Accounting Exam 1

McKinney Corporation had beginning retained earnings of 2,292,000 and ending retained earnings of 2,499,000. During the year they issued common stock totaling 141,000. what was their net income for the year.

207,000

Which of the following would not be classified as a long-term liability

Current maturities of long-term debt

Beginning Retained Earnings+Net Income-Dividends= _______

Ending Retained Earnings

Which of the following activities involves collecting the necessary funds to support the business

Financing

Medina company purchased office supplies costing 5,000 and debited office supplies (an asset account reflecting supplies on hand) for the full amount. Supplies on hand at the end of the accounting period were 1,300. The appropriate adjusting journal entry to be made would be

Debit office supplies expense 3,700; credit office supplies 3,700

Which of the following is NOT a satisfactory statement of the accounting equation

assets=stockholders equity-liabilities

When a company receives a utility bill but will not pay it right away it should

debit utilities expense and credit. Accounts payable

When a company has performed a service but not yet received payment, it

debits accounts receivable and credit revenue from services (service revenue)

DEA

debits are expenses, assets, and dividends

measures the percentage of total assets that creditors provide

debts to assets ratio

Chuck Norris MD reports a net loss of $22,000. This will ______

decrease retained earnings

Dividends paid

decrease retained earnings

The payment of a liability

decreases assets and liabilities

Distribution of cash or other assets from a corporation to its stockholders

dividends

A measure of profitability is the

earnings per share

A measure of the net income earned on each share of common stock

earnings per share

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time.

Long-term investments appear in the property, plant, and equipment section of the balance sheet.

false

Issuing share of stock in exchange for cash is an example of a

financing activity

Which of the following represents the correct order of the three business activities for a new company

financing, investing, operating.

If the retained earnings account decreases from the beginning of the year to the end of the year, then _________

net. income is less than dividends

Receiving payment of a portion of Accounts Receivable will __________

not affect total assets

Buying and selling products are examples of

operating activities

Measures of the income or operating success of an enterprise for a given period of time

profitability

The financial statement that summarizes the changes in retained earnings for a specific period of time is the

retained earnings statement

adjusted trial balance

to ensure that the period ending financial statements will be accurate and in balance. And is used to prepare closing entries.

What is the role of the FASB

to establish accounting standards in the US

Sarbanes-Oxley Act

to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals. As a result of SOX, top management must now certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased both the independence of the outside auditors who review the accuracy of corporate financial statements and the oversight role of boards of directors.

The debt to total assets ratio is computed by dividing

total liabilities divided by total assets

debts to assets ratio

total liabilities divided by total assets

An accounting record that includes a list of accounts and their balances at a given time is called a

trial balance

A debit to an asset account indicates a

increase in the asset

The purchase of an asset on credit ______________

increases assets and liabilities

A revenue generally ___________

increases assets and stockholders equity

A revenue account

is increased by credits

A business organized as a corporation

is owned by its stockholders

The right side of an account

is the credit side

To be relevant what characteristic must accounting information exhibit

it must be capable of making a difference in decision

An advantage of the corporate form of business is that _________

its ownership is easily transferable via the sale of shares of stock.

Payments received in advance of services provided are

liability

the ability of a borrower to pay obligations when the become due

liquidity

In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $800. The cash account has a ____ ____ balance

$400 debit balance

steps in accounting cycle

1. Analyze business transactions 2. debits and credits 3. Journal Entries 4. Ledger and Posting 5. Trial balance

Which accounts normally have debit balances?

Assets, expenses, and dividends

Which of the following items has no effect on retained earnings?

Land purchase

Which of the following is. a measure of liquidity

Working capital

A balance sheet shows

assets, liabilities, and stockholders equity

Revenues owned by a business are referred to as

assets

Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a________

credit to Notes Payable

The current ratio is________

current assets divided by current liabilities.

Measures the ability of an enterprise to survive over a long period of time

solvency

The periodicity assumption

the life of a business can be divided into artificial times periods for which useful reports can be prepared

Working capital formula

working capital=current assets-current liabilities