Accounting 4A Final

Mia Hero Shop sold its table with a book value of $1,000 for $800. Mia Hero will record:

a loss on the sale

Every transaction:

has at least 2 effects on the the basic accounting equation

goods in transit are:

inventory items being transported from a seller to a buyer

An invoice ______.

is the bill that the purchaser receives from the vendor

A chart of accounts is a:

list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named

Generally accepted accounting principles (GAAP) require that the inventory be reported at:

lower of cost or market

Expenses do not include...

making a payment on account

If the allowance for doubtful accounts on January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off, then its allowance for doubtful accounts will have an unadjusted balance of:

$1,000 credit

An accounting system is referred to as a double-entry system because:

Both what is received and what is given in exchange are recorded

Under which of the terms will the buyer be required to pay transportation costs?

FOB shipping point

The accounts payable account is a temporary account

False

The common stock account is a temporary account

False

Which statement about financial accounting is correct?

Financial accounting reports are primarily prepared to provide information for external decision makers.

Salaries and Wages Expense appears on the ____, while Salaries and Wages Payable is a(n):

Income Statement: liability on the balance sheet

On February 28, AppGame paid for a one-year insurance policy that begins March 1. AppGame Company's entry to record this transaction includes a:

Prepaid Insurance

To which of the accounts should the balance in the income summary account be closed?

Retained earnings

The inventory turnover ratio directly measures:

The times per period the average inventory balance is sold

Which natural resources are depleted over time?

Timber

The salaries payable account is a permanent account

True

The separate entity assumption means:

a company's financial statements reflect only the business activities of that company

A merchandiser purchased inventory on account for $17,000. In a periodic inventory system, the journal entry to record the purchase would include _________.

a debit to purchases for $17,000 and a credit to accounts payable for $17,000

Which would be listed as a current liability?

accounts payable

Reporting revenues when they are earned and expenses when they are incurred is called ___ basis accounting.

accrual

Generally, freight costs incurred when a long-lived asset is purchased should be:

added to the cost of the asset

Accounts receivable, net (or net accounts receivable) equal accounts receivable (gross) minus:

allowance for doubtful accounts

Property, Plant, and Equipment are ___

also called fixed or plant assets

An economic resource that is owned by a company and will provide future benefits is referred to as:

an asset

accounts receivable

asset, debit

cash

asset, debit

equipment

asset, debit

land

asset, debit

supplies

asset, debit

The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the ____.

balance sheet

Net income is the amount:

by which revenues exceed expenses

The goals of reporting realistic figures and never overstating assets or net income applies to the _________.

conservatism principle

Which of the following states that the business should use the same accounting methods from period to period?

consistency principle

Which is an example of an intangible asset?

copyright

Gross profit is calculated as the difference between net sales revenue and ___.

cost of goods sold

The requirement that transactions be recorded at their exchange price at the transaction date is called the:

cost principle

The main expense of a merchandiser is usually​ ________.

costs of good sold

Your company has 100 units in inventory, purchased at $16 per unit. These units have a current market value of $14. The entry to write-down the inventory will include a:

credit to inventory for $200

under the perpetual inventory system, discounts taken on an invoice by the buyer would be ______.

credited to merchandise inventory

Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ___ assets

current

On a balance sheet for a merchandiser, merchandise inventory is listed as a(n) _______.

current asset

Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ____

current liabilities

Recording a lower of cost or market (LCM) adjustment involves which of the generic journal entries?

debit cost of goods sold and credit inventory

Which of the entries will be necessary to close the insurance expense account at the end of the year?

debit income summary and credit insurance expense

Kata company uses the allowance method. On May 1, Kata wrote off a $22,000 customer account balance when it becomes clear that the particular customer will never pay. The journal entry to record write-off in May 1 would include what...

debit to allowance for doubtful accounts and credit to accounts receivable

When the direct write-off method is used, the entry to write-off a specific account would:

decrease accounts receivable and decrease net income

Which of the accounts will be closed by debiting the Income Summary account?

depreciation expense

Revenues are:

earned by selling goods or services to customers

Which item does not affect the calculation of depreciation expense?

economic benefits generate by the asset.

