ACCT201 SDSU Deboskey Test 1

BACK EXAM: Consider the following transactions: 1. The company pays cash for supplies (but does not use them), $100 2. The company pays cash to workers for salaries earned in the current period, $200 3. The company pays cash for one year of rent in advance, $300 4. The company pays cash for dividends to shareholders, $400 Calculate the amount of accrual-basis expense.

$200

The following amounts are reported in the ledger of Mariah Company... Assets: $80,000 Liabilities: $36,000 Retained Earnings: $22,000 What is the balance in the Common Stock account?

$22,000

BACK EXAM: At the beginning of 2012, Dade Company has a balance for Retained Earnings of $500. For 2012, 2013, and 2014, the company has net income of $1,500, $2,000, and $2,500, and pays dividends of $500, $1,000, and $2,000. What is the balance of Retained Earnings at the end of 2014?

$3,000

BACK EXAM: The company has a beginning cash balance of $7,000. Using the following information, calculate the ending balance of cash: -Note receivable collected by the bank = $5,000 -Checks outstanding = $8,000 -Bank service fees = $1,000 -Non-sufficient funds (NSF) checks = $2,000 -Deposits Outstanding = $11,000

$9,000

BACK EXAM: How many of the following transactions would decrease net income? Purchased land with cash Paid cash for utilities received in the current period Paid employees for salaries earned in the current period Repaid money previously borrowed from the bank Purchased supplies for future use Paid rent for the current month (not in advance)

3

BACK EXAM: Which the following transactions are investing activities? 1. Borrowed $25,000 from the bank 2. Pay $4,000 in advertising in the current period 3. Provide services to customers for $14,000 4. Purchased a delivery truck for $50,000 5. Paid dividends of $2,000

4 only

Corporation

A business organization that issues shares of stock to its investors

Dividend

A distribution of net income to the stockholders of a corporation Distribution of cash to stockholders; NOT AN EXPENSE

Ethics

A term that refers to a code or moral system that provides criteria for evaluating right or wrong.

The accounting equation is defined as: A. Assets = Liabilities + Stockholders' Equity B. Liabilities + Revenues = Assets C. Assets = Liabilities - Stockholders' Equity D. Net Income = Revenues - Expenses

A. Assets = Liabilities + Stockholders' Equity

BACK EXAM: On September 1, 2012, Aesop borrows $10,000 from the bank, due in one year with 12% interest. What is the amount of interest expense that Aesop would report for 2012 using accrual-basis versus cash-basis accounting?

Accrual-basis = $400; Beg balance ($10,000) x Interest (.12) divided by 12 months x number of months (4) = $400 Cash-basis = $0

BACK EXAM: On May 1, 2012, Red's Basket Company purchased a one-year insurance policy for $12,000 ($1,000 per month). What is the amount of insurance expense in 2012 using accrual-basis versus cash-basis accounting?

Accrual-basis = $8,000; Cash-basis = $12,000

Cash's classification

Asset

BACK EXAM: The resources of a company are referred to as:

Assets

BACK EXAM: Which of the following represents an alternative form of the accounting equation?

Assets - Liabilities = Stockholders' Equity

Accounting equation

Assets = Liabilities + Stockholders' Equity

What type of information is contained in the balance sheet?

Assets, liabilities, and stockholders equity.

BACK EXAM: The following account balances were drawn from the records of Hatter's Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000 What is net income for Hatter's Tea Company?

B. $8,000 (REV - EXP)

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as: A. A trial balance B. An adjusted trial balance C. A post-closing trial balance D. An accounting trial balance

B. An adjusted trial balance

A company provided $1,500 of services to customers during the month of May. The customers paid in June. What would the impact of these transactions be during May on each of the following three items? A. Cash Balance Increases, Cash-Basis Net Income Increases, Accrual-Basis Net Income Increases. B. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, Accrual-Basis Net Income Increases. C. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, No Effect on Accrual-Basis Net Income. D. Cash Balance Increases, Cash-Basis Net Income Increases, No Effect on Accrual-Basis Net Income.

B. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, Accrual-Basis Net Income Increases.

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 is a component of common stock. D. Revenue should be recognized in the balance sheet.

