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.