Accounting Exam 1

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? a. $34,000 increase b. $55,000 increase c. $34,000 decrease d. $76,000 increase

a. $34,000 increase

The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: a. A debit to a liability b. A debit to an asset c. A credit to a liability d. A credit to an asset

a. A debit to a liability

The owner of an office building should report rent collected in advance as a debit to Cash and a credit to: a. A liability b. An asset other than cash c. Revenue d. Stockholders' Equity

a. A liability

Which of the following accounts would normally have a debit balance and appear in the balance sheet? a. Accounts Receivable b. Unearned Revenue c. Salaries Expense d. Dividends

a. Accounts Receivable

The accounting equation is defined as a. Assets = Liabilities + Stockholders' Equity b. Assets = Liabilities - Stockholders' Equity c. Net Incomes = Revenues - Expenses d. Liabilities + Revenues = Assets

a. Assets = Liabilities + Stockholders' Equity

Retained earnings at the end of the year is calculated using: a. Beginning retained earnings, net income, and dividends b. Common stock and dividends c. Stockholders' equity, net income, and dividends d. Net income and dividends

a. Beginning retained earnings, net income, and dividends

Frosty Inc. has the following balances on December 31 prior to closing entries: Revenues: $35,000 Retained Earnings, Jan. 1: 10,000 Cash: 7,000 Expenses: 23,000 Accounts Payable: 4,000 Dividends: 1,000 Supplies: 18,000 Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries? a. Increase of $11,000 b. Increase of $13,000 c. Increase of $12,000 d. Increase of $14,000

a. Increase of $11,000 Rev - Exp - Div

Transactions of a company that include the purchase and sale of long-term productive assets are referred to as: a. Investing activities b. Financing activities c. Expenditure activities d. Operating activities

a. Investing Activities

An adjusted trial balance: a. Is a list of all accounts and their balances after adjusting entries b. Is a list of all accounts and their balances before adjusting entries c. Is a list of all accounts and their balances after closing entries d. Is a trial balance adjusted for cash-basis accounting

a. Is a list of all accounts and their balances after adjusting entries

Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January: 1. Issued 10,000 shares of common stock for $15,000 cash 2. Purchased land for $12,000, signing a note payable for the full amount 3. Purchased office equipment for $1,200 cash 4. Received cash of $14,000 for services provided to customers during the month 5. Purchased $300 of office supplies on account 6. Paid employees $10,000 for their first month's salaries How many of these transactions decreased Gotebo's total assets? a. One b. Two c. Three d. Four

a. One

Financial Accounting... a. Provides information primarily for external decision makers b. Provides information primarily for a company's employees c. Provides information primarily for the use of managers of the company d. Is primarily used to compute a company's tax obligation

a. Provides information primarily for external decision makers

The following amounts are reported in the ledger of Mariah Company: Assets: $80,000 Liabilities: 36,000 Retained Earnings: 12,000 What is the balance in the common stock account? a. $44,000 b. $32,000 c. $48,000 d. $42,000

b. $32,000

DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? a. $24,300 b. $32,900 c. $300 d. $69,300

b. $32,900

The Accounts Payable account has a beginning balance of $12,000 and the company has purchased $50,000 of supplies on account during the month. The ending balance was $10,000. How much did the company pay to the creditors during the month? a. $50,000 b. $52,000 c. $60,000 d. $62,000

b. $52,000

Which of the following describes revenue? a. Resources of a company b. Amounts earned from providing goods and services to a customer c. Cash received from a customer d. Dividends paid to stockholders

b. Amounts earned from providing goods and services to a customer

When a payment is made on an account payable: a. Assets and stockholders' equity decrease b. Assets and liabilities decrease c. Liabilities and revenues decrease d. Assets and expenses decrease

b. Assets and liabilities decrease

Which of the following is NOT a major section in the statement of cash flows? a. Cash flows from operating activities b. Cash flows from customers c. Cash flows from financing activities d. Cash flows from investing activities

b. Cash flows from customers

Which of the following is NOT a possible journal entry? a. Credit assets; Debit expenses b. Debit assets; Debit stockholders' equity c. Credit revenues; Debit assets d. Debit expenses; Credit liabilities

b. Debit assets; Debit stockholders' equity

The costs of providing goods and services to customers are referred to as: a. Assets b. Expenses c. Liabilities d. Revenues

b. Expenses

When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to: a. Cash b. Rent Expense c. Rent Payable d. Rent Receivable

b. Rent Expense

The revenue recognition principle states that: a. Revenue should be recognized in the period the cash is received b. Revenue should be recognized in the period earned c. Revenue should be recognized in the balance sheet d. Revenue is a component of common stock

b. Revenue should be recognized in the period earned

When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to: a. Accounts Payable b. Supplies c. Cash d. Retained Earnings

b. Supplies

The ending balance of Retained Earnings can best be described as: a. The amount of cash received from stockholders over the life of the company b. The amount of net income over the life of the company not paid to owners in the form of dividends c. The amount of dividends paid over the life of the company d. The amount of net income over the life of the company

b. The amount of net income over the life of the company not paid to owners in the form of dividends