B. Revenue should be recognized in the period earned.

BACK EXAM Geppetto Company owes Pinocchio Company $15,000. Geppetto would report this in its:

Balance Sheet

Making insurance payments in advance is an example of: A. An accrued expense B. An unearned revenue C. A prepaid expense D. An accrued revenue

C. A prepaid expense

The full set of procedures used to accomplish the FN Measurement/communication process of financial accounting is referred to as the: A Trial Balance B General Ledger C Accounting Cycle D Chart of Accounts

C. Accounting Cycle

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

BACK EXAM: Operating cash flows in the statement of cash flows represent:

Cash flows from revenue and expense activities

The two main functions of accounting are to:

Communicate information to investors and creditors AND measure business activities

After considering the following transactions, the amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____: 1. $1,500 of supplies purchased in previous period 2. $6,000 rent paid cash in advance 3. $10,000 loan repaid to bank (ignore interest) A. $6,000, $16,000 B. $6,000, $11,500 C. $1,500, $16,000 D. $1,500, $6,000

D. $1,500, $6,000

The primary purpose(s) of financial accounting is (are) to: A. Measure and record business transactions. B. Prepare federal and state tax returns. C. Communicate financial results to investors and creditors. D. Both measure and communicate financial information.

D. Both measure and communicate financial information

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. Retained Earnings B. Cash C. Accounts Payable D. Supplies

D. Supplies

BACK EXAM: On March 1, Granny Inc. purchases one year of rent for $6,000 ($500 per month). What is the appropriate adjusting entry for rent at the end of the year?

Debit Rent Expense $5,000; Credit Prepaid Rent $5,000

BACK EXAM: Which of the following is an example of a closing entry?

Debit Retained Earnings; Credit Supplies Expense

BACK EXAM: Huntsman Inc. hired six employees on Dec. 20. All employees worked through the end of the year, earning $6,000 in salaries. Payday is not until Jan. 5. What adjusting entry does Huntsman need to make on Dec. 31?

Debit Salaries Expense 6,000; Credit Salaries Payable 6,000

BACK EXAM: Suppose supplies at the beginning of the year equal $1,200. During the year, an additional $5,400 of supplies is purchased. At the end of the year, $1,400 of supplies remains. The adjusting entry for supplies would include:

Debit Supplies Expense for $5,200

Increase account with a debit

Dividends, Expenses, and Assets

BACK EXAM: The following account balances were drawn from the records of Hatter's Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000 What is ending retained earnings for Hatter's Tea Company?

E. 12,000 Beg balance + net income (rev-expenses) - dividends

BACK EXAM: When obtaining cash from signing a note with the bank, which of the following would be recorded?

E. Debit Cash

When a company incurs employee salaries but does not pay them, how will the basic accounting equation be affected? A. Stockholders' equity decreases B. Revenues decrease C. Expenses increase D. Liabilities decrease E. Two of the answers are correct

E. Two of the answers are correct

Lake ERIE

Earned Revenue Incurred Expenses Revenues are ONLY RECORDED WHEN EARNED. Expenses are ONLY RECORDED WHEN INCURRED.

Shareholders' equity arises primarily from amounts invested by shareholders and amounts ________.

Earned by the corporation

BACK EXAM: Under accrual-basis accounting, revenues are recorded when __________. Under cash-basis accounting, revenues are recorded when _________.

Earned; Cash is received

Internal transactions

Events that affect the financial position of the company but do not exchange with a separate economic entity. Do not include an exchange with a separate economic entity.

True or False? After closing entries are posted to the accounts in the general ledger, all asset and liability accounts have a balance of zero.

False; Assets and liabilities are permanent accounts.

True or False? Cash, inventory, supplies, and buildings are examples of liabilities.

False; They are assets.

Generally accepted accounting principles are abbreviated as:

GAAP

"Orders"

Generally means no accounting entry needed.

BACK EXAM: Which financial statement reports the details of a company's profitability over the previous 12 months?

Income Statement

Revenue is earned:

Increase (credit) revenue. Performs/provides service/renders services, etc.

Expense is incurred:

Increase (debit) expense. Used/consumed/expired OR Pay part of bill for current period.

Asset is recognized:

Increase asset "prepaid asset" Pay cash in advance.

BACK EXAM: Recording salaries owed but not yet paid would have what effect on the accounting equation?

Increase liabilities; Decrease stockholders' equity

Liability is recognized:

Increase liability "deferred revenue" Receiving cash in advance.

BACK EXAM: Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type?

Investing - purchase an office building

Operating Activities

Involves purchasing goods from suppliers, designing and manufacturing products, and selling products to customers. EX: Transactions related to revenues and expenses. EX: Sell goods to customers.

Investing activities

Involves the buying and selling of land, buildings, and equipment used in the business. EX: Transactions involving the purchase and sale of productive assets.

Creditor

Lends money to the company

Increase account with a credit

Liabilities, Stockholders' Equity, and Revenues

BACK EXAM: Which of the following accounts increase with a credit?

Liabilities, owners' equity, and revenues (DEALOR)

Notes payable's classification

Liability

"Borrow"

Liability is recognized (increase liability).

Financial accounting:

Maintains records of a company's operations and communicate information to external decision makers

What is included in the annual report?

