Exam 1 Practice

Which of the following correctly describes the closing entry process?

The closing process creates a zero balance in all temporary accounts at the end of each period.

A company's retained earnings increased $385,000 last year and its assets increased $983,000. The company declared a $78,000 cash dividend during the year. What was last year's net income?

The net increase in retained earnings of $385,000 would have included the deduction for the dividend of $78,000 so adding these two numbers would equal the amount of net income which is $463,000 net income.

Which of the following describes the primary objective of financial accounting?

To provide useful financial information about a business to help external parties make informed decisions.

Which of the following journal entries is correct when a company has incurred an expense for work performed but has not yet paid for theses wages to employees?

Wages Expense XXXX | Wages Payable | XXXX

Assume Idaho Company recorded the following adjusting journal entry at year-end: Insurance expense $3,600 | Prepaid insurance | $3,600 If the beginning balance in prepaid insurance was $600, and $5,000 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?

$2,000

On January 1, 2019, the general ledger of Global Corporation included supplies of $1,600. During 2019, supplies purchased amounted to $6,200. A physical count of inventory on hand at December 31, 2019 determined that the amount of supplies on hand was $1,800. How much is the supplies expense for year 2019?

$6,000

During the current fiscal year, a company had revenues of $380,000, cost of goods sold of $235,000, and an income tax rate of 36 percent on income before income taxes. What was the company's current year net income?

$92,800

A company's January 1, 2019 balance sheet reported total assets of $128,000 and total liabilities of $32,000. During January 2019, the following transactions occurred: (A) the company issued stock and collected cash totaling $38,000; (B) the company paid an account payable of $6,800; (C) the company purchased supplies for $1,800 with cash; (D) the company purchased land for $52,000, paying $18,000 with cash and signing a note payable for the balance. What is total stockholders' equity after the transactions above?

*Start with Assets - Liabilities = Stockholder's Equity (128,000 - 32,000 = 96,000) *Only Transaction A effects Stockholder's Equity (96,000 + 38,000 = 134,000) Answer: $134,000

Atlantic Corporation reported the following amounts at the end of the first year of operations: Common stock $220,000 Sales revenue $890,000 Total assets $690,000 Dividends declared $60,000 Total liabilities $420,000 What are the retained earnings of Atlantic at the end of the year, and what amount of expenses were incurred during the year?

?

Centex, Inc. issued 54,000 shares of its $1 par value common stock for $20 per share. The journal entry to record the stock issue would include which of the following?

A credit to common stock for $54,000.

Cadet Company paid an accounts payable of $2,700. This transaction should be recorded on the payment date as follows:

Accounts Payable 2,700 | Cash | 2,700

*Fill in the blanks for the accounting equation

Assets = Liabilities + Stockholder's Equity Just find assets & liabilities & then do the math to check equity

*Complete an Income Statement

Revenues, Expenses, Pretax Income, Net Income (for year ended)

Which of the following is represented by elements of the statement of stockholders' equity? A. Common stock reinvested in the business. B. Revenues plus dividends and expenses. C. Earnings not distributed to owners. D. Financing from creditors and stockholders.

C. Earnings not distributed to owners.

*Prepare an unadjusted trial balance

Current Assets - Long Term Assets Current Liabilities - Long Term Liabilities Stockholder's Equity - Retained Earnings Revenue - COGS Operating Expenses - random income/expenses

Which of the following describes the impact on the balance sheet of paying a current liability using cash?

Current assets will decrease.

Which of the following statements is false? A. Absent evidence to the contrary, a company is expected to continue operating for the foreseeable future. B. An item is considered relevant if it has the ability to influence a decision. C. Information is considered to be faithfully represented when it is complete, neutral, and free from error. D. Accounting information should be reported in the national monetary unit with adjustment for inflation.

D. Accounting information should be reported in the national monetary unit with adjustment for inflation.

Which of the following is considered to be an expense on the income statement? A. accounts payable B. notes payable C. wages payable D. cost of goods sold

D. cost of goods sold

Which of the following statements regarding earnings per share is not correct?

Earnings per share does not have to be disclosed on the income statement or the notes to the financial statements.

The primary difference between revenues and gains is:

Gains are increases in net assets from periodically selling assets (other than inventory), while revenues are increases from major or central ongoing operations of a business.

Which of the following expenses does not affect the reporting of operating income?

Income tax expense.

Which of the following best describes the balance sheet?

It provides information pertaining to a company's economic resources and the sources of financing for those resources.

Which of the following properly describes the impact on the financial statements when a company borrows $40,000 from a local bank?

Liabilities increase $40,000.

Which of the following account balances would be closed at year-end by crediting the account?

Loss on sale of building.

What is the effect on the financial statements when a company fails to adjust the prepaid insurance expense account at year-end for insurance coverage that has been used?

Net income is overstated and assets are overstated.

Dama June Pizza Company sold land costing $35,000 for $50,000 cash. Which of the following statements concerning the land sale is correct?

Operating Income increased $15,000

Lant Company has provided the following information: • Cash sales totaled $320,000. • Credit sales totaled $492,000. • Cash collections from customers for services yet to be provided totaled $92,000. • A $28,000 loss from the sale of property and equipment occurred. • Interest income was $9,000. • Interest expense was $19,200. • Supplies expense was $390,000. • Rent expense for the store was $31,000. • Wages expense was $52,000. • Other operating expenses totaled $82,000. • Unearned revenue was $4,300. What is the amount of Lant's income from operations (operating income)?

Operating Revenues = Cash Sales + Credit Sales (320,000 + 492,000 = 812,0000) Operating Expenses = Loss of Sale of Property & Equipment + Supplies Expense + Rent Expense + Wages Expense + Other Expenses (28,000 + 390,000 + 31,000 + 52,000 + 82,000 = 583,000) Operating Income = Operating Revenues - Operating Expenses (812,000 - 583,300 = 228,700) Answer: $229,000

Trend Decorations Company provides decorating services for store displays. Trend sold equipment that it had been using to create decorations. Of the following choices, which will Trend report on its income statement when it sells the equipment?

Operating expenses: Loss on disposal of equipment

On December 31, 2019, Aver Corporation paid $13,000 for next year's insurance policy. This transaction should be recorded as

Prepaid Insurance 13,000 | Cash | 13,000

On October 1, 2019, Adams Company paid $5,160 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2019, which of the following account balances are correct after adjusting entries have been made?

Prepaid insurance $4,515, and Insurance expense $645.

Assets, liabilities, and stockholders' equity are all found within which of the following financial statements?

balance sheet

*Complete an unadjusted classified income statement

piano problem example: it was just operating revenues - operating expenses the piano problem needed operating income/loss (for amount of time ended)

Prepare journal entries

print transaction analysis picture