Management 200 Exam 1 iClicker

1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. What was the total amount of ATI's liabilities following these six transactions? A. $12,300. B. $27,300. C. $22,600. D. $15,500.

A. $12,300 2. Purchased land for $12,000, signing a note payable for the full amount 5. Purchased $300 of office supplies on account

A business provides a service to a customer. The customer will pay the business next month. assets = liabilities + common stock + retained earnings A. ( + ) = ( ) + ( ) + ( + ) B. ( + ) = ( ) + ( ) + ( ‐ ) C. ( + ) = ( + ) + ( ) + ( ) D. ( +,‐ ) = ( ) + ( ) + ( )

A. ( + ) = ( ) + ( ) + ( + )

The concept of matching in accounting refers to: A. All costs that are used to generate revenue are recorded in the period the revenue is recognized. B. All transactions are recorded at the exchange price. C. The business is separate from its owners. D. The business will continue to operate indefinitely unless there is evidence to the contrary.

A. All costs that are used to generate revenue are recorded in the period the revenue is recognized.

When cash payments are made to stockholders, what is the effect on the company's accounts? A. Cash decreases and dividends increase. B. Cash increases and dividends decrease. C. Cash decreases and common stock decreases. D. Cash increases and common stock increases.

A. Cash decreases and dividends increase.

Prepayments occur when: A. Cash payment (or an obligation to pay cash) occurs before the expense recognition. B. Sales are delayed pending credit approval. C. Customers are unable to pay the full amount due when goods are delivered. D. Cash payment occurs after the expense is incurred and liability is recorded.

A. Cash payment (or an obligation to pay cash) occurs before the expense recognition.

A company received a bill for newspaper advertising services, $400. The bill will be paid in 10 days. How would the transaction be recorded today? A. Debit Advertising Expense $400, credit Accounts Payable $400. B. Debit Accounts Payable $400, credit Advertising Expense $400. C. Debit Accounts Payable $400, credit Cash $400. D. Debit Advertising Expense $400, credit Cash $400.

A. Debit Advertising Expense $400, credit Accounts Payable $400.

The independent, private‐sector group that is primarily responsible for setting financial reporting standards in the United States is the: A. FASB. B. IASB. C. SEC. D. IRS.

A. FASB.

Which of the following is not possible when recording a transaction? A. Liabilities increase and assets decrease. B. Stockholders' equity increases and assets increase. C. One asset increases and another asset decreases. D. Stockholders' equity decreases and assets decrease.

A. Liabilities increase and assets decrease.

Which of the accounts are decreased on the debit side and increased on the credit side? A. Liabilities, stockholders' equity, and revenues B. Dividends, liabilities, and assets C. Expenses, dividends, and stockholders' equity D. Assets, dividends, and expenses

A. Liabilities, stockholders' equity, and revenues

Knomark, Inc. sold $500 of shoe polish to a customer on account on January 1. On January 11 Knomark collected the cash from that customer. What is the impact on Knomark's accounting equation from the collection of cash? A. No net effect to the accounting equation. B. Decrease assets and increase liabilities. C. Increase assets and increase liabilities. D. Decrease assets and decrease liabilities.

A. No net effect to the accounting equation

A customer purchased a drill press on November 14 on account from Sears. The drill press was delivered two weeks later (November 28). The customer paid for the drill press on December 5. When should Sears record the revenue for this transaction according to the revenue recognition principle? A. November B. December C. Evenly in each of the two months D. One‐third in November and two‐thirds in December

A. November - Record on Delivery Date

Of the following, the most important objective for financial accounting is to provide information useful for: A. Predicting cash flows. B. Determining taxable income. C. Providing accountability. D. Increasing future profi

A. Predicting Cash Flows

When a company pays employees' salaries for the current period, how will the basic accounting equation be affected? A. Stockholders' equity decreases. B. Revenues decrease. C. Expenses decrease. D. Liabilities decrease.

A. Stockholders' equity decreases

Which of the following would be recorded as an expense under cash‐basis accounting? A. The company purchases office supplies with cash and does not use the supplies. B. The company uses utilities in the current period but does not pay cash. C. The company provides services to customers for cash. D. The company purchases equipment by borrowing from the bank.

