Accounting 1 Final Exam Review

Ashley earns an hourly rate of $15 and worked 48 hours in one week. She had taxes withheld totaling $175 and union dues deducted for $50. Assuming that Ashley receives and overtime at a rate of 1.5 what would her net earnings be for the week?

$555

Dowdy Co. has equipment with a cost of $30,000 and accumulated depreciation of $22,000. What is the book value of the equipment?

$8,000

Clean and Fresh laundromat has assets of $120,000 and liabilities of $35,000. Determine the amount of Owner's Equity.

$85,000

What is deducted from the ledger balance of cash in the bank reconciliation statement?

A bank service charge

How do you find book value?

Book Value = Cost of an Asset - Accumulated Depreciation

Jefferson invested $15,000 cash in his business. The accountant would record the following journal entry:

Cash $15,000 J. Jefferson, Capital $15,000

Munoz Co. prepays cash in October for insurance that covers only the month of November. Munoz Co. records the expense in October. Which method of accounting is Munoz Co. using?

Cash Basis of Accounting

The ___________ requires that assets be recorded at the actual cost.

Cost Principle

The last step in the closing procedure closes:

The drawing account

Magna Company paid $2400 for a 6-month liability insurance policy. At the time of the payment, this transaction should be recorded as...

Prepaid Insurance $2400

FUTA tax liability is generally deposited ________ and reported _________.

Quarterly, Annually

The proof that the debits and credits in the ledger are equal is called the...

Trial Balance

T/F: A revenue will increase with a credit.

True

T/F: Every transaction is required as an increase and/or decrease in two or more accounts.

True

T/F: The FUTA wage taxable limit is $7000.

True

T/F: Wages Payable will be shown on the post-closing trial balance.

True

A company received $193 from a charge customer which was recorded and posted as $391. The entry to correct the error would be:

a debit to Accounts Receivable for $198 and a credit to cash for $198

The parties to a check are:

a drawer, a payee, and a bank

Which of the following refers to any period of time covering a complete accounting cycle? a. A fiscal period b. A journal period c. A matching cycle d. A time cycle

a. A fiscal period

The entry to record the employer's payroll taxes includes a

credit to FICA Tax Payable

Which of the following payroll taxes do employers pay on employees? a. Federal Insurance Contribution Tax (FICA) Payable b. State Unemployment Tax (SUTA) Payable c. Federal Unemployment Tax (FUTA) Payable d. All of these are correct e. None of these are correct

d. All of these are correct

The structure of the payroll entry to record the payroll is:

debit Wages Expense; Credit each employee deduction; credit Salaries Payable

A $4500 payment for Rent Expense was incorrectly journalized and posted as a debit it Rent Expense for $5400 and a credit to cash for $5400. The correcting entry, using the one-step method, would include a:

debit to Cash for $900

Arthur Co. establishes a Petty Cash Fund of $500. The journal entry would include:

debit to Petty Cash Fund

Tonka Services receives a bill for a three-month liability insurance policy. The transaction would involve a

debit to prepaid insurance

Patrick Services paid the office rent for the current month. The transaction would involve a:

debit to rent expense

The entry to reimburse the Petty Cash Fund includes a

debit to various accounts upon which the money was spent

To locate and error in a trial balance you should: a. look for the correct location of normal balances b. verify figures transferred from the accounts to the trial balances c. check footings and balance of accounts d. re-add e. all of these are correct

e. all of these are correct

The order the financial statements are prepared is:

income statement, statement of owner's equity, balance sheet

The deposit of cash by the owner in the name of the business would involve

increase in assets and increase in owner's equity

Azure Company would record its rent bill for the month, which amounts to $920, as a(n):

increase in expenses

The borrowing of money will

increase liabilities

The systems of policies and procedures that a company sets to protect its assets are known as:

internal control system

A ________ is a book in which business transactions are recorded.

journal

A book of original entry is known as a

journal

Accounts Payable is a(n)

liability

When a T account has several items on both sides, the balance of the account is written...

on the side with the larger total

Closing entries are prepared to close the:

temporary accounts

Closing entries are prepared to close:

temporary accounts

The __________ requires that revenue is recorded when earned and expenses and recorded when incurred.

Accrual based accounting

Accountants refer to the wages earned by employees but not paid to them at the end of an accounting period as:

Accrued wages

Which of the following accounts will have a remaining balance after the closing process is completed? a. Income from Services b. Owner's Capital c. Owner's Drawing d. Depreciation Expense e. Rent Expense

Owner's Capital

This form is also called the Transmittal of Wage and Tax Statement.

W-3

The amount of employee compensation before deductions are taken out is referred to as:

gross pay

A person who performs a service for a fixed amount and is not under the specific direction of the party being served is called

an independent contractor

Accounts receivable is a(n)

asset

Which of the following accounts would be shown on the post-closing trial balance? a. Rent Expense b. Accumulated Depreciation c. Owner's Drawing d. All of these would be shown

b. Accumulated Depreciation

Which of the following is not considered an account? a. Accounts Receivable b. Revenues c. Accounts Payable d. Cash e. Equipment

b. Revenues

Which of the following is true? a. The process of transferring information from the journal to the ledger is called journalizing. b. The ledger account form maintains a running balance of the account. c. When recording business transactions, it is not important that one use the exact amount titles d. All are correct

b. The ledger account form maintains a running balance of the account.

