Accounting Final
If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be:
Debit Unearned Service Rev, credit Service revenue
Under the perpetual inventory system, in addition to making the entry to record a sale, a company would
Debit cost of goods sold and credit inventory
Expenses are recognized when
they contribute to the production of revenue
A bank reconciliation should be prepared
to explain any difference between the depositor's balance per books with the balance per bank
The revenue recognition principle dictates that revenue should be recognized in the accounting records:
when the performance obligation is satisfied
Which of the following is the most appropriate and modern definition of accounting?
The information system that identifies, records, and communicates the economic events of an organization to interested users
The accounting equation may be expressed as
Assets = Liabilities + Stockholders' Equity
which of the following correctly identifies normal balances of accounts?
Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit
An adjusting entry
affects a balance sheet account and an income statement account
Debts and obligations of a business are referred to as
liabilities
earnings per share are calculated by dividing
(net income less preferred dividends) by average common shares outstanding.
Anderson Inc. sells 1,200 of merch on account to Baltic Co. w credit terms 2/10, n/30. If Baltic remits a check taking advantage of the discount, what is the amount of Baltic Co's check?
1,176
3 Rules of Adjusting Entries
1. Must have 1 income statement account and 1 balance sheet account 2. Must adjust for the specific period 3. Cash cannot be an adjusting entry
Davies Company purchased merchandise inventory with an invoice price of $15,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?
14,700 Solution: 15,000 x .02 = 300. 15000-300=
At January 1, 2012, Troyer industries reported Retained Earnings of 260,000. During 2012, Troyer had a net loss of 60,000 and paid dividends to the stockholders of 40,000. At December 31, 2012, the balance in RE is
160,000 credit
The following is selected info from L corporation for the fiscal year ending Oct. 31 Cash: 300,000 Revenue Recognized: 440,000 Cash paid for expenses: 170,000 Cash paid for computers on Nov 1, 2020 that will be used for 3 years: 48,000 Expenses incurred including depreciation: 216,000 Proceeds from a bank loan, part of which was used to pay for computers: 100,000 Based on the accrual basis of accounting, what is L corps net income for the year?
224,000
Barnes Company showed the following balances at the end of its first year: Cash $7,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 1,400 Dividends 700 Revenues 22,000 Expenses 17,500 What did Barnes Company show as total credits on its trial balance?
30,400
if total liabilities decreased by 50,000 and stockholders E increased by 10,000 during a period of time, then total assets must change by what amount and direction during that same period?
40,000 increase
Pinson Company began the year with retained earnings of $570,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson's retained earnings at the end of the year?
650,000
At December 31, 2022, Howell Company's inventory records indicated a balance of 878,000. It included the following: -168,000 in purchases shipped from seller terms FOB destination, not received till Jan 2. -111,000 in GS w terms FOB destination. GS not expected to reach destination until Jan. 6. term-20 -9,000 of goods received on consignment from Westwood CO.
701,000
Sales Returns and Allowances account is
A contra revenue account
When expenses exceed revenues, which of the following is true?
A net loss results
which of the following is not classified properly as a current asset?
A receivable from the sale of an asset to be collected in two years
Which of the following groups uses accounting information to determine whether the company can pay its obligations?
Creditors
Current Ratio Formula
Current Ratio = Current Assets / Current Liabilities
The entry to close expense accounts is
Credit income summary
A gift shop signs a three month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $50,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?
DB interest expense 500 CR interest payable 500 Solution= 6%/12 months x 50,000 x 2 months = 500
On July 7, 2012, Shireman Enterprises received cash $1400 for services rendered. The entry to record this transaction will include
DB Cash 1400 CR Service Revenue 1400
The left side of an account is
Debit
The Harris Company purchased equipment for $15,000 on December 1. It is estimated that annual depreciation on the equipment will be $3000. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:
Debit depreciation expense, 250; credit accumulated depreciation, 250
Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
Debit supplies expense, 4500; credit Supplies, 4500
A corporation has which of the following set of characteristics?
Easier to transfer ownership and raise funds, no personal liability
under the double-entry system, revenues must always equal expenses
F
Which of the following is not an advantage of the corporate form of business organization?
Favorable tax treatment
Sales revenue less cost of goods sold is called
Gross profit
Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase?
Investors in common stock
Which of the following is the best definition of an internal user of accounting information?
Managers who use accounting information to plan, organize, and run a business.
Prepaid Accounts
Prepaid insurance Prepaid Rent
the balance sheet
Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.
Deferral Accounts
Unearned service revenue
On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include
a debit to Supplies and a credit to Accounts payable
Under a perpetual inventory system
accounting records continuously disclose the amount of inventory
The usual sequence of steps in the transaction recording process is
analyze, journalize, post to ledger
Ending Retained Earnings
beginning retained earnings + net income - dividends
which of the following is not a current liability?
bonds payable
Current assets include
cash, marketable securities, accounts receivable, and inventories
A business organized as a separate legal entity is a
corporation
Declaring a cash dividend will
decrease retained earnings
In preparing a bank reconciliation, outstanding checks are
deducted from the bank balance
Revenue increases stockholders' equity and should be recorded whenever cash is received from customers.
false
The common characteristic possessed by all assets is
future economic benefit
Gross Profit Rate
gross profit/net sales
deposits in transit
have been recorded on the company's books but not yet by the bank
On a classified balance sheet, companies usually list current assets
in order of liquidity
Stockholders' Equity
includes retained earnings and common stock
which financial statement is prepared first?
income statement
debits
increase assets and decrease liabilities
Issuing new shares of common stock will
increase in common stock
Reporting a net income of $95,000 will
increase retained earnings
Trademarks would appear in which balance sheet section?
intangible asset
LIFO
last in first out
In the credit terms of 1/10, n/30, the "1" represents the
percent of the cash discount
An income statement
presents the revenues and expenses for a specific period of time.
Ratios that measure the income or operating success of a company for a given period of time are
profitability ratios
Before adjusting entries, unearned revenues are
received and recorded as liabilities before they are recognized as revenue
Net income results when
revenues exceed expenses
A bank statement
shows the activity that increased or decreased the depositors's account balance
FIFO inventory method
stands for first in, first out; states that assets (inventory) produced or purchased first, are then sold, used or disposed of first
The primary source used in the preparation of financial statements is
the adjusted trial balance
All of the following are true regarding bank statements except
the bank statement balance will always agree with the company recorded
The LIFO reserve
the difference between inventory reported using LIFO and inventory using FIFO
Average Cost
total cost of goods available for sale/total units available for sale.