A. The company purchases office supplies with cash and does not use the supplies

If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A. The company's assets exceed liabilities by $60,000. B. The company has issued $60,000 of common stock. C. Net income for the year equals $60,000. D. Total revenues during the year equal $60,000

A. The company's assets exceed liabilities by $60,000.

The primary difference between accrual‐basis and cash‐basis accounting is: A. The timing of when revenues and expenses are recorded. B. Cash‐basis accounting is allowed for financial reporting purposes but not accrual‐basis accounting. C. Accrual‐basis accounting violates both the revenue recognition and matching principles. D. Adjusting entries are only a necessary part of cash‐basis accounting.

A. The timing of when revenues and expenses are recorded.

1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries How many of these transactions decreased ATI's total assets? A. one B. two C. three D. four

A. one 6. Paid employees $10,000 for their first month's salaries

Accounting Equation

Assets = Liabilities + Stockholders Equity Stockholders Equity = Common Stock + Retained Earnings Retained Earnings = Revenues - Expenses - Dividends

LePage's has an ending Retained Earnings balance of $51,100. If during the year LePage's paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? A. $24,300 B. $32,900 C. $300 D. $69,300

B. $32,900 (Beginning Balance = Ending Balance - Net Income + Dividends)

Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000 A. $6,000. B. $8,000. C. $4,000. D. $14,000

B. $8,000

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the: A. Trial balance B. Accounting cycle C. Chart of accounts D. General ledger

B. Accounting Cycle

When a payment is made on an account payable A. Assets and stockholders' equity decrease. B. Assets and liabilities decrease. C. Liabilities and revenues decrease. D. Assets and expenses decrease.

B. Assets and Liabilities decrease.

Which financial statement best reveals to investors and creditors information about a company's debt? A. Income statement B. Balance sheet C. Statement of cash flows D. Statement of stockholders' equity

B. Balance sheet

Which of the following is equivalent to the book value of an asset? A. Cost of the asset plus the accumulated depreciation B. Cost of the asset less the accumulated depreciation C. The estimate of time that the asset will last D. Cost of the asset divided by its life

B. Cost of the asset less the accumulated depreciation

Revenues normally carry a _______ balance and are shown in the ______________. A. Debit; Statement of stockholders' equity B. Credit; Income statement C. Credit; Balance sheet D. Debit; Balance sheet

B. Credit; Income statement

Sparkle, Inc. performed cleaning services for its customers for cash. These transactions would be recorded as: A. Debit Service Revenue, credit Cash. B. Debit Cash, credit Service Revenue. C. Debit Cash, credit Accounts Receivable. D. Debit Accounts Receivable, credit Service Revenue.

B. Debit Cash, credit Service Revenue

Which of the following is not a possible journal entry? A. Credit assets; Debit expenses. B. Debit assets; Debit stockholders' equity. C. Credit revenues; Debit assets. D. Debit expenses; Credit liabilities

B. Debit assets; Debit stockholders' equity

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. In which month should the company record salaries expense? A. November. B. December. C. January. D. Evenly over the three months.

B. December (when services are provided)

I. Total debits should equal total credits. II. It is possible to have multiple debits or credits in one journal entry. III. Assets are always listed first in journal entries. IV. Some journal entries will have debits only Which are true? A. I only. B. I and II. C. I, II, and IV. D. II, III, and IV.

B. I and II.

Net income (loss) appears in which two financial statements? A. Balance sheet and income statement. B. Income statement and statement of stockholders' equity. C. Statement of stockholders' equity and balance sheet. D. Net income appears in only one financial statement.

B. Income statement and statement of stockholders' equity.

Financing activities include: A. The purchase of a building. B. Issuing common stock to stockholders. C. Transactions with company employees. D. Selling goods or services to customers.

B. Issuing common stock to stockholders.

A company orders office supplies in June. Those supplies are received and used in July. The supplies are paid for in August. In which month should the company record supplies expense? A. June. B. July. C. August. D. Evenly over the three months.

