Summer Accounting

Which financial statement indicates if a company is PROFITABLE?

Statement of Retained Earnings

Sales Allowances are designed to encourage customers to pay early.

False

The normal/plus of a Revenue account is:

Credit

Hasbeen Company completed its inventory count. Given the facts below, what is the correct inventory value: Preliminary inventory value: $200,000 Additional Info:INCLUDED: Goods held on consignment for Falls Co: $15,000EXCLUDED: Purchased goods currently in transit (FOB Shipping point): $10,000EXCLUDED: Inventory sold currently in transit (FOB Shipping point): $12,000

$195,000

Revenues for the year totaled $90,500 and expenses totaled $44,500. Additional capital investments of $15,000 were made during the year and dividends of $5,000 were paid. Calculate NET INCOME:

$46,000

Use the following information to calculate Gross Profit: Net sales: $400,000 Cost of Goods Sold: $310,000 Operating Expenses: $60,000

90,000

A CURRENT asset is an asset that:

A company expects to convert to cash or use within one year.

Classify Truck Purchased:

Asset

Inventory is what type of account and what is its normal/plus side?

Asset, Debit

The fundamental accounting equation is:

Assets = Liabilities + Equity

Accounts Receivable appear on which financial statement:

Balance Sheet

Unearned Rent Revenue would appear on which financial statement?

Balance Sheet

Which financial statements indicates if a company is financially HEALTHY?

Balance Sheet

Which sales accounts normally have a DEBIT balance?

Both Sales Discounts & Sales Returns & Allowances.

An actual physical count of inventory is taken for which reason:

Both. To check the accuracy of inventory records. Determine the amount lost due to shoplifting, waste or employee theft.

In this class, PP&E stands for:

Property, Plant & Equipment

Who made the following quote, "We never reach a serious goal unless we have the intention of doing so."

Coach John Wooden, UCLA Retired Basketball Coach

Classify Issuance of ownership shares:

Common Stock

Which one of these statements is false about the accrual basis of accounting?

Companies record revenue only when they receive cash, and record expense only when they pay out cash.

The lower-of-cost-or-market rule for inventory is an example of the application of:

Conservatism

The left side of a T-account is called a:

Debit

The normal/plus side of an asset account is:

Debit

Which of the following entries record the purchase of office supplies on account:

Debit Office Supplies; Credit Accounts Payable

All of the following are considered a business transaction, EXCEPT:

Discussing guided trip options with a potential customer.

Returns mades to shareholders is best described by which term:

Dividends

When a BUYER purchases inventory, the correct journal entry is:

Dr Inventory; Cr Accounts Payable

Classify the Cost of Renting Property:

Expense

Cost of Goods Sold is a(n) ________________ account and has a ___________ normal/positive side of a _____________.

Expense, Debit

The cost flow method that often parallels the actual physical flow of merchandise is:

FIFO

The most widely used method of inventory costing is:

FIFO

A building was purchased for $75,000. Assuming annual depreciation of $5,000, the net book value (NBV) of the building two years later is $85,000.

False

An adjusting journal entry must include either a Debit or Credit to Cash.

False

At the end of the fiscal period, Prepaid Expenses are reported on the Income Statement as expenses:

False

Closing journal entries are required at the end of each fiscal year so that a company can reset to ZERO its revenue, expense, asset and liability accounts.

False

Freight costs for the PURCHASER is included as an expense in their Income Statement.

False

In order to minimize expenses and maximize internal controls, a company should assign the duties of collecting cash and recording cash receipts to the same employee.

False

It is acceptable under GAAP to change which inventory valuation method used (FIFO, LIFO, etc.) in order to maximize net income.

False

Sales revenue is only earned during the period cash is collected from the seller.

False

Setting up perfect internal controls prevents all errors and losses.

False

The CASH-BASIS of accounting is in accordance with GAAP.

False

The right side of the account always increases that account's balance:

False

The specific identification method of valuing inventory would be most appropriate for low cost items such as nails, paper clips, etc.

False

Under the Accrual Method of accounting, Expenses are recognized only once cash has been paid.

False

With FOB Destination, the buyer pays the shipping costs.

