ACC 200 chapters 4,5,7 review

A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $2 in cash. In recording the check:

Cash Over and Short should be debited for $4.

Which of the following is not one of the sections of a cash budget?

Cash from operations section

What are the two types of adjusting entries?

Defferals and Accruals

The gross profit rate is equal to:

net sales minus cost of goods sold, divided by net sales.

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Expense recognition principle

Accrued expenses

Expenses incurred but not yet paid in cash or recorded.

Summary of the accounting cycle

1. Analyze business transactions 2. Journalize the transactions 3. Post to ledger accounts 4. Prepare a trial balance 5. Journalize and post adjusting entries: Deferrals/Accruals 6. Prepare an adjusted trial balance 7. Prepare financial statements 8. Journalize and post closing entries 9. Prepare a post-closing trial balance

2/10, n/30

2% discount if paid within 10 days, otherwise net amount due within 30 days.

During the year ended December 31, 2014, Bjornstad Corporation had the following results: sales revenue $267,000; cost of good sold $107,000; net income $92,400; operating expenses $55,400; net cash provided by operating activities $108,950. What was the company's profit margin?

34.6 92,400/267,000

If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?

90,000

accrued revenues

An adjusting entry serves two purposes: (1) Shows the receivable that exists, and (2) Records the revenues for services performed.

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

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

adjusting entries for prepaid expense

Payment of cash, that is recorded as an asset because service or benefit will be received in the future. cash payment before expense is recorded

What happens in the cash basis accounting?

Revenues are recognized only when cash is received. Expenses are recognized only when cash is paid. Prohibited under generally accepted accounting principles (GAAP).

In the Accrual basis accounting what happens?

Transactions recorded in the periods in which the events occur. Revenues are recognized when services performed, even if cash was not received. Expenses are recognized when incurred, even if cash was not paid.

Which of the following would not be included in the definition of inventory under IFRS?

Used office equipment held for sale by the human relations department of a plastics company

perpetual inventory system

a detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory should be on hand.

The cost of goods sold is determined and recorded each time a sale occurs in:

a perpetual inventory system only

cash basis accounting

accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash

accrual basis accounting

accounting basis in which companies record, in the periods in which the events occur, transactions that change a company's financial statements, even is cash was not exchanged.

Adjusting entries can be classified as:

accruals and deferrals.

Accruals

accrued revenues and accrued expenses

In a bank reconciliation, deposits in transit are:

added to the bank balance.

The primary source used in the preparation of the financial statements is the:

adjusted trial balance

periodic inventory system

an inventory system in which a company does not maintain detailed records of goods on hand throughout the period and determines the cost of goods sold at the end of an accounting period

unearned revenue

cash received and a liability recorded before services are preformed

Raxon Company borrowed $40,000 from the bank signing a 6%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be:

debit Interest Expense, $200; credit Interest Payable, $200.

On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:

debit Rent Expense, $3,000; credit Prepaid Rent, $3,000.

Adjustments for prepaid expenses:

decrease assets and increase expenses.

Adjustments for accrued revenues:

increase assets and increase revenues.

Which of the following would not be an example of good cash management?

nvest temporary excess cash in stock of a small company.

All of the following are required steps in the accounting cycle except:

reversing entries

Which of the following would not result in unearned revenue?

Rent collected in advance from tenants.

Which statement is incorrect concerning the adjusted trial balance?

The adjusted trial balance does not list temporary accounts

Which statement is incorrect concerning the adjusted trial balance?

The adjusted trial balance does not list temporary accounts.

Mary Richardo, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will she make upon receipt of the payments?

Debit Cash and credit Accounts Receivable

The control features of a bank account do not include:

aving bank auditors verify the correctness of the bank balance per books

The multiple-step income statement for a merchandiser shows each of the following features except:

investing activities section

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

inventory

To record the sale of goods for cash in a perpetual inventory system:

two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

What is the periodicity assumption

The economic life of a business can be divided into artificial time periods.

quality of earnings ratio

a measure used to indicate the extent of which a company's earnings provide a full and transparent depiction of its performance; computed as net cash provided by operating activities divided by net income

Which of the following items in a cash drawer at November 30 is not cash?

A customer check dated December 1.

Unearned revenue is classified as a(n):

liability.

Which of the following would not be a line item of a company reporting costs by nature?

manufacturing expense

Expense recognition principle

match expenses with revenues in the period when the company makes efforts to generate those revenues

Defferals

prepaid expenses and unearned revenues

Bufford Corporation had reported the following amounts at December 31, 2014: sales revenue $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchase discounts $3,000; purchase returns and allowances $1,100; freight-in $600; freight-out $900. Calculate the cost of goods available for sale.

$74,100. 17,200+(60,400-3,000-1,100+600)

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

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

Prepaid expenses

: Expenses paid in cash and recorded as assets before they are used or consumed.

Accrued revenues

: Revenues for services performed but not yet received in cash or recorded.

Unearned revenues

Adjusting entry to record the revenue that has been earned and to show the liability that remains. Adjusting entry results in a decrease (a debit) to a liability account and an increase (a credit) to a revenue account.

Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?

All of these control activities are relevant to a computerized system.

adjusted trial balance

After all adjusting entries are journalized and posted the company prepares another trial balance from the ledger accounts The adjusted trial balance's purpose is to prove the equality of debit balances and credit balances in the ledger. The adjusted trial balance is the primary basis for the preparation of the financial statements.

Which of the following would affect the gross profit rate? (Assume sales remains constant.)

An increase in cost of goods sold.

Which statement correctly describes the reporting of cash?

Cash is listed first in the current assets section.

Unearned Revenues

Cash received before service are performed.

Which of the following statements about a periodic inventory system is true

Companies determine cost of goods sold only at the end of the accounting period.

Which of the following was not a result of the Sarbanes-Oxley Act?

Companies must file financial statements with the Internal Revenue Service.

prepaid expenses

Costs that expire either with the passage of time or through use. Adjusting entry results in an increase (a debit) to an expense account and a decrease (a credit) to an asset account.

adjusting entries for accrued expenses

Expenses incurred but not yet paid in cash or recorded. expense recorded before cash payment Increases (debits) an expense account and Increases (credits) a liability account.

adjusting entries for accrued revenue

Revenues for services performed but not yet received in cash or recorded. revenue recorded before cash receipt

Which of the following items does not result in an adjustment in the Inventory account under a perpetual system?

Payment of freight costs for goods shipped to a customer.

Which types of accounts will appear in the post-closing trial balance?

Permanent accounts

adjusting entries for unearned revenue

Receipt of cash recorded as a liability before services are performed cash receipt before revenue recorded

Colleen Mooney earned a salary of $400 for the last week of September. She will be paid on October 1. The adjusting entry for Colleen's employer at September 30 is:

Salaries and Wages Expense 400 Salaries and Wages Payable 400

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

Segregation of duties.

Which account will have a zero balance after a company has journalized and posted closing entries?

Service Revenue

Which of the following would not result in unearned revenue?

Services performed on account.

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause:

an understatement of expenses and an understatement of liabilities.

permanent accounts

balance sheet accounts whose balances are carried forward to the next accounting period.

profit margin

measure the percentage of each dollar sales that results in net income, computed by dividing net income by net sales

Profit margin ratio

measures the extent by which selling price covers all expenses (including cost of goods sold).

Gross profit rate

measures the margin by which selling price exceeds cost of goods sold.

Adjustments for unearned revenues:

decrease liabilities and increase revenues.

The use of prenumbered checks in disbursing cash is an application of the principle of:

documentation procedures.

What do adjusting entries include?

ensure that the revenue recognition and expense recognition principles are followed. are required every time a company prepares financial statements. includes one income statement account and one balance sheet account. never include cash.

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

establishment of responsibility.

Adjusting entries are made to ensure that:

expense are recognized in the period in which they are incurred. revenues are recorded in the period in which the performance obligation is satisfied. balance sheet and income statement accounts have correct balances at the end of an accounting period. all of these answer choices are correct.-------

Adjusting entries are made to ensure that:

expense are recognized in the period in which they are incurred. revenues are recorded in the period in which the performance obligation is satisfied. balance sheet and income statement accounts have correct balances at the end of an accounting period. *all of these answer choices are correct.

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

expense recognition principle

If a company fails to make an adjusting entry to record supplies expense, then:

expense will be understated.

Adjusting entries are made to ensure that:

expenses are recognized in the period in which they are incurred. b. revenues are recognized in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d. All of the above. answer is all of the above

The principles of internal control do not include:

financial performance measures.

Physical controls do not include

independent bank reconciliations.

quality of earnings

indicates the level of full and transparent information that a company provides to users of its financial statements

total cost of goods sold

is the total cost of merchandise sold during the period.

Which types of accounts will appear in the post-closing trial balance?

permanent accounts

When goods are purchased for resale by a company using a periodic inventory system:

purchases on account are debited to Purchases.

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

revenues to be understated.

temporary accounts

revenues, expenses, and dividend accounts whose balances a company transfers to retained earnings at the end of an accounting period.

Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to:

safeguard its assets.

(LO 3) Which sales accounts normally have a debit balance?

sales discounts, sales allowances, and sales returns

Gross profit will result if:

sales revenues are greater than cost of goods sold.

Which account will have a zero balance after a company has journalized and posted closing entries?

service revenue

A quality of earnings ratio:

that is less than 1 indicates that a company might be using aggressive accounting tactics.

book value

the difference between the cost of a depreciable asset and its related accumulated depreciation.

earnings management

the planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income

earnings management

the planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income. Companies may manage earnings by: one-time items to prop up earnings numbers. inflate revenue numbers in the short-run. improper adjusting entries.

revenue recognition principle

the principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied

expense recognition principle

the principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues

depreciation

the process of allocating the cost of asset to expense over its useful life.

Each of the following is a major type (or category) of adjusting entry except:

unearned expenses

Each of the following is a major type (or category) of adjusting entry except:

unearned expenses.

If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit:

unearned rent revenue.

Which of the following would not be a line item of a company reporting costs by function?

utilities expense