B. July (Record when used)

The trial balance represents the: A. Source documents used to determine the effects of transactions on the company's accounts B. List of all accounts and their balances at a particular date to ensure that debits equal credits C. Chronological record of all transactions affecting the company D. Process of transferring debit and credit information from the journal to the accounts in the general ledger

B. List of all accounts and their balances at a particular date to ensure that debits equal credits

The assumption that the life of the business can be divided into time intervals for reporting purposes is the: A. Monetary unit assumption. B. Periodicity assumption. C. Economic entity assumption. D. Going concern assumption.

B. Periodicity assumption

Investing cash flows in the statement of cash flows would include which of the following? A. Paying salaries for the month. B. Purchase of land. C. Paying dividends to stockholders. D. Selling goods or services to customers.

B. Purchase of Land

Which of the following would increase assets and increase liabilities? A. Provide services to customers on account. B. Purchase office supplies on account. C. Pay dividends to stockholders D. Receive a utility bill but do not pay it immediately

B. Purchase office supplies on account.

The amounts recorded when the company sells products or provides services to customers are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses

B. Revenues

Which of the following best describes revenue? A. Resources of a company. B. Sales of goods and services to a customer. C. Cash received from a customer. D. Dividends paid to stockholders.

B. Sales of goods and services to a customer.

Which of the following would be recorded as an expense under accrual‐basis accounting? A. The company purchases office supplies with cash and does not use the supplies. B. The company uses utilities in the current period but does not pay cash. C. The company provides services to customers for cash. D. The company purchases equipment by borrowing from the bank.

B. The company uses utilities in the current period but does not pay cash

Transfer of ownership will not affect the continuity of a A. corporation of partnership B. corporation C. partnership D. sole proprietorship

B. corporation

The accounting equation is in balance if there is a (an) A. increase in liabilities and an increase in equity B. decrease in assets and an decrease in liabilities C. decrease in assets and an increase in equity D. decrease in equity and an increase in assets

B. decrease in assets and an decrease in liabilities

The Accounts Receivable account has a beginning balance of $10,000 and the company provides services of $50,000 on account during the month. The ending balance was $12,000. How much did the company receive from customers during the month? A. $50,000 B. $52,000 C. $48,000 D. $62,000

C. $48,000

Which of the following accounts represents a resource of the company? A. Common stock. B. Service revenue. C. Accounts receivable. D. Salaries expense.

C. Accounts receivable

The accounting basis that records revenues when goods or services are provided to customers and expenses with related revenues is referred to as: A. Cash‐basis. B. Matching‐basis. C. Accrual‐basis D. Reporting‐basis

C. Accrual - Basis

Adjusting entries: A. Often include the Cash account. B. Usually are recorded at the beginning of the accounting period. C. Always involve at least one income statement account and one balance sheet account. D. Adjust the balance of revenue and expense accounts to zero.

C. Always involve at least one income statement account and one balance sheet account

American Airlines collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should American Airlines have recognized this revenue? A. January. B. February. C. April. D. Evenly in each of the three months.

C. April. (Record Revenue when services are performed)

Xenon Corporation borrows $75,000 from First Bank. Xenon Corporation records this transaction with a: A. Debit to Investments. B. Credit to Retained Earnings. C. Credit to Notes Payable. D. Credit to Interest Expense.

C. Credit to Notes Payable

Liabilities normally carry a _______ balance and are shown in the ______________. A. Debit; Statement of stockholders' equity B. Debit; Income statement C. Credit; Balance sheet D. Debit; Balance sheet

C. Credit; Balance sheet

Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are: A. Debit Rent Expense, credit Cash. B. Debit Prepaid Rent, credit Rent Expense. C. Debit Prepaid Rent, credit Cash. D. Debit Cash, credit Prepaid Rent

C. Debit Prepaid Rent, credit Cash.

An increase to an asset account is shown with a ______________. An increase to a liability account is shown with a ______________. A. Debit; Debit B. Credit; Debit C. Debit; Credit D. Credit; Credit

C. Debit; Credit

Which statement best describes when expenses should be recorded? A. Expenses are recorded when paid. B. Expenses are recorded the day a company promises to pay. C. Expenses are recorded when the cost is used to help produce revenue. D. None of the above

C. Expenses are recorded when the cost is used to help produce revenue.

Fundamental qualitative characteristics of accounting information are: A. Relevance and comparability. B. Comparability and consistency C. Faithful representation and relevance. D. Faithful representation and consistency

C. Faithful representation and relevance

The major underlying assumptions of accounting include all of the following except: A. Economic entity. B. Monetary unit. C. Legal liability. D. Going concern.

