Mod 1 Midterm

Which of the following is the principle that a business must report any business activities that could affect what is reported on the financial statements?

Full Disclosure Principle

Which of the following accounts does not increase with a debit entry?

Retained Earnings

Josh Bell Company has a 12/31 fiscal year end. Bell declared, but did not record, dividends on 12/30/19. The dividends will be paid to shareholders on 1/15/20. The consequence of these circumstances after the books are closed on 12/31/19 is that

Retained earnings are overstated and liabilities are understated.

That a business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally, is known as which of the following?

Separate Entity Concept

Which financial statement shows the financial performance of the company on a cash basis?

Statement of Cash Flows

Which of these statements is not one of the financial statements?

Statement of Owner Investments

0 / 1 pts The following information is provided by the Franco Harris Corporation: Beginning retained earnings $50,000 Ending retained earnings 70,000 Expenses 10,000 Revenue 50,000 Calculate Harris Corporation's dividends declared during the year

$20,000

Clemente Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Clemente's total assets increased by $80,000 and its total liabilities increased by $57,000 during the year, what is the amount of Clemente's owners' equity at the end of the year?

$243,000

Lincoln Corp. has bought a machine on Jan 1, 2030 for 39. It sold it on December 31, 2033 for 10. The machine is linearly depreciated over 10 years. The residual value is 10% of the purchase price. Calculate the gain or the loss associated with the second transaction? Indicate a loss with a negative number (e.g., - 10.5)

-15

On July 1, 2019, Allen Company signed a $100,000, one-year, 6 percent note payable. The principal and interest will be paid on June 30, 2020. How much interest expense should be reported on the income statement for the year ended December 31, 2019?

$3,000

The following information is provided by the Franco Harris Corporation: Beginning retained earnings $50,000 Ending retained earnings 70,000 Dividends declared and paid 10,000 Revenue 50,000 What is the net income for Harris Corp.?

$30,000

On April 1, 2016, SBD Corp. paid $120,000 for rent on warehouse space one year in advance. On October 1, 2016, SBD Corp. entered into a lease agreement to rent out a different warehouse it was no longer using. This agreement calls for SBD to receive $8,000 per month from the lessee, due and payable at the end of the 4-month lease term. At December 31, 2016, none of the rental payments from the lessee had yet been received. If SBD makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as prepaid rent and rent receivable, respectively?

$30,000 and $24,000

On January 1, 2029, the general ledger of Global Corporation included supplies of $1,000. During 2029, supplies purchased amounted to $5,000. A physical count of inventory on hand at December 31, 2029 determined that the amount of supplies on hand was $1,200. How much is the supplies expense for year 2029?

$4,800

Clemente Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Clemente total liabilities increased by $31,000 and its owners' equity decreased by $53,000 during the year, what was the amount of its total assets at the end of the year?

$428,000.00

Marcos Company reported the following items on its financial statements for the first year of operations ending December 31, 2015: Sales $ 560,000 Salary expense 40,000 Dividends 20,000 Cost of Goods sold 400,000 Interest expense 30,000 Income tax provision 25,000 How much will be reported as retained earnings on Marcos' balance sheet at December 31, 2015?

$45,000

Hoya Consultants had the following balance sheet amounts at the beginning of the year: Total assets $ 400,000 Total owner's equity 150,000 During the year, total assets increased by $100,000 and total liabilities increased by $40,000. Hoya also paid $30,000 in dividends. How much is net income for the year?

$90,000

During the audit of XT Company's 2029 financial statements, the auditors discovered that the 2029 ending inventory had been overstated by $8,000 and that the 2029 beginning inventory was overstated by $5,000. Before the effect of these errors, 2029 pretax income had been computed as $100,000. What should be reported as the correct 2029 pretax income?

$97,000

Trevor Williams Company borrowed $10,000 from Mike Trout National Bank on May 1, 2019. Interest on the note, which accumulates at 6% annually, is paid when the loan principal is repaid. The loan remains outstanding on June 30 when both the Williams Company's and the Trout National Bank close their books to prepare financial statements. Other than cash, Trout National Bank's balance sheet shows which of these amounts related to the loan?

An asset = $ 10,100

If a journal entry includes a debit or credit to the Retained Earnings account, it is most likely which of the following?

A closing entry

Which of these accounts commonly requires both debit and credit entries?

Accounts Receivable

Which set of accounts has the same type of normal balance?