Management discussion and analysis and note disclosures to the financial statements

Accountants' primary information-related roles are to:

Measure companies' activities AND communicate measurements of companies' activities to others

Revenues - Expenses =

Net income

What type of information is contained in the statement of cash flows?

Operating, investing, and financing activities.

Investor

Owns stock in the company

The two sources of stockholders' equity are amounts:

Paid in from shareholders AND earned by the corporation

Retained earnings

Profits earned by a company that have not been paid to stockholders

Financial accounting

Represents a company's primary means of communicating information to external users

Assets

Resources owned by a company

What type of information is contained in the income statement?

Revenues and expenses.

Revenues

Sales of goods or services to customers

BACK EXAM: Which of the following accounts is (are) considered to have a temporary balance?

Service Revenue

BACK EXAM: Which of the following transactions would cause an increase in both the assets and stockholders' equity of a company?

Services provided to a customer on account

The three most common forms of business organization are:

Sole proprietorship, partnership, and corporation

The financial statement that provides information about cash receipt and cash disbursements for the period is the:

Statement of cash flows

Retained earning's classification

Stockholders' equity

BACK EXAM: When preparing a bank reconciliation, a check outstanding would be:

Subtracted from the bank's cash balance.

BACK EXAM: At any given time, the amount of cash in the petty cash fund should equal:

The established balance of the fund less all vouchers written during the accounting period.

Income statement

The financial statement that summarizes revenues and expenses for a period of time. Reports revenue minus expenses Measures the profitability of the company.

Accounting equation is commonly referred to as

The fundamental model of business valuation

BACK EXAM: Which of the following best explains the meaning of stockholders' equity?

The resources owned by the company minus the amounts owed

Retained earnings represents:

The total net income earned over the life of the company that has not been distributed as dividends.

BACK EXAM: What is the primary importance of financial accounting?

To help investors and creditors to distinguish good companies from bad companies

BACK EXAM: What is one purpose for closing entries?

To transfer the balance of temporary accounts to Retained Earnings

External transactions

Transactions between the company and a separate company or individual. Transactions the firm conducts with a separate economic entity.

True or False? The Dividends account decreases with a credit and increases with a debit.

True.

Which of the following appears on the statement of stockholders' equity? (Select all that apply) a. Dividends b. Beginning balance of retained earnings c. Cash received during the accounting period d. Net income

a. Dividends b. Beginning balance of retained earnings d. Net income

Selling stock to an investor is a(n) a. Financing activity b. Operating activity c. Sales activity d. Investing activity

a. Financing activity

Which of the following items are reported on the balance sheet as liabilities? (Select all that apply). a. Wages and salaries payable b. notes payable c. supplies inventory d. cash received from a client

a. Wages and salaries payable b. notes payable

The two external users of financial accounting information that contribute financial resources to a company are: a. investors b. tax authorities c. creditors d. regulators

a. investors c. creditors

Which of these would be found on a company's balance sheet? Select all that apply. a. Sales revenue b. Equipment c. Notes payable d. Accounts receivable e. Depreciation expense

b. Equipment c. Notes payable d. Accounts receivable

Which of the following items are found on a balance sheet? (Select all that apply). a. Dividends b. Liabilities c. Revenue d. Assets e. Stockholders equity

b. Liabilities d. Assets e. Stockholders' equity

For a corporation, the owners' claims to the resources of a company are called: a. Assets b. Stockholders' equity c. Liabilities d. Revenues

b. Stockholders' equity

Which of the following financial statements shows a firm's financial position on a particular date? a. Statement of cash flows b. Statement of stockholders' equity c. Balance sheet d. Income statement

c. Balance sheet

Which of the following are operating activities? (Select all that apply). a. Purchasing plant and equipment b. Borrowing form creditors c. Paying salaries to employees d. Providing services to customers e. Paying advertising expenses

c. Paying salaries to employees d. Providing services to customers e. Paying advertising expenses

BACK EXAM: Which of the following is (are) a purpose of financial accounting? a. Calculate the taxes owed because of profitable business transactions b. Communicate business transactions to investors and creditors c. Measure business transactions d. Two of the above are correct e. All of the above are correct

d. Two of the above are correct

BACK EXAM: In an accounting journal entry: a. Total debits must equal total credits b. Debits are shown on top c. Credits are shown on bottom d. Two of the above are correct e. Answers a, b, and c are correct

e. Answers a, b, and c are correct

BACK EXAM Debits increase which of the following accounts: a. Assets b. Revenues c. Expenses d. Dividends e. Three of the above are correct

e. Three of the above are correct

BACK EXAM: What is a direct purpose of internal controls? a. Ensure a company will continue to exist for the foreseeable future b. Help managers determine which projects are likely to be more profitable. c. Improve the accuracy and reliability of accounting information d. Safeguard the company's assets e. Two of the above are correct

e. Two of the above are correct