C. Legal liability

Which of the following best represents value created for stockholders during the current period? A. Retained earnings B. Total assets. C. Net income. D. Stockholders' equity.

C. Net Income

Which of the following transactions would cause a decrease in both assets and stockholders' equity? A. Paying insurance premium for the next two years B. Purchasing office equipment on account C. Paying advertising for the current month D. Providing installation services to customers

C. Paying advertising for the current month

Which statement below best describes the accounting equation? A. The change in retained earnings equals net income less dividends. B. Equality of revenue and expense transactions over time. C. Resources of the company equal creditors' and owners' claims to those resources. D. Financing activities equal investing and operating activities.

C. Resources of the company equal creditors' and owners' claims to those resources.

Consider the following list of accounts: Cash - Retained Earnings - Service Revenue - Utilities Expense -Salaries Expense - Accounts Receivable - Accounts Payable - Common Stock - Equipment - Dividends How many of these accounts have a normal debit balance? A. four B. five C. six D. seven

C. Six Cash Utilities Expense Salaries Expense Accounts Receivable Equipment Dividends

Liabilities can be best described as: A. The amount of expenses over the past year. B. The amount expected to be distributed to stockholders. C. The amount owed to creditors. D. The amount of services provided to customers during the year.

C. The amount owed to creditors.

A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true? A. The company records service revenue on October 15. B. The company records cash collection on November 20. C. The company records deferred revenue on October 15. (liability) D. The company records nothing on October 15.

C. The company records deferred revenue on October15. (liability)

How many of the following transactions are operating activities? • Borrowed $50,000 from the bank • Purchased $12,000 in supplies • Provide services to customers for $27,000 • Paid the utility bill of $750 • Purchased a delivery truck for $12,000 • Received $25,000 from issuing common stock A. One. B. Two C. Three D. Four

C. Three

External events include all of the following except: A. Paying rent. B. Purchasing equipment. C. Using office supplies. D. Collecting an account receivable

C. Using office supplies

What is the best definition of an accounts receivable? A. an amount owed by the company to others. B. owners' investment in the business. C. amounts owed by customers to a company D. none of the above

C. amounts owed by customers to a company

The accounting equation is in balance if there is a (an) A. increase in liabilities and an increase in equity B. decrease in assets and an increase in liabilities C. increase in assets and an increase in equity D. decrease in equity and an increase in assets

C. increase in assets and an increase in equity

Most business enterprises in the United States are A. government units. B. partnerships C. sole proprietorship. D. corporations.

C. sole proprietorship

In what order are the following financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity? A. 1, 2, 3. B. 3, 2, 1 C. 1, 3, 2 D. 2, 3, 1

D. 2, 3, 1

Which one of the following best describes the characteristics of adjusting entries? A. Adjusting entries reduce the balance of revenue, expense, and dividend accounts to zero. B. Adjusting entries allow for the proper recognition of cash flows. C. Adjusting entries allow for the proper recognition of investments from and distributions to stockholders. D. Adjusting entries allow for the proper recognition of revenue and expenses.

D. Adjusting entries allow for the proper recognition of revenue and expenses

Investments by stockholders have what effect on the accounting equation? A. Assets increase and liabilities increase. B. Expenses increase and liabilities increase. C. Assets increase and revenues increase. D. Assets increase and stockholders' equity increases.

