ba215 midterm 1

The resources a business owns are called

assets

FOB shipping point

buyer pays delivery

buildings

fixed asset

equipment

fixed asset

land

fixed asset

Gross Profit %

gross profit / sales

Where to find revenues & expenses =

income statement

Which of the following statements is NOT true about deferred expenses? a. Deferred expenses are initially recorded as assets b. An example of a deferred expense is prepaid insurance c. Over time, deferred expenses become expenses on the income statement d. Adjusting entries related to deferred expenses involve an increase in total assets

Adjusting entries related to deferred expenses involve an increase in total assets

Which of the following statements is NOT true about deferred expenses?a. Deferred expenses are initially recorded as assets b. An example of a deferred expense is prepaid insurance c. Over time, deferred expenses become expenses on the income statement d. Adjusting entries related to deferred expenses involve an increase in total assets

Adjusting entries related to deferred expenses involve an increase in total assets

Which of the following is NOT an administrative expense? a. Usage of office supplies b. Depreciation on office equipment c. Salaries to company's accountant d. Advertising

Advertising

Which of the following is nat an example of a manufacturing business? a. general motors b. apple inc c. amazon.com d. Hershey's

Amazon.com

Accounting equation:

Assets = liabilities + stockholder's equity

Paying dividends affects which of the following financial statement elements? a. Asset and liabilities b. Assets and stockholder's equity c. Liabilities and stockholder's equity d. Only assets

Assets and stockholder's equity

A company performed services on account, how does this affect the financial statement elements? a. Assets and stockholder's equity both increase b. Assets increase, stockholder's equity decreases c. Assets and stockholder's equity both decrease d. Only assets increase

Assets and stockholder's equity both increase

Which of these accounts does not appear in the income statement?a. Fees earned b. Dividends c. Miscellaneous Expense d. Utilities Expense

Dividends

If the seller pays for the delivery costs, what is the delivery term stated as? a. FOB Seller b. FOB Shipping Point c. FOB Destination d. FOB Buyer

FOB Destination

Retained earnings will be increased by the amount in the dividend account T/F

False

The balance sheet is the first financial statement that you prepare T/F

False

The stockholders' equity of a company should equal the sum of its total assets and total liabilities T/F

False

The following principle: "When preparing financial statements, assume that a company will continue in business indefinitely" relates to which principle? a. Cost concept b. Going concern concepts c. Entity concept d. The revenue you received from rent

Going concern concept

Flow, Inc. received cash from fees earned. How does this transaction affect the Statement of Cash Flows? a. Increase cash from investing activities b. Increase cash from operating activities c. No effect on the statement of cash flows d. Increase cash from financing financing activities

Increase cash from operating activities

Which of the following would NOT be considered part of property, plant and equipment on the balance sheet? a. Building b. Machine c. Inventory d. Land

Inventory

Stockholders' equity will be reduced by: a. An increase in revenues b. Payment of dividends c. Issuance of bonds d. Owner's investments

Payment of dividends

Which of these activities would be considered an investing activity? a. Purchasing land b. Issuing common stock c. Paying salaries d. Collecting cash from sales

Purchasing land

Which of the following is an example of deferred revenue? a. Performing services prior to receiving cash b. Selling inventory on account c. A customer paying back a loan d. Receiving advance rent from a tenant.

Receiving advance rent from a tenant

Which of the following is a current liability? a. A bank loan the company took out, due in 2 years b. A bank loan the company took out, due in 8 months c. A bank loan the company took out, due in 1 month d. Both B and C

Both B and C

Which of the following is NOT an intangible asset? a. Patents b. Trademarks c. Building d. Copyright

Building

Which of the following accounts is a stockholders' equity account? a. Capital stock b. Prepaid insurance c. Cash d. Accounts payable

Capital stock

Which 2 accounts are always up to date in a perpetual inventory system? a. Inventory and purchases b. Purchases and purchase discounts c. Inventory and cost of merchandise sold d. Purchases and cost of merchandise sold

Inventory and cost of merchandise sold

A company paid expenses of $1,000 with cash. Which of the following financial statement elements will NOT be affected by this transaction? a. Assets b. Liabilities c. Stockholder's Equity d. All 3 elements will be affected

Liabilities

Net Income =

Net Income = revenues - expenses

Which of the following is an example of accrued expense? a. Supplies on hand b. Salary owed but not yet paid c. A two-year premium paid on a fire insurance policy d. Fees received but not yet earned

Salary owed but not yet paid

Gross Profit =

Sales - COGS

Depreciation on company's store equipment is an example of ______: a. Selling expenses b. Administrative expenses c. Other expenses d. Cost of Goods Sold

Selling Expenses

Which of the following activities would not be a financing activity?a. Paying dividends b. Taking out a bank loan c. Paying cash to retire a notes payable d. Selling an old machine

Selling an old machine

Which of these are true about sole proprietorships? a. Sole proprietorships are easier and costs less to set up than corporations b. Sole proprietorships have limited liability. c. It is easier to obtain financing using a sole proprietorship than corporations d. Sole proprietorship are organized as a separate legal entity.

Sole proprietorships are easier and costs less to set up than corporations

If inventory is delivered from the seller to the buyer with delivery terms FOB Destination, who possesses legal title to the inventory as it is being delivered? a. The buyer b. The seller c. Both parties own 50% d. The truck driver

The seller

What does unearned revenue (rent) represent a. The amount of rent you expect to receive from a tenant b. The of rent you expect to pay to a landlord c. The value of the rental space that you owe to a tenant d. The revenue you received from rent

The value of the rental space that you owe to a tenant

A company purchased $500 of supplies with cash. How does this affect total assets? a. Total assets will increase $500 b. Total assets will not change. c. Total assets will decrease $500 d. Total assets will increase $1,000

Total assets will not change

A ____ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded a. Set of rules b. Control c. Transaction d. Framework

Transaction

The accrual basis of accounting requires revenue to be recorded when the service is performed T/F

True

Using accrual accounting, revenue is recorded and reported only: a. When services are rendered without regard to when cash is received b. If cash is received after services are rendered c. When cash is received without regard to when services are rendered d. When cash is received before services are rendered

When services are rendered without regard to when cash is received

Cash

current asset

accounts receivable

current asset

inventory

current asset

prepaid expense

current asset

supplies

current asset

Accounts payable (30 days) NO INTEREST

current liability

Salaries payable

current liability

Unearned revenue

current liability

Notes payable

current liability / long-term liability

FOB destination

seller pays delivery