ACC Final Exam

Natural resources can be replaced or restored only by an act of nature

T

You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have to much debt. Which financial statement would provide you information needed in order to evaluate your concern?

Balance sheet

Payment is made for machinery purchases previously made on credit. What effect does this transaction have on the accounting equation?

Assets and liabilities decrease

Dividends are declared and paid to the company's stockholders. What effect does this transaction have on the company's accounting equation?

Assets and retained earnings decrease

A novelties company makes cash sales to customers. What effect does this transaction have on the accounting equation?

Assets and retained earnings increase

Which of the following statements is true concerning assets?

Assets are initial recorded using the historical cost principle

In which form of organization are the owners' legal responsibility for the debt of the business limited to the amount they invested in the business?

Corporation

A manufacturing company purchased equipment on January 1, 2004 for $450,000. As of January 1, 2013, depreciation of $202,500 had been recorded on this asset. Depreciation expense for 2013 is $22,500. After the adjustments are recorded and posted at December 31, 2013, what are the balances for the Equipment and Accumulated Depreciation?

Equipment: $450,000 Accumulated Depreciation: $225,000

Which of the following invests funds into a business and is considered an owner?

Stockholder

Canterbury Cycles sells Harleys and pays each salesperson a commission of $800 for each cycle sold. During the month of December, a salesperson sold 3 cycles. The company pays commissions on the 5th day of the month following the sale. Which of the following statements is true?

The company will recognize commission expense in the amount of $2400 in December

When should a shipping company recognize revenue from its delivery service?

on the date the customer's packages are delivered

While preparing the April 30th bank reconciliation, the accountant identified the following items: Company's balance according to the general ledger $15,000 Outstanding checks $2,500 Bank service charge $15 A customer's NSF check returned by the bank $100 What is the company's adjusted cash balance at April 30th?

$14,885

Data for A&B Foods for year that ended Dec. 31, 2012: Sales (100% on credit) $2,100,000 Sales returns $150,000 Accounts Receivable (Dec. 31, 12) $420,000 Allowance for Doubtful Accounts (Before adjustment on Dec 31) $25,000 Estimated amount of uncollected accounts based on aging analysis $75,000 If the company uses the aging of accounts receivable method to estimate its bad debts, what amount will be reported as bad debt expense for 2012?

$50,000

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720

Businesses engage in which of the following three main activity categories?

Financing, investing, operating

Which of the following items would not be a reconciling item on a bank reconciliation?

canceled checks

What is the name for a person who lends funds to a business entity and expects repayment with interest?

Creditor

All intangible assets are subject to amortization (T/F)

F

The Securities Exchange Commission (SEC) is concerned with

Setting accounting rules for publicly-traded companies in the United States

Expenses should be matched against revenue

after payment has been made for any costs related to the revenue

According to the Sabrades-Oxley Act of 2002, who is primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting?

management of a company

Which allowance method approach is considered to be an income statement approach to estimating bad debts?

the percentage of net credit sales approach

Beginning accounts receivable were $200,000 and ending accounts receivable were $300,000. Assuming cash collections totaled $1,100,000, what were credit sales?

$1,200,000

Depreciation has an effect on the company's income taxes (T/F)

T

Assets become expenses when?

Their economic benefits expire

Carothers Cleaning Service received advance payments from customers during 2013 of $24,000. At December 31, 2013, $5,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2013, the balances in the Unearned Service Revenue and Service Revenue accounts will be

Unearned Service Rev: $5000 Service Rev: $19,000

Revenues are best described as

Increases in assets resulting from the sale of products of ervices

What is unearned revenue?

Liability

A check returned by a bank because the issuer's cash account balance could not cover the check is called a(an)

NSF check

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance?

bank service charges

Which of the following is an internal user of financial information?

company management

The time-period assumption is necessary because

external users of financial statements want accurately reported net income for a specific time period

(Dance Town Academy) The items listed below were identified while preparing a bank reconciliation for the company's checking account as of March 31, 2013 Cash balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks $2700 Customer's bounced check $350 Bank service charges $100 Deposits in transit $1000 Interest earned on the checking account $60 Refer to Dance Town Academy. How will the customer's bounced checks be handled on a bank reconciliation?

subtract from the balance of the company record

Cambridge Cleaners started business on January 1, 2013, and immediately purchased $5,000 of supplies to use in the business. At the end for ehe month 30 percent of the supplies remains unpaid and 20% are still on hand. What amounts should appear as an expense on the financial statements for January, 2013?

Income statement: 4,000 Statement of cash flows: $3,500

What does the phrase, "Revenue is recognized when earned" mean?

Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures (T/F)

T

Which of the following best describes the term "expenses"?

The cost of assets used in the operations of a business.

Data for A&B Foods for year that ended Dec. 31, 2012: Sales (100% on credit) $2,100,000 Sales returns $150,000 Accounts Receivable (Dec. 31, 12) $420,000 Allowance for Doubtful Accounts (Before adjustment on Dec 31) $25,000 Estimated amount of uncollected accounts based on aging analysis $75,000 If the company estimates its bad debts at 4% of net credit sales, what amount will be reported as bad debt expense for 2012?

$78,000

In order for accounting information to be useful in making informed decisions, it must be

Both relevant and reliable

Which financial statement would to analyze to assess a firm's operating performance for the past year?

Income statement

A tax service prepared tax returns for twenty clients at $200 each. By the end of June, the service had collected from eight clients. Under the accrual basis, what amounts will be reported on the income statement and on the statement of cash flows for June?

Income statement: $4000, Statement of cash flow: $1600

The company sold merchandise to a customer on December 1, 2012 for $120,000. The company accepted a promissory note as payment. The note has a term of three months and an annual interest rate of 10%. The company's accounting period ends on Dec 31. What is the maturity date of the note?

March 1, 2013

Which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements?

Monetary unit

When are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

Under the cash basis of accounting

Allowing only certain employees to order goods and services on behalf of the company is an example of what internal control activity?

clearly defined authority and responsibility

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

deposits in transit

The principal amount of a note receivable plus the interest due is referred to as the note's

maturity value

Which of the following would not appear on a bank statement for a checking account?

outstanding checks

Which of the following is the correct entry to establish a petty cash fund in the amount of $300?

petty cash fund 300 --------------------cash 300

A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the custodian tallies the records of the petty cash transactions and presents them for reimbursement. April 4 US Post Office $48 April 21 Callabaugh Supply $146 April 25 Speedy Delivery $35 Which of the following entries is necessary for recording the replenishment of the fund?

postage expense 48 office supplies expense 146 delivery expense 35 ------------- cash 250

The principle of conservatism is concerned with

the avoidance of overstating assets or income in the preparation of financial statements

The payment of employee salaries has what effect on the accounting equation?

Assets and stockholders equity decrease

Which internal control activity is followed when inventory storage areas are secured with limited access?

safeguarding of assets and records