BUS 201A // Stevens, Diane // Exam 1

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation? a) Assets increase by $75,000 and liabilities increase by $75,000 b) Liabilities increase by $75,000 and expenses decrease by $75,000 c) Assets increase by $75,000 and expenses increase by $75,000 d) Assets increase by $75,000 and expenses decrease by $75,000 e) Assets decrease by $75,00 and expenses decrease by $75,000

a) Assets increase by $75,000 and liabilities increase by $75,000

When expenses exceed revenues, the resulting change in equity is: a) Net loss b) Net assets c) Net income d) A liability e) Negative equity

a) Net loss

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? a) Assets, $30,000 decrease; liabilities, $30,000 increase b) Liabilities, $30,000 decrease; equity, $30,000 increase c) Assets, $30,000 decrease; equity, $30,000 decrease d) Assets, $30,000 decrease; liabilities, $30,000 decrease e) Assets, $30,000 increase; equity, $30,000 increase

d) Assets, $30,000 decrease; liabilities, $30,000 decrease

A resource that the stockholder receives from the company is called a(n)? a) Liability b) Common stock c) Expense d) Dividend e) Investment

d) Dividend

If assets are $99,000 and liabilities are $32,000, then equity equals: a) $67,000 b) $32,000 c) $99,000 d) $198,000 e) $131,000

a) $67,000

A company earned $3,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: a) 30% b) 3% c) 333% d) 33% e) $7,000

a) 30%

Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is: a) 8.3% b) 83.3% c) 16.7% d) 120% e) 12%

a) 8.3%

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation? a) Assets would decrease $38,000 and liabilities would decrease $38,000 b) Assets would increase $38,000 and liabilities would decrease $38,000 c) There would be no effect on the accounts because the accounts are affected by the same amount d) Assets decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000 e) Assets decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000

a) Assets would decrease $38,000 and liabilities would decrease $38,000

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): a) Balance sheet b) Financial status statement c) Income statement d) Statement of retained earnings e) Statement of cash flows

a) Balance sheet

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owner is known as the: a) Business entity assumption b) Going-concern assumption c) Cost principle d) Revenue recognition principle e) Time-Period assumption

a) Business entity assumption

An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n): A) Contra account b) Accrued expense c) Adjunct account d) Accrued revenue e) Intangible asset

a) Contra account

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways? a) Debit salaries expense and credit salaries payable b) Debit accrued salaries and credit salaries payable c) Debit salaries payable and credit salaries expense d) Debit salaries expense and credit cash e) Debit cash and credit salaries expense

a) Debit salaries expense and credit salaries payable

All of the following are asset accounts except: a) Supplies Expense b) Buildings c) Accounts receivable d) Prepaid insurance e) Equipment

a) Supplies Expense

Identify the account below that is classified as a liability in a company's chart of accounts: a) Unearned revenue b) Accounts receivable c) Cash d) Salaries expense e) Supplies

a) Unearned revenue

On May 1, a two-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31? a) $5,270 b) $6,000 c) $6,750 d) $750 e) $18,000

b) $6,000

Gi Gi's Bakery has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. a) 13.4% b) 25.9% c) 34.9% d) 14.9% e) 38.6%

b) 25.9%

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: a) Cost principle b) Going-concern assumption c) Business entity assumption d) Objectivity principle e) Monetary unit assumption

b) Going-concern assumption

The income statement reports all of the following except: a) Expenses incurred by a business b) Net income or loss earned or incurred by a business c) Assets owned by a business d) The time period over which the earnings occurred e) Revenues earned by a business

c) Assets owned by a business

Which of the following is classified as current assets? a) Patent b) Unearned revenue c) Office supplies d) Office equipment e) Land

c) Office supplies

A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is: a) $4,000 b) $800 c) $1,600 d) $3,200 e) $2,400

d) $3,200

If equity is $300,000 and liabilities are $192,000, then assets equal: a) $192,000 b) $108,000 c) $792,000 d) $492,000 e) $300,000

d) $492,000

Which of the following accounts are permanent (real) accounts? a) Interest revenue b) Salaries expense c) Fees earned d) Accounts payable e) Office supplies

d) Accounts payable

All of the following are classified as liabilities except: a) Wages payable b) Taxes payable c) Accounts payable d) Accounts receivable e) Notes Payable

d) Accounts receivable

compare the list of accounts below and choose the list that contains only accounts that would be classified as assets accounts on the chart of accounts. a) Accounts payable; cash; supplies b) Unearned revenue; accounts payable; dividends c) Notes payable; cash; dividends d) Cash; prepaid insurance; equipment e) Building; prepaid insurance; supplies expense

