on the balance sheet

A multistep income statement is useful to financial statement users because it ________________.

separates cost of goods sold from other operating expenses, which allows the calculation of gross profit; Separates income statement items into meaningful components

a classified balance sheet ________.

shows subtotals for current assets and current liabilities

a _______-_____________ income statement reports a single measure of income. it reports the difference between total revenues and total expenses.

single- step

Which business organization's owner has unlimited liability?

sole proprietorship

three common forms of business organizations include ________.

sole proprietorship; corporation; partnership

Which financial statement reports the operating, investing and financing activities affect on cash?

statement of cash flows

a ___________ certificate is a legal document representing ownership in a corporation.

stock

equity financing is financing obtained from ____________.

stockholders

NSF checks from customers should be a(n) _____ on a bank reconciliation.

subtraction from the book balance

"NSF" checks stand for "non-___________ funds"

sufficient

The journal entry to record the purchase of supplies on account is debit _____________.

supplies and credit Accounts Payable

WOTF statements are true?

supplies are assets that can be used in the process of earning revenue in the near future; equipment is furniture or machinery that can be used for years

closing entries move the balances from the _______ accounts into the retained earnings account.

temporary

Which of the following statements is incorrect regarding the need to make accrual adjustments at the end of the accounting period?

the Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period.

Z Best, Inc. issued $1000000 of common stock for cash. By accident, Z Best recorded the transaction by increasing cash and decreasing SE. As a result of this entry, ___________.

the accounting equation is out of balance; common stock is understated; SE is understated.

Why is an adjustment necessary for interest accrued on a note payable at the end of the period if the interest will not be paid until the note is due?

the adjustment is needed to accurately portray the interest liability of the company, all amounts owed should be reported on the balance sheet; even though the interest will not be paid until a future period, the expense was actually incurred during the current accounting period.

the balance in retained earnings prior to the closing process equals ________.

the balance at the end of the previous accounting period

The balance in Retained Earnings prior to the closing process equals __________.

the balance at the end of the previous accounting period.

to see the detail of increases and decreases in a company's cash account, you should look at ___________.

the company's general ledger (T-Accounts)

To see the detail of increases and decreases in a company's cash account, you should look at ____________.

the company's general ledger (T-accounts)

How does the adjustment for Depreciation differ from other deferral adjustments?

the depreciation adjustment uses a contra-account rather than reducing the asset accounts directly

the trial balance at year end shows ________________.

the ending balance in each T-account

temporary accounts are found on __________.

the income statement

IFRS are __________.

the international Financial Reporting Standards

In which of these situations would a merchandiser record revenue?

the obligation has been fulfilled and control of the goods has been transferred to the customer; Goods were delivered FOB shipping point but have not yet arrived at the buyer's place of business.

Which of the following statements is correct regarding a long-lived asset such as equipment?

the original cost in the Equipment account will not change during the adjustment process

Petty cash payments are recorded in the accounting system's ledger when ____________.

the petty cash fund needs to be replenished

After the adjustments have been recorded, Unearned Revenue on the balance sheet reports the amount of ____________.

the sale or services still owed to the customer

Deferred Revenue should be reduced and revenue increased for the amount of revenue __________ during the period.

the seller performs of its obligations

the financial reports of a business include only the results of that business's activities. This is ____________.

the separate entity assumption

the financial reports of a business include only the results of that business's activities. This is _____________.

the separate entity assumption

FOB destination means that goods are owned by the buyer as soon as ____________________.

they arrive at the buyer's place of business

Fraudsters may rationalize their actions _________.

through a feeling of personal entitlement; As legitimate since they are underpaid; By convincing themselves their actions are justified

dividing the long life of a company into shorter periods such as months, quarters or years for reporting purposes is called the ______________.

time period assumption

Why are adjustments needed at the end of an accounting period?

to ensure that all assets and liabilities are reported at appropriate amounts

What is the purpose of preparing an adjusted trial balance?

to ensure that total debits equal total credits after the adjustments have been recorded

a private corporation becomes a public company ____________.

to raise capital by selling new issues of stock to investors

Noodlecake purchases and receives $10,000 in computers, printers, and desks in exchange for its promise to pay next month. What is the effect of this purchase on account on the accounting equation?

total Assets increase; total SE remains the same; Total liabilities increase

a company purchased $2200 of equipment in exchange for a cash payment of $1200 and a $1000 promise to pay. the company recorded a $1200 increase in the equipment and a $1200 decrease in the cash account. no entry was made to the accounts payable account. as result, _____________.

total assets are too low; the accounting equation is in balance

A company purchased a $100000 building in exchange for a 20-year note payable. the company recorded a $100000 increase in the building account and a $100000 decrease in cash. As a result of this error, ____________.

total assets are too low; total liabilities are too low

a company purchased a new cash register in exchange for a cash payment of $1200. As a result of recording the purchase, __________.

total assets remain the same; one asset is exchanged for another

After the adjustments have been completed, the adjusted balance in the interest expense account represents ___________.

total interest that has been paid or accrued during the period.

a company purchased a $100000 building in exchange for a 20 year note payable. The company recorder $100000 increase in the building amount, but did not record the note payable. as a result of this error, ____________.

total liabilities too low; total assets are correct

After the adjustments have been completed, the adjusted balance in the "Salaries and Wages Expense" account represents ______________.

total salaries and wages, paid and unpaid, that have been incurred during the accounting period

business activities that effect the basic accounting equation and are recorded in the accounting system are called ________.

transactions

business activities that effect the basic accounting equation and are recorded in the accounting system are called __________.

transactions

EFT stands for "electronic fund ____________"

transfer

the internal report that lists all of the accounts and their balances is used to determine that the total debits equals total credits is called the _________ _____________.

trial balance

T/F: When a company sells different types of products, the income statement will report the Cost of Goods Sold for all of the products in one line item.

true

Why are the adjustments important to the preparation of the financial statements?

unadjusted financial statements could present a misleading and incomplete picture of the company's financial results; Adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes; Adjustments ensure that the revenues earned and expenses incurred during the period are reflected in the income statement

What is a good starting point for determining which accounts require adjustment?

unadjusted trial balance

when a company collects cash in advance from customers it records a liability called __________ _____________.

unearned revenue

adjusting entries ____________.

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

After the adjustments have been completed, the Supplies Expenses account on the balance sheet represents the cost of supplies _________.

used during the accounting period

accounts are

used to accumulate and report the effects of each different business activity

The balance in the Prepaid Insurance account after the adjusting entries have been recorded represents the __________.

value of the insurance prepayment that remains to benefit future periods

A(n) ___________ system is a process for approving and documenting all purchases and payments made on an account.

voucher

When employees work for a company in June but are not paid until July, the June financial statements will include ___________ on the _______________.

wages expense: income sheet; wages payable: balance sheet

Which of the following transactions constitute an accrual adjustment involving an expense account?

wages incurred but not yet paid to employees as of the end of the accounting period; taxes incurred but not yet paid to the government as of the end of the accounting period.

which of these inventory accounting methods are acceptable under US GAAP?

weighted average; LIFO; FIFO; Specific Identification

Current Liabilities ___________.

will be paid or fulfilled withing 12 months

Deferring a revenue or expense account in accounting means that the amount ___________.

will be reported as a revenue or as an expense in a later period