The purchase of an asset for cash will...

have no effect on total assets or total liabilities

Which of the following is required by a bank to authorize the payment of a check made out to a business? a. The acceptance of the check b. The endorsement of the check c. The issue of the check d. The transfer of the check

b. the endorsement of the check

The W-3 shows all of the following except: a. Employer name b. EIN c.Employee Social Security Number d. Total Company Wages

c. Employee Social Security Number

The W-4 lists all of the following EXCEPT one: a. Shows the filing status b. Lists the employee's Social Security number c. Lists the total wages to be earned d. Lists the number of allowances claimed

c. Lists the total wages to be earned

Which of the following would be subtracted from the bank statement balance when preparing a bank reconciliation? a. deposits in transit b. bank service charges c. outstanding checks d. notes collected by bank

c. outstanding checks

An employer may withhold portions of an employee's total earnings for

charitable contributions

A credit may result in... a. decrease in a capital account b. increase in an asset account c. decrease in a liability account d. increase in a liability account e. none of these are correct

d. An increase in a liability account

Bendada deposited $25,000 in a bank account in the name of the business. Which is true regarding to the fundamental accounting equation? a. Liabilities decrease $25000 b. Owner's Equity decreases by $25000 c. Liabilities Increase $25000 d. Assets increase $25000 e. Assets decrease $25000

d. Assets increase $25000

Which of the following accounts decrease when they are debited? a. Drawing & Capital b. Liabilities & Expenses c. Assets and Drawing d. Capital and Liabilities e. Expenses and Assets

d. Capital and Liabilities

The first step in the posting process is recording the...

date in the ledger account

The entry to close expenses would involve (a)

debit to Income Summary

Every Friday, Neil pays weekly wages of $15,000 to his workers for a five-day week which ends on that day. Assuming the fiscal year ends on a Tuesday, the adjusting entry for accrual of wages recorded by Neil is:

debit to Wages Expense for $6000, credit to Wages Payable for $6000

G. Wilson invested her personal computer, which had a fair market value of $5000 in her business. The transaction would involve a:

debit to equipment

A Petty Cash Fund established for a $250 balance had petty cash receipts totaling $219 and cash in the amount of $31. The entry to replenish the fund would include a:

debit to the various accounts money was spent on for $219

A business received $600 cash from Charge Customers to apply on account. The effect of the transaction is an increase in assets (A/R) and a...

decrease in an asset (cash)

In a bank reconciliation, a $400 NSF check is

deducted from the ledger balance

A debit may result in: a. a decrease in a liability account b. a decrease in a revenue account c. an increase in an asset account d. an increase in an expense account e. all of these are correct

e. All of these are correct

A credit may result in: a. an increase in a revenue account b. a decrease in an asset account c. an increase in a liability account d. an increase in the capital account e. all of these are correct

e. all of these are correct

Payroll tax expense represents the amount of taxes contributed by the...

employer

The term, accrued wages, means that:

expenses have been incurred but not yet been recorded

Jamie's Lighting Company paid rent for the month, $2500. What are the effects on the fundamental accounting equation?

Assets decrease $2500; Liabilities no effect; Owner's Equity decreases $2500

Apple Company purchased $6000 in equipment, paying $2000 in cash and placing the remainder on an account. The journal entry would look like this:

Equipment $6000 Accounts Payable $4000 Cash $2000

Which accounts are debited to record the payment of taxes shown on the quarterly 941 tax form?

FICA Social Security Tax Payable, FICA Medicare Tax Payable, and Employee's Federal Income Tax Payable

T/F: Employee income taxes are an expense of the employer.

False

Extra hours that are added to wage information in order to increase pay is an example of:

False Wage Claim Fraud

Which payroll taxes are the employee's responsibility?

Federal Income Tax, FICA SS & Medicare

If the cost of a piece of equipment is $15000 and accumulated depreciation amounts to $5000, the book value of the equipment is:

$10,000

If total assets increase by $27,000 and total liabilities increase by $7,000, then the owner's equity will increase by:

$20,000

An example of a liability is

Accounts Payable

Which data is generally not included on a check?

Address of the payee

When a business pays a creditor on account total _______ decreases.

Assets

The adjusting entry to record depreciation of equipment is:

Debit Depreciation Expense, credit Accumulated Depreciation

What are added to the bank statement balance when preparing a bank reconciliation?

Deposit in Transits

The process of subtotaling both sides of an account and recording the amount on that side is known as...

Footing

The post closing trial balance is best prepared using the:

General Ledger

Expenses are recorded when the are:

Incurred

Which payroll taxes have a maximum of earnings subject to that tax?