False

The rulebook of U.S. accounting can be found in:

GAAP

Which book of record lists business transactions in CHRONOLOGICAL order:

General Journal

Which book of record sorts transactions by account:

General Ledger

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:

Inventory

Which ratio category "Measures the income or operating success of a company for a given period of time."?

Profitability ratios

Cash is ___________. Collect __________. Pay __________.

King, Quick, Slow

In a period of INflation (rising costs), the cost flow method that results in the LOWEST income taxes is:

LIFO

Which inventory valuation method is described as "The newest goods are the first to be recognized in Cost of Goods Sold".

LIFO

Classify Notes Payable:

Liability

Unearned Ticket Revenue for a concert or sporting event is what type of account?

Liability

Which ratio category measures the "short term ability of the company to pay its maturing obligations and to meet unexpected needs for cash"?

Liquidity ratios

What type of company classifies its inventory in the following categories: Raw Materials Work in Process Finished Goods

Manufacturing

The gross profit ratio:

Measure a merchandising firm's ability to earn a profit from the sale of inventory.

The purpose of internal controls includes all of the following, except:

Minimizing the efficiency of operations.

All of the following are benefits to a Corporate structure, EXCEPT for:

Participation in daily activities as an investor.

Who made the following quote, "Hard work, dedication and perseverance won't guarantee you anything, but without them you don't stand a chance."

Pat Riley, NBA Legend

Which inventory method is considered Outdated and therefore not generally used?

Periodic

All of the following, except, are examples of physical controls to protect assets:

Prenumbered documents

Examples of PP&E include all of the following, EXCEPT:

Prepaid Rent

Which of the accounting steps in the accounting process below would be completed last?

Preparing the financial statements.

The correct order to close: Dividends Revenues Income Summary Expenses

REID

Classify Amount earned from providing service:

Revenue

Amounts earned from the sale of products or services is best described by which term:

Revenues

Net Income results when:

Revenues exceed expenses

When designing an internal control system, which term best describes "Evaluate areas of risk and the ways to best manage them."

Risk Assessment

Gross profit is calculated as:

Sales - Cost of Goods Sold

All of the following EXCEPT are guidelines to making Ethical Decisions:

Seek out advice from others.

Which of the following is NOT an element of the fraud triangle?

Segregation of duties

We will cover all of the following financial statements in Ch 1, EXCEPT for:

Statement of Cash Flows

Accumulated Depreciation is a contra-asset account whose normal balance is a CREDIT.

True

Adjusting journal entries will always one income statement account and one balance sheet account.

True

Freight charges are considered an expense if paid for by the seller.

True

In order to find how much cash is in the account, the business owner can look in the General Ledger.

True

Pre-numbered checks (top right of every check) are a helpful internal control since they ensure that every check is accounted for.

True

Requiring employees to take vacations are helpful in establishing effective internal controls.

True

The JIT (Just-in-Time) philosophy for inventory is a major contributing factor to the shortage in toilet paper during the Covid crisis in Spring 2020. Just in time (JIT) inventory is a strategy to increase efficiency and decrease waste by receiving goods only as they are needed, thereby reducing inventory costs.

True

The Securities and Exchange Commission (SEC) is an agency of the federal government that enforces GAAP and makes the rules for companies that issues stock to the public.

True

We will only cover the PERPETUAL method of inventory valuation in this class. We will NOT cover the PERIODIC method.

True

When an account receivable is collected in cash, the total assets of the business are UNCHANGED.

True

With credit terms of 2/10, n/30 the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise the full amount is due in 30 days.

True

All of the following are a principle in cash management, except:

always keep inventory high so that sales opportunities are never missed.

A multi-step income statement for a merchandising company shows each of these features, except:

an investing activities section

The debit side of an account:

is the left side of the T

There is nothing more important that the _____________ and ____________ of your people and product. Everything depends on upholding that principle. (Robert Iger, CEO Disney) image, appearance

quality, integrity

In which of the following types of accounts are increases recorded by credits?

revenues, liabilities

Fill in the missing word: "We don't have to be _____________ ... All we have to do is learn, to rise to every occasion, give our best effort and make those around us better as we do it."

superstars