Consider the following list of accounts: Accounts Payable Cash Prepaid Rent Common Stock Salaries Payable Equipment Supplies Rent Expense How many of these accounts have a normal CREDIT balance? a. Two b. Three c. Four d. Five

b. Three

Net income (loss) appears in which two financial statements? a. balance sheet and income statement b. income statement and statement of stockholders' equity c. statement of stockholders' equity and balance sheet d. net income appears in only one financial statement

b. income statement and statement of stockholders' equity

The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $5.4 million during the year. What was the net income earned during the year? a. $7.5 million b. $6.4 million c. $4.4 million d. $1.0 million

c. $4.4 million

In the first three years of operations, Lindsey Corporation earned net income/loss of -$150,000, $100,000, and $250,000. At the end of the third year, Lindsey Corporation has a balance of $120,000 in its Retained Earnings account. What is the total amount of dividends Lindsey Corporation paid over the three years? a. $130,000 b. $120,000 c. $80,000 d. $380,000

c. $80,000

A company has the following transactions: 1. Pay workers' salaries for the current period 2. Pay rent in advanced 3. Pay dividends to stockholders' in the current period 4. Receive (but do not pay) a utility bill 5. Use supplies previously purchased How many of these transactions result in an expense being reported in the current period using accrual-basis accounting? a. 1 b. 2 c. 3 d. 4 e. 5

c. 3

Which of the following statements is NOT correct about the financial statements? a. An income statement reports revenues, expenses, and net income information b. The statement of stockholders' equity presents common stock, dividends, and retained earnings information c. A balance sheet reports assets, liabilities, revenues, and expenses d. The statement of cash flows shows cash inflows and outflows from operating, financing, and investing activities

c. A balance sheet reports assets, liabilities, revenues, and expenses

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue? a. January b. February c. April d. Evenly in each of the three months

c. April

When a company pays $2,500 dividends to its stockholders, the transactions should be recorded as: a. Debit Cash; Credit Dividends b. Debit Retained Earnings; Credit Dividends c. Debit Dividends; Credit Cash d. Debit Dividends; Credit Accounts Payable

c. Debit Dividends; Credit Cash

Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are: a. Debit Rent Expense, Credit Cash b. Debit Prepaid Rent, Credit Rent Expense c. Debit Prepaid Rent, Credit Cash d. Debit Cash, Credit Prepaid Rent

c. Debit Prepaid Rent, Credit Cash

At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month, the supplies balance was only $800. What is the appropriate month-end adjusting entry? a. Debit Cash $4,200, credit Supplies $4,200 b. Debit Supplies $4,200, credit Supplies Expense $4,200 c. Debit Supplies Expense $4,200, credit Supplies $4,200 d. Debit Cash $800, credit Supplies $800

c. Debit Supplies Expense $4,200, credit Supplies $4,200

Which of the following is NOT a balance sheet item? a. Assets b. Retained Earnings c. Expenses d. Liabilities

c. Expenses

Creditors' claims to a corporation's resources are referred to as: a. Dividends b. Assets c. Liabilities d. Stockholders' Equity

c. Liabilities

Which of the following describes the purpose(s) of closing entries? a. Adjust the balances of asset and liability accounts for unrecorded activity during the period b. Transfer the balances of temporary accounts to common stock c. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period d. Transfer the balances of temporary accounts to common stock; reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period

c. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period

"Record Revenue in the period in which it's earned" is the definition of which principle in accounting? a. Trial Balance b. Debits and Credits c. Revenue Recognition d. Accounting Equation

c. Revenue Recognition

Consider the following list of accounts: Cash, Service Revenue, Salaries Expense, Accounts Payable, Equipment, Retained Earnings, Utilities Expense, Accounts Receivable, Common Stock, Dividends How many of these accounts have a normal debit balance? a. Four b. Five c. Six d. Seven

c. Six

Liabilities can be best described as: a. The amount of expenses over the past year b. The amount expected to be distributed to stockholders' c. The amount owed to creditors d. The amount of services provided to customers during the year

c. The amount owed to creditors

A company receives a $50,000 cash deposit from a customer on October 15, but will not provide services until November 20th. Which of the following statements is true? a. The company records service revenue on October 15. b. The company records cash collection November 20. c. The company records unearned revenue on October 15. d. The company records nothing on October 15.