d) Cash; prepaid insurance; equipment

Golddigger services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a: a) Credit to cash for $60,000 b) Debit to management fees earned for $60,000 c) Credit to management fees earned for $60,000 d) Credit to unearned management fees for $60,000 e) Debit to unearned management fees for $60,000

d) Credit to unearned management fees for $60,000

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: a) Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440 b) Debit Insurance Expense, $360; credit Prepaid Insurance, $360 c) Debit Prepaid Insurance, $1,800; credit Cash, $1,800 d) Debit Prepaid Insurance, $360; credit Insurance Expense, $360 e) Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440

d) Debit Prepaid Insurance, $360; credit Insurance Expense, $360

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction? a) Debit common stock, $200,000; credit assets, $200,000 b) Debit common stock, $200,000; credit cash $70,000; credit land, $130,000 c) Debit cash and land, $200,000; credit common stock, $200,000 d) Debit cash $70,000; debit land $130,000; credit common stock, $200,000 e) Debit assets $200,000; credit common stock $200,000

d) Debit cash $70,000; debit land $130,000; credit common stock, $200,000

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry? a) Debit income summary $62,000; credit expenses $62,000 b) Debit income summary $13,000; credit retained earnings $13,000 c) Debit revenues $75,000; credit income summary $75,000 d) Debit income summary $75,000; credit revenues $75,000 e) Debit retained earnings $8,000, credit dividends $8,000

d) Debit income summary $75,000; credit revenues $75,000

Rent expense appears on which of the following statements? a) Statement of periodic expenses b) Balance sheet c) Statement of cash flows only d) Income statement e) Statement of retained earnings

d) Income statement

Which of the following assets is not depreciated? a) Equipment b) Computers c) Buildings d) Land e) Store fixtures

d) Land

Identify the account below that is classified as an asset account: a) Common stock b) Service revenue c) Unearned revenue d) Supplies e) Accounts payable

d) Supplies

Revenues are: a) The excess of expenses over assets b) Resources owned or controlled by a company c) The costs of assets or services used d) The increase in equity from a company's sales of products and services e) The same as net income

d) The increase in equity from a company's sales of products and services

Identify the statement below that is correct. a) Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts b) Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts c) In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction d) The left side of a T-account is the debit side e) The left side of a T-account is the credit side

d) The left side of a T-account is the debit side

Identify the statement below that is incorrect a) The normal balance of the common stock account is a credit b) The normal balance of unearned revenues is a credit c) The normal balance of accounts receivable is a debit d) The normal balance of an expense account is a credit e) The normal balance of dividends is a debit

d) The normal balance of an expense account is a credit

Larry Bar opened a frame shop and completed these transactions: 1) Larry started the shop by investing $40,000 cash and equipment valued at $18,000 2) Purchased $70 of office supplies on credit 3) Paid $1,200 cash for the receptionist's salary 4) Sold a custom frame service and collected a $1,500 cash on the sale 5) Completed framing services and billed the client $200 What was the valance of the cash account after these transactions were posted? a) $41,500 b) $38,500 c) $300 d) $38,700 e) $40,300

e) $40,300

Identify the accounts that would normally have balances in the debit column of a business's trial balance. a) Assets and revenues B) Liabilities and dividends c) Revenues and expenses d) Liabilities and expenses e) Assets and expenses

e) Assets and expenses

Accounts payable appear on which of the following statements? a) Income statement b) Statement of retained earnings c) Transaction statement d) Statement of cash flows e) Balance sheet

e) Balance sheet

The right side of a T-account is a(n): a) Account balance b) Debit c) Decrease d) Increase e) Credit

e) Credit

Joel Consulting received $3,000 from a customer for services provided. Joel's general journal entry to record this transaction will be: a) Debit cash, credit accounts payable b) Debit services revenue, credit accounts receivable c) Debit accounts payable, credit services revenue d) Debit cash, credit accounts receivable e) Debit cash, credit services revenue

e) Debit cash, credit services revenue

On December 31, 2015 Carmack Company received a $215 utility bill for December that it will not pay until January 15, 2016. The adjusting entry needed on December 31 to accrue this expense is: a) Debit prepaid utilities $215; credit cash $215 b) Debit prepaid utilities $215; credit accounts payable $215 c) Debit accounts payable $215; credit utilities expense $215 d) Debit utilities expense $215; credit prepaid utilities $215 e) Debit utilities expense $215; credit accounts payable $215

e) Debit utilities expense $215; credit accounts payable $215

The process of transferring general journal entry information to the ledger is called: a) Not required unless debits do not equal credits b) Balancing an account c) Double-entry accounting d) Journalizing e) Posting

e) Posting