D. Assets increase and stockholders equity increases

An alternative form of the accounting equation is: A. Net Income = Revenues ‐ Expenses. B. Stockholders' Equity = Assets + Liabilities. C. Assets = Liabilities ‐ Stockholders' Equity. D. Assets ‐ Liabilities = Stockholders' Equity

D. Assets ‐ Liabilities = Stockholders' Equity

Which of the following items would not appear in an income statement? A. Salaries expense B. Advertising expense C. Service revenue D. Cash

D. Cash

Which of the following accounts would normally have a debit balance? A. Accounts Payable, Service Revenue, Common Stock. B. Salaries Payable, Deferred Revenue, Utilities Expense. C. Income Tax Payable, Service Revenue, Dividends. D. Cash, Delivery expense, Dividends.

D. Cash, Delivery expense, dividends

A $5,200 amount on the debit side of a t - chart could represent which of the following? A. Purchase of supplies on account B. Ending balance of cash C. Payment for salaries D. Collection from customers

D. Collection from customers.

Which one of the following accounts will have a credit balance? A. Dividends B. Salary Expense C. Supplies D. Common Stock

D. Common Stock

Knomark, Inc. purchased equipment by signing a note payable. This transaction would be recorded as: A. Debit Equipment, credit Cash. B. Debit Cash, credit Notes Payable. C. Debit Notes Payable, credit Equipment. D. Debit Equipment, credit Notes Payable.

D. Debit Equipment, credit Notes Payable.

Providing services on account would be recorded with a: A. Debit to Service Revenue. B. Credit to Accounts Receivable. C. Credit to Accounts Payable. D. Debit to Accounts Receivable.

D. Debit to Accounts Receivable.

The costs associated with producing revenues are referred to as: A. Dividends. B. Assets. C. Liabilities. D. Expenses.

D. Expenses

Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity? A. Investing B. Organizing C. Operating D. Financing

D. Financing

The assumption that a business will continue to operate into the future is the: A. Monetary unit assumption. B. Periodicity assumption. C. Economic entity assumption. D. Going concern assumption.

D. Going concern assumption

The financial statement(s) that record activity over an interval of time include the A. Income statement B. Balance sheet C. Balance sheet and income statement D. Income statement and statement of cash flows.

D. Income statement and statement of cash flows.

Which of the following is an operating activity? A. Issuing common stock. B. Paying dividends. C. Borrowing cash from a bank to acquire a factory. D. Paying electricity bills for the month.

D. Paying electricity bills for the month.

Those who lend money or deliver goods and services before being paid are called A. investors B. debtors C. underwriters D. creditors

D. creditors

T/F - A debit to an account balance always results in the balance increasing.

False

T/F - Amalgamated Company begins the year with $1,000 in supplies, purchases an additional $5,500 of supplies during the year, and ends the year with $700 in supplies. The year‐end adjusting entry includes Supplies Expense of $7,200.

False

T/F - Dividends are considered an expense in running the business and reported in the income statement.

False

T/F - If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000.

False

T/F - Selling common stock for cash is recorded with a debit to common stock.

False

T/F - The accounting equation will not be in balance when a business transaction increases and decreases assets in the same amount?

False

T/F - The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time.

False

T/F - The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision‐making purposes.

False (Primarily External)

T/F - J&L provides services to a customer on June 17, but the customer does not pay for the services until August 12. According to the revenue recognition principle, J&L should record the revenue on August 12.

False - Record Revenue when services are performed on June 17

T/F - The process of transferring the debit and credit information from the journal to individual accounts in the general ledger is called journalizing.

False - it is called posting

T/F - A corporation is an entity that is legally separate from its owners.

True

T/F - Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers

True

T/F - After posting transactions to the general ledger accounts, the sum of the accounts with debit balances should equal the sum of the accounts with credit balances.

True

T/F - Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings.

True

T/F - Because cash‐basis accounting violates both the revenue recognition principle and the matching principle, it is generally not accepted in preparing financial statements.

True

T/F - Dividends represent a return of the company's profits to its owners, the stockholders.

True

T/F - If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000.

True

T/F - Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation.

True

T/F - The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

True

T/F - The difference between revenues and expenses is referred to as net income or net loss.

True