c. The company records unearned revenue on October 15

Consider the following account balances of Shattuck Law Firm at the end of the year: Accounts Payable $4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 8,300 Supplies 4,300 Retained Earnings 1,100 Utilities Expense 5,000 How many of these accounts would appear in Shattuck's year-end income statement? a. Five b. Four c. Three d. Two

c. Three

External events include all of the following except: a. Paying employees salaries b. Purchasing equipment c. Using office supplies d. Collecting an account receivable

c. Using office supplies

Stimpleton Company engages in the following Cash Payments: Purchase Equipment $2,000 Pay Rent 500 Repay loan to the bank 5,000 Pay workers' salaries 1,000 What is the total amount of cash paid for operating activities? a. $6,000 b. $2,000 c. $7,000 d. $1,500

d. $1,500

The following table contains financial information for Trumpeter Inc. before closing entries: Cash: $12,000 Supplies: 4,500 Prepaid Rent: 2,000 Salary Expense: 4,500 Equipment: 65,000 Service Revenue: 30,000 Miscellaneous Expenses: 20,000 Dividends: 3,000 Accounts Payable: 5,000 Common Stock: 68,000 Retained Earnings: 8,000 What is Trumpeter's net income? a. $3,500 b. $2,500 c. $5,000 d. $5,500

d. $5,500

A company has the following three events in December: 1. December 1 - Pay last month's rent (November), $500 2. December 15 - Pay rent for the current month (December), $500 3. December 31 - Pay rent for the following year, $6,000 How much would be recorded as Rent Expense for the month of December using accrual-basis accounting? a. $6,500 b. $7,000 c. $1,000 d. $500

d. $500

The adjusting entry required to record accrued expenses includes: a. A credit to Cash b. A debit to an asset c. A credit to an asset d. A credit to a liability

d. A credit to a liability

Which of the following is(are) true regarding the characteristics of adjusting entries? a. Adjusting entries reduce the balance of revenue, expense, and dividend accounts to zero b. Adjusting entries allow for the proper recognition of revenue c. Adjusting entries allow for the proper recognition of expenses d. Adjusting entries allow for the proper recognition of revenue and expenses

d. Adjusting entries allow for the proper recognition of revenue and expenses

A trial balance can be best explained as a list of: a. The income statement accounts used to calculate net income b. Revenue, expense, and dividend accounts used to show the balances of the components of retained earnings c. The balance sheet accounts used to show the equality of the accounting equation d. All accounts and their balances at a particular date

d. All accounts and their balances at a particular date

Consider the following events for Sophia Incorporated: April 5: Sophia purchases volleyballs for $200 on account April 6: Sophia advertises a sand volleyball camp for $20 a person April 12: Thirty people sign up for the camp paying a total of $600 April 21: Sophia hosts the sand volleyball camp April 23: Sophia pays for the volleyballs purchased on April 5. Under accrual-basis accounting, what is the appropriate day to record the revenues from the sand volleyball camp? a. April 5 b. April 6 c. April 12 d. April 21

d. April 21

The accounts that represent the resources of the company are called: a. Liabilities b. Revenues c. Expenses d. Assets

d. Assets

When a company provides services on account, the accounting equation would be affected as follows: a. Assets increase b. Revenues increase c. Assets increase and Liabilities decrease d. Assets increase and stockholders' equity increases

d. Assets increase and stockholders' equity increase

Investments by stockholders have what effect on the accounting equation? a. Assets increase and liabilities increase b. Expenses increase and liabilities increase c. Assets increase and revenues increase d. Assets increase and stockholders' equity increases

d. Assets increase and stockholders' equity increases

Which one of the following accounts will have a credit balance? a. Dividends b. Salary Expense c. Supplies d. Common Stock

d. Common Stock

When the company pays stockholders' a dividend, what is the effect on the accounting equation for that company? a. Decrease stockholders' equity and increase assets b. Increase liabilities and increase assets c. Decrease assets and decrease liabilities d. Decrease assets and decrease stockholders' equity

d. Decrease assets and decrease stockholders' equity

Which of the following is the correct order for preparing the financial statements? a. Balance sheet, statement of stockholders' equity, income statement b. balance sheet, income statement, statement of stockholders' equity c. statement of stockholders' equity, income statement, balance sheet d. income statement, statement of stockholders' equity, balance sheet

d. Income Statement, Statement of Stockholders' Equity, Balance Sheet

Consider the following events for Betterment Incorporated: January 1: Betterment purchases gasoline for $200 on account January 7: Betterment advertises lawn mowing services for $100 January 9: Betterment signs up 8 customers who pay a total of 800 cash January 12: Betterment mows the lawns of 8 customers and all gasoline purchased on January 1 is used January 13: Betterment pays for the gasoline purchased on January 1 Under accrual-basis accounting, what is the appropriate day to record the revenues related to lawn services? a. January 1 b. January 7 c. January 9 d. January 12

d. January 12

Which of the following is an operating activity? a. Issuing common stock b. Paying dividends c. Borrowing cash from a bank to acquire a factory d. Paying electricity bills for the month

d. Paying electricity bills for the month.

Which of the following is NOT a balance sheet item? a. Assets b. Common Stock c. Retained Earnings d. Revenues

d. Revenues

Which of the following is true about adjusting entries? a. Entries are necessary due to the conservatism principle b. Entries can be done at the beginning or end of the accounting period c. They zero the balance of all income statement accounts d. They are a necessary part of accrual-basis accounting

d. They are a necessary part of accrual-basis accounting

Which of the following accounts is(are) listed in a post-closing trial balance? a. Prepaid Rent b. Accounts Payable c. Salaries Expense d. Two of these three accounts would be included in a trial balance

d. Two of these three accounts would be included in a trial balance (Prepaid Rent & Accounts Payable)