State Unemployment Tax and FICA Social Security

Baker Co. uses the accrual basis of accounting. Baker Co. prepays cash in May for insurance that covers only the month of June. Which of the following statements is true? a. Baker Co. should record the insurance expense in June b. Baker Co. should record the insurance expense in May c. Baker Co. should record the payment of cash in June d. Baker Co. should neither record the payment of cash nor the insurance expense in May. e.

a. Baker Co. should record the insurance expense in June

Which of the following statement is true? a. FICA Medicare Payable increases with a credit b. Payroll Tax Expense increases on the credit side of the account c. Employee Payroll Taxes withheld are recorded in Payroll Tax Expense d. Federal Income Tax Withholding Payable decreases with a credit

a. FICA Medicare Payable increases with a credit

Any additional investments by the owner should be shown as a(n):

addition on the Statement of Owner's Equity

A check issued to a creditor in the amount of $35 was recorded in the journal as $350. In the bank reconciliation, the correction would be recorded as a(n)

addition to the ledger balance of cash

The source of information for the employee's individual earnings record is:

the payroll register

Net income results when:

total revenue exceeds total expenses over the period

Prepaid Insurance is a(n)

Asset

The expanded accounting equation is

Assets = Liabilities + Capital - Drawing + Revenue - Expenses

What is the fundamental accounting equation?

Assets = Liabilities + Owners Equity

Graves Company bought supplies on credit, $1800. What are the effects on the fundamental accounting equation?

Assets increase $1800; Liabilities increase $1800; Owner's Equity is not effected.

When an owner withdraws cash from the business, it results in a decrease in:

Cash and Capital

Entries required to clear or zero the balances of temporary accounts at the end of the year are called ______ entries.

Closing

What would the journal entry for the withdrawal of cash for personal use by D. Bill, the owner of a business look like?

Debit D. Bill, Drawing and credit Cash

Which of the following is the journal entry to record a NSF check received from a customer?

Debit to Accounts Receivable and a credit to Cash

Net income for Susan's Treasures is $25,000 for the current year. The owner withdrew $3,000 per month for personal living expenses. The owner's Capital account will show a net...

Decrease of $11,000

The closing process causes the account balance of which account to be zeroed out?

Drawing Account

The fourth step in the closing process is to close _________ account(s) into the _________ account(s).

Drawing, Capital

The fourth step in the closing process is to close the _______ account(s) into the _______ account(s).

Drawing, Capital

Form 940 is filled by employers to submit:

Employer's Annual Federal Unemployment (FUTA) Tax Return

The second step in the closing process is to close the __________ account(s) into the ___________ account(s).

Expense, Income Summary

The purpose of Form 941 is to report the tax liability for withholdings of employees':

FICA and federal income taxes

T/F: Expenses are shown as credits.

False. Expenses are shown as debits

For which of the following taxes is there no ceiling on the amount of an annual employee earnings subject to tax?

Federal Income Tax

The _______ is a book or file containing the activity by accounts of a business.

General Ledger

If Nixon Company sold services on account, what is your credited account?

Income from Services/ Revenue

Burnet Co. has a balance in Prepaid insurance that represents the premium paid in advance for a nine-month liability insurance policy. Assuming that 5 months of premium is still remaining is still remaining, the adjusting entry would be recorded as:

Insurance Expense $1800 Prepaid Insurance $1800

What is the effect of net loss on financial statements?

It decreases the owner's capital account balance.

Amounts owned by a business are referred to as...

Liabilities

Which of the following accounts is not adjusted? a. Depreciation Expense b. Prepaid Insurance c. Wages Payable d. Owner's Capital e. Accumulated Depreciation

Owner's Capital

T/F: The first step in analyzing a transaction is the determine what accounts are involved.

True

T/F: The income statement is reported as a period of time.

True

Assume a company has a net income that exceeds the owner's drawing for the current year. The owner's Capital account:

Will Incease

Which of the following is true about the Federal Insurance Contributions Act? a. I provides a health insurance program for workers after age 65 b. It provides early retirement after a worker reaches 65 c. It provides free health insurance for the dependents of all workers d. It provides retirement benefits to workers who become disabled after 68

a. It provides a health insurance program for workers after age 65

Which of the following statements is true concerning the steps in the accounting cycle? a. Journalizing and posting the closing entries should be completed after preparing financial statements. b. Completing the work sheet should be completed after preparing the financial statements. c. Preparing a post-closing trial balance should be completed before completing the work sheet. d. Preparing a trial balance should be completed before recording business transactions into a journal.

a. Journalizing and posting the closing entries should be completed after preparing financial statements.

To which of the following payroll taxes are employers required to contribute a matching portion for each employee? a. Social Security & Medicare b. State Unemployment c. Federal Unemployment d. Workers' Compensation e. All of these are correct

a. Social Security & Medicare

What item is NOT used to calculate the federal income tax to be withheld by employers? a. W-2 b. Publication 15 (Circular E) c. Total Earnings d. W-4

a. W-2

A check written for $68.30 in payment of an account was recorded on the books as $86.30. On a bank reconciliation, this will appear as a(n)

addition to the ledger balance for $18

An NSF check held by the payee should be carried on the payee's records as:

an accounts receivable