The office supplies account is a temporary account

false

The service revenue account is a permanent account

false

Which of the inventory costing methods yields the highest net income during a period of rising inventory costs?

first-in, first-out

The Sales discounts account _________.

is a contra sales revenue account

All other things being equal, a company is better off when its receivable turnover ratio:

is high and its days-to-collect measure is low

Why is the direct write-off method not allowed under GAAP to account for doubtful accounts?

it violates the expense recognition principle ("matching")

Which of the following would be considered a long-term asset?

land

For a manufacturer, inventory turnover refers to how many times:

the company produces its goods and delivers the inventory to customers

The financial reports of a business include only the results of that business's activities. This is:

the separate entity assumption

A legal document called a stock certificate is used to indicate ownership in a:

Corporation

A business can obtain financing by issuing stock or borrowing from third parties, such as banks. What are the balance sheet effects of issuing stock to obtain cash?

Increase assets; No effect on liabilities; Increase stockholders' equity

If supplies are purchased for cash:

total assets will remain the same

The accumulated depreciation account is a permanent account

true

The depreciation expense account is a temporary account

true

The supplies expense account is a temporary account

true

Which accounts would appear in the balance sheet credit column of the worksheet?

unearned revenue

What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory?

weighted average

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period?

$20,000 decrease

A company buys equipment for $48,000, expects to use it for ten years, and then sell it for $6,000. Using the straight-line method, the company should report annual depreciation for the equipment of:

$4,200

Shenandoah Skies bought land to be used for a new ski resort. Which costs should not be capitalized?

$7,500 paid for a party to celebrate the grand opening

Baldini's Restaurant purchased a new building with the surrounding land. The price paid was $1,200,000, including the commission charged on the sale. An appraisal of the land and building at the time of purchase indicated that the market value of land was $1,000,000 and the market value of the building was $500,000. What amounts would be recorded for the purchase of the 2 assets?

land $800,000 and building $400,000

A company bought land and a building for $128,000. The building has a useful life of 20 years. Why should the company split the $128,000 cost between the land and the building?

land is not depreciated, while the building will be depreciated over its 20 year useful life.

Which of the inventory costing methods yields the highest cost of goods sold during a period of rising inventory costs?

last-in, first-out

Which of the inventory valuation methods minimizes income tax expense during a period of riding inventory costs?

last-in, first-out

The obligations and debts of a business are referred to as:

liabilities

Unearned revenue is a(n):

liability

Accounts Payable

liability, credit

income tax payable

liability, credit

notes payable

liability, credit

Assets are listed in the order of their ___ on the balance sheet.

liquidity

When a company has inventory which is subject to gradually increasing prices, the use of the LIFO method of valuing inventory will result in the:

lowest amount of assets and the lowest amount of net income

The primary goal of most companies is to:

make a profit

Acme Company's balance sheet shows three inventory accounts—raw materials, work in process, and finished goods. Acme Company must be a:

manufacturer

What is not a primary goals of inventory management?

minimize the quantity if ending inventory

Financial statements are most commonly prepared

monthly, quarterly, annually

In April, Pizza Aroma hired a new employee at a rate of $1,000 per month to start work at the beginning of May. In April, Pizza Aroma should record:

nothing, because an exchange of promises is not a transaction

The characteristic shared by all liabilities is that they:

obligate the company to do something in the future

Merchandise inventory and cost of goods sold appear ______.

on the balance sheet and income statement, respectively

The primary difference between ordinary repairs and extraordinary repairs is:

ordinary repairs are expenditures for routine maintenance and upkeep, whereas extraordinary repairs increase an assets economic usefulness in the future through increased efficiency, capacity or longer life.

Under a periodic inventory system, which is correct?

purchase returns and allowances and purchase discounts are contra expense accounts

Which account does not have a normal credit balance?

rent expense

The net cost of merchandise inventory purchased ______.

represents the actual cost of merchandise purchased

Which is a temporary account and is closed at the end of the year?

revenues, expenses, and dividends

Revenues are recognized when ___, even when cash is collected in a different accounting period than the revenue is earned.

services are performed

Which of the following business organizations has only one owner?

sole proprietorship

common stock

stockholders equity, credit

retained earnings

stockholders equity, credit

If a company receives payment when it provides a service:

stockholders' equity will increase