Accounting 201 (wvu) Midterm

Indicate the financial statement where you would expect to find each line item:

Advertising Expense Income Statement Cash Paid for Advertising Statement of Cash Flows Prepaid Advertising Balance Sheet

Indicate whether each activity for Anudu Hair Salon would be classified as an operating, investing, or financing activity.

Purchased $100,000 of land Investing Activity Paid $200 for supplies to be used on customers over the next two months. Operating Activity Received $500 from its customers. Operating Activity

The entry to record the purchase of merchandise on account causes an increase in _________.

assets and liabilities

The entry to record the issuance of stock causes an increase in _______.

assets and shareholders' equity

The statement of shareholders' equity reports the ______.

changes that occurred in shareholders' equity during the accounting period

Depreciating a long-term asset, such as Equipment, over its useful life records the ______. (Select all that apply.)

getting use of or service from an asset, Depreciation Expense giving up some of the asset's usefulness, Accumulated Depreciation

The cost of a long-term asset, such as Equipment, is expensed ______.

over its useful life

The income statement reports the ______.

revenues minus expenses for the accounting period

During its first month of business, Dig the Dogs, Inc. purchased $900 of hotdogs of which it paid $300 and owes the rest. During the month, it sold 3/4 of its inventory for $1,000 on account. What is the amount of Cost of Goods Sold for the month ended?

675 900 (3/4)= 675

On January 1 of its first month of business, Juan in a Million, Inc., paid $68,000 for four months rent beginning in January. How much will be reported as Prepaid Rent on its balance sheet at January 31?

68000/4= 17000 68000-17000= 51000

If a company's total assets equals $90,000 and its shareholders' equity equals $20,000, then its liabilities must equal $______.

70,000 assets= liabilities - shareholders' equity 90000-20000= $70000

Eel Electronics paid $4,000 of the $5,000 its employees had earned during the period. Eel Electronics should report Wages Expense of ______ on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles.

$5,000; $1,000

In its first month of business, Brewed Awakenings, Inc., collected $28,000 from customers in advance during May. During May, it performed $12,000 of services. What is the balance of the Deferred Revenue account at the end of the month?

16000 28000-12000= 16000

If a company's total assets equals $60,000 and its shareholders' equity equals $40,000, then its liabilities must equal $______.

20000

Applesoft, Inc. Income Statement For the year ended December 31 Sales Revenue $73,000 Cost of Goods Sold $58,000 Selling Expenses $3,000 Depreciation and Amortization Expense $2,000

21 Gross Profit Margin= (Net Sales - Cost of Goods Sold)= Gross Profit Margin/Net Sales (73000-58000)=15000/73000*10= 20

During December, Acme, Inc., performed and billed its customers $23,000 for services on account of which it collected $12,000. How much revenue should Acme record in December?

23000

Wok On Water, Inc.'s employees had worked during the first month of May and earned $7,000. Wok on Water had paid $4,000 of the amount owed. How much will be reported as Wages Payable on its May 31 balance sheet?

3000 7000-4000

Thistle Do Nicely had $200 of supplies on May 1. During May, it purchased $400 of supplies on account. It paid $250 of the $400 it owed for its supplies. At May 31, Thistle Do Nicely only had $35 of supplies left. Supplies on the balance sheet equals ______.

35 (supplies on the balance sheet = supplies left)

Florist Gump, Inc. purchased land at a cost of $5,000 on February 2, 2000. At December 31, 2014, the land is worth $53,000 according to an appraiser. At what amount should the land be reported on Florist Gump's balance sheet at December 31, 2014?

5,000 Historical Cost Principle

Determine the missing amounts for Operating Income in the following multi-step income statement: Sales Revenue$2,000 Cost of Goods Sold1,400 Gross Profit? Operating Expenses100 Operating Income? Interest Expense10 Net Income?

500

Thistle Do Nicely had $100 of supplies on May 1. During May, it purchased $500 of supplies on account. It paid $150 of the $500 it owed for its supplies. At May 31, Thistle Do Nicely only had $55 of supplies left. Supplies Expense on the income statement equals ______.

545 100+500-55

Wok On Water, Inc.'s employees had worked during its first month of May and earned $6,000. Wok on Water had paid $1,000 of the amount owed. How much will be reported as Wages Expense on its May income statement?

6000

During the year, A Salt & Buttery, Inc., had revenue of $95,000 of which $11,000 was collected from customers. It also had expenses of $28,000 of which $3,000 was paid. The owners were paid $20,000 in dividends. Net income for the year equals $______.

67000 95000-28000= 67000

Purses, Inc., sold 3 purse(s) that cost $40 each to its customers for a price of $70 each. The Gross Profit amount on the income statement will equal $______.

90 3*40= 120 3*70= 210 210-120= $90

balance sheet Noncurrent Liabilities $145,000 Total Assets $994,000 Noncurrent Assets $227,000 Common Stock $133,000 Total Shareholders' Equity $186,000

994000-227000= 767000

Hot Diggity Dog, Inc., paid $10 of May's interest on the note payable, plus it paid off the $2,000 note payable. Show the effect of this transaction on total Assets, Liabilities, Stock and/or Retained Earnings and the account titles. If no effect, select "$0 No Effect".

