ACCT Midterm

14. Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January 2012: 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. What was the total amount of Gotebo's liabilities following these six transactions? A. $12,300. B. $27,300. C. $22,600. D. $15,500.

A' Liabilities = ($12,000 + $300) = $12,300.

When the balance of the Unearned Revenue account decreases during an accounting period: A. Accrual-basis revenues exceed cash collections from customers. B. Accrual-basis expenses exceed cash collections from customers. C. Accrual-basis revenues are less than cash collections from customers. D. Accrual-basis net income is less than cash-basis net income.

A. A decrease in revenue collected in advance (Unearned Revenue) means that services were provided without a related cash collection, making revenues earned greater than cash collected.

3. If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A. The company's assets exceed liabilities by $60,000. B. The company has issued $60,000 of common stock. C. Net income for the year equals $60,000. D. Total revenues earned during the year equal $60,000.

A. The company's assets exceed liabilities by $60,000 Assets - Liabilities = Stockholders' Equity.

16. Which of the following is possible for a particular business transaction? A. Increase assets; Decrease liabilities B. Decrease assets; Increase assets C. Decrease assets; Increase stockholders' equity D. Decrease liabilities; Increase expenses

B

When preparing a bank reconciliation, a deposit outstanding would be: A. Added to the company's cash balance. B. Added to the bank's cash balance. C. Subtracted from the company's cash balance. D. Subtracted from the bank's cash balance

B.

19. Eve's Apples opened for business on January 1, 2012, and paid for two insurance policies effective that date. The liability policy was $36,000 for eighteen-months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2012? A. $9,000. B. $18,000. C. $30,000. D. $48,000.

B Prepaid liability insurance: $36,000 x 6/18 = $12,000. Prepaid crop insurance: $12,000 x12/24 = $6,000

. If a company provides services on account, which of the following is true? A. Expenses increase. B. Liabilities increase. C. Stockholders' equity increases. D. Assets decrease.

C

McGregor Company allows customers to pay with credit cards. The credit card company charges McGregor 3% of the sale. When a customer uses a credit card to pay McGregor $200 for services provided, McGregor would: A. Debit Cash for $200. B. Credit Service Revenue for $194. C. Debit Service Fee Expense for $6. D. Credit Service Revenue for $206.

C

The following data were obtained from the bank statement and from the process of reconciling it: Bank service charges = $20 Deposit outstanding = $150 Interest earned on the bank account = $10 Checks outstanding = $400 Which items should be deducted from and added to the bank balance in completing the reconciliation? A. Deduct checks outstanding; add service charges and deposit outstanding. B. Deduct interest earned; add deposit outstanding. C. Deduct checks outstanding; add deposit outstanding. D. Deduct deposit outstanding; add checks outstanding.

C

The following information was taken from the bank reconciliation for Mooner Sooner Inc. at the end of 2012: Bank balance: $8,000 Checks outstanding: $5,800 Note collected by the bank: $1,500 Service fee: $20 Deposits outstanding: $4,000 NSF check (bad check) returned for $300 What is the correct cash balance that should be reported in Mooner Sooner's balance sheet at the end of 2012? A. $10,200. B. $7,400. C. $6,200. D. $6,160.

C Bank balance ($8,000) plus deposits outstanding ($4,000) less checks outstanding checks ($5,800) equal $6,200.

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the net income earned during the year? A. $1.9 million B. $3.2 million C. $4.5 million D. $1.3 million

C Increase in Retained Earnings ($3.2) = Net Income - Dividends ($1.3).

Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January 2012: 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 increased Gotebo's liabilities? A. Four. B. Three. C. Two

C Transactions 2 and 5

4. Sooner Company has had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the company's existence. If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained earnings balance? A. $47,000. B. $35,000. C. $23,000. D. $7,000.

C. $23,000 Beginning Retained Earnings ($0) + Net Income ($8,000 + $5,000 + $12,000 + $10,000) - Dividends ($3,000 * 4) = Ending Retained Earnings.

6. 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. $300. C. $32,900. D. $69,300

C. 32,900 Beginning Retained Earnings + Net Income ($22,500) - Dividends ($4,300) = Ending Retained Earnings ($51,100).

2. Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A. Investing activities. B. Management activities. C. Operating activities. D. Financing activities.

C. Operating activities.

1. Which statement below best describes the accounting equation? A. The change in retained earnings equals net income less dividends. B. Equality of revenue and expense transactions over time. C. Resources of the company equal creditors' and owners' claims to those resources. D. Financing activities equal investing and operating activities.

C. Resources of the company equal creditors' and owners' claims to those resources. Assets = Liabilities + Stockholders' Equity.

7. How many of the following transactions are operating activities? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock A. One. B. Two. C. Three. D. Four.

C. Three Purchased Supplies Provided services to customers Paid utility bill

12. Receiving cash from an account receivable: A. Increases a revenue and decreases an asset. B. Decreases a liability and increases an asset. C. Increases an asset and increases a revenue. D. Increases one asset and decreases another asset.

D

Which of the following is the correct order for preparing the financial statements? A. Balance sheet, statement of stockholders' equity, and income statement. B. Balance sheet, income statement, and statement of stockholders' equity. C. Statement of stockholders' equity, income statement, and balance sheet. D. Income statement, statement of stockholders' equity, and balance sheet

D.

5. Nina Corp. had the following net income (loss) the first three years of operation: $7,100, ($1,600), and $3,600. If the Retained Earnings balance at the end of year three is $1,100, what was the total amount of dividends paid over these three years? A. $500. B. $0. C. $9,100. D. $8,000.

D. $8,000 Beginning Retained Earnings ($0) + Net Income ($7,100 - $1,600 + $3,600) - Dividends = Ending Retained Earnings ($1,100)