Assets $(2,010) Cash Liabilities $(2,000) Note Payable Stock $0 No Effect Retained Earnings 4(10) Interest Expense

Indiana Bones, Inc., paid $15 for the interest it owes for the month and the $3,000 principal. Show the effect of this transaction on total Assets, Liabilities and/or Shareholders' Equity and the account titles. If no effect, select "$0 No Effect".

Assets $(3,015) Cash Liabilities $(3,000) Notes Payable Shareholders' Equity $(15) Interest Expense

Jim's Jambs, Inc., recorded an adjusting entry for the $15 of interest it owes on its $3,000 note payable. Show the effect of this transaction on total Assets, Liabilities, Stock and/or Retained Earnings and the account titles. If no effect, select "$0 No Effect".

Assets $0 No Effect Liabilities $15 Interest Payable Stock $0 No Effect Retained Earnings $(15) Interest Expense

Par for the Course, Inc., purchased equipment for $60,000 by issuing a $20,000 note and paying the remainder with cash.

Assets $20,000 increase Liabilities $20,000 increase Shareholders' Equity No Effect

On February 28, Wursthaus, Inc., adjusted for insurance used during the month. It had paid $600 in advance on January 1 for three months of insurance beginning on January 1, its first month of business. Show the effect of the adjusting entry on the accounting equation.

Assets (200) Prepaid Insurance Liabilities 0 No Effect Shareholders' Equity (200) Insurance Expense

February 1: Wursthaus, Inc., paid $600 cash for three months of insurance coverage that begins February 1. Show the effect of this transaction on the accounting equation.

Assets 600 Prepaid Insurance; (600) Cash Liabilities 0 No Effect Shareholders' Equity 0 No Effect

Match the definition with each of the elements of the accounting equation.

Assets Economic resources that will provide future benefit Liabilities Creditors' claims to economic resources Shareholders' Equity Owners' claims to economic resources

Which of these would be reported as cash flows from investing activities? (Select all that apply.)

Cash paid to buy equipment Cash paid to build a new corporate headquarters

Indicate the financial statement where you would expect to find each line item:

Cost of Goods Sold Income Statement Cash Paid for Merchandise Statement of Cash Flows Inventory Balance Sheet Accounts Payable Balance Sheet

Indicate whether the account is an Asset, Liability or Shareholders' Equity account:

Cost of Goods Sold Shareholders' Equity Rent Expense Shareholders' Equity Prepaid Rent Asset

Classify each of the items below according to the section of a firm's financial statements in which they would be reported. Each section may be used more than once. Some may not be used at all.

Equipment Non-current Assets Notes Payable (due in 3 months) Current Liabilities Accounts Payable Current Liabilities Notes Payable (due in 18 months) Non-current Liabilities

Accounts Payable Inventory Cash Paid for Merchandise Wages Payable Wages Expense Supplies Expense Deferred Revenue Depreciation Expense

Four

Match each item below with the appropriate description using each one only once.

Income Statement Reports a summary of all revenues minus all expenses during a period Statement of Shareholders' Equity Reports the changes that took place in the amount of the owners' investment during a period Statement of Cash Flows Reports a summary of cash collected and cash paid during a period Balance Sheet Reports the assets, liabilities and shareholders' equity of a company at a specific point in time Notes (or footnotes) Reports additional information needed to better understand the financial statements

Which of the following are assets? (Select all that apply.)

Inventory Equipment Supplies Land

Indicate whether each activity for Hot Diggity Dogs, Inc., would be classified as an operating, investing, or financing activity.

Issued $10,000 of stock. Financing Activity Purchased $1,000 of inventory. Operating Activity Purchased land for $1,000. Investing Activity

If a company incorrectly records cash received for services to be provided in the future by increasing Cash and increasing Sales Revenue, how will this error affect net income for the current period?

Net income will be too high

If a company incorrectly records cash received for services to be provided in the future by increasing Cash and increasing Sales Revenue, how will this error affect net income for the current period?

Net income will be too high.

Which accounts appear on the balance sheet?

Receivables, Deferred Revenue, Stock

Match the correct description with each of the following line items found on the income statement.

Sales Revenue price times the quantity sold Cost of Sales subtracted Sales Revenue to arrive at gross profit Gross Profit Sales Revenue minus Cost of Sales Operating Expenses subtracted from Gross Profit to arrive at Operating Income

Which of the following accounts are liabilities? (Select all that apply.)

Taxes Payable Notes Payable Wages Payable

What is the effect on total assets when a company buys a building in exchange for a 20-year note payable?

Total assets will increase.

Indicate whether the account is an asset, liability, or shareholders' equity account.

Utilities Payable Liability Utilities Expense Shareholders' Equity Prepaid Utilities Asset

The expensing of a long-term asset, such as Equipment, over its useful life causes a(n) ______. (Select all that apply.)

decrease in total Assets decrease in Shareholders' Equity

When a company receives cash in advance for services it has not yet performed, it records a(n) ______.

liability called Deferred Revenue

If a company incorrectly records cash received from customers by increasing Cash and Service Revenue for services that were previously recorded as sales on account, how will this error affect the current period?

net income will be too high

What is the effect on total assets when a company purchases a cash register for a cash payment of $1,200?

no effect

Morris Lest, Inc., purchased machinery for $10,000 cash. The effect of this transaction is to cause ______.

total assets to remain the same