Accounts payable, retained earnings

Easter Bunny Corporation prepared its annual financial statements for its shareholders for the fiscal year ending December 31, 2018. Record whether the transaction below for Easter Bunny Corporation overstated (O), understated (U), or correctly stated (C) total assets, total liabilities, stockholders' equity, and net income in 2018. Easter Bunny Corporation received $10,000 from a customer for services to be provided in 2019. Upon receiving this money, Easter Bunny debited cash and credited revenue. Easter Bunny made no further entries relating to this transaction.

Assets : C Liabilities :U Equity : O Net Income : O

Easter Bunny Corporation prepared its annual financial statements for its shareholders for the fiscal year ending December 31, 2018. Record whether the transaction below for Easter Bunny Corporation overstated (O), understated (U), or correctly stated (C) total assets, total liabilities, stockholders' equity, and net income in 2018. Easter Bunny Corporation failed to recognize amortization on its patents in the amount of $42,000.

Assets : O Liabilities :C Equity : O Net Income : O Cash Flows : O

KLA Corporation prepared its annual financial statements for its shareholders for the fiscal year ending December 31, 2019. Record whether the transaction below for KLA Corporation overstated (O), understated (U), or correctly stated (C) total assets, total liabilities, stockholders' equity, and net income in 2019. You must write "O", "U", or "C" in each blank for credit. KLA did not adjust its prepaid insurance account for the $1,000 of insurance coverage used in December 2019.

Assets : O Liabilities :C Equity : O Net Income : O Cash Flows : O

For the following transactions for Hoya Company in January of 2020, state whether the total effect of the transaction results in an increase, decrease, or has no effect on Hoya Company's assets, liabilities, equity, net income, and cash flows. Hoya purchased a truck by paying $5,000 cash and signing a $20,000 note payable.

Assets : increase Liabilities : increase Equity : no effect Net Income : no effect Cash Flows : decrease

For the following transaction for Tian Company in 2028, state whether the total effect of the transaction results in an increase, decrease, or has no effect on Tian Company's assets, liabilities, equity, and net income. Tian Company paid a total of $3,500 cash for oil changes for every delivery truck in its fleet.

Assets :decrease Liabilities : no effect Equity : decrease Net Income : decrease

For the following transaction for Tian Company in 2028, state whether the total effect of the transaction results in an increase, decrease, or has no effect on Tian Company's assets, liabilities, equity, and net income. Tian Company recognized $1,000 of impairment on its manufacturing equipment.

Assets :decrease Liabilities : no effect Equity : decrease Net Income : decrease

The accounting equation is expressed as ________.

Assets = Liabilities + Owner's Equity

For the following transactions for Hoya Company in January of 2020, state whether the total effect of the transaction results in an increase, decrease, or has no effect on Hoya Company's assets, liabilities, equity, net income, and cash flows. Hoya collected $9,000 in sales tax.

Assets increase Liabilities "increase" Equity no effect Net Income no effect Cash Flows increase

An alternative name for the statement of financial position is

Balance Sheet

How much net cash did Hoya receive from issuing & repaying debt during 2015?

Change in notes payable - ST: 8 - 10 = - 2k Change in notes payable - LT: 60 - 69 = - 9k Total change: - 2 - 9 = -11 K

Owners have no personal liability under which legal business structure?

Corporation

Also known as the historical cost principle, ________ states that everything the company owns or controls (assets) must be recorded at their value at the date of acquisition.

Cost Principle

Which of the following journal entry descriptions correctly describes Kline Inc.'s closing process for total expenses on December 31, 2015?

Debit Retained Earnings for $12,950, and Credit Expenses for $12,950

Which of the following would be reported on a statement of stockholders' equity?

Dividends

Which of these accounts would be present in the closing entries?

Dividends

Assume that Wayne Gretzky has a 12/31 fiscal year end. On 12/29/2016, Sears Company paid Gretzky $250,000 (in cash) to appear in TV commercials during the two years encompassing 1/1/2017 to 12/31/2018. Half of the advertisements will be shown during fiscal 2017 and half will be shown during fiscal 2018. What is the effect of the 12/29/2016 payment on Gretzky's 12/31/2016 working capital?

Gretzky's 12/31/2016 working capital is $125,000 greater than if the 12/29/2016 transaction had not been made.

For each of the following transaction(s) that KLA engaged in during 2015, state the effect on KLA's assets, liabilities and stockholders' equity. KLA declared a dividend of $2,000 which will be paid in 30 days.

Increase in Dividends Payable $2,000 & decrease in Retained Earnings $2,000

Which of these items decreases with a credit entry?

Inventory

Which balance sheet accounts are most affected by financing activities?

Longterm liabilities and stockholders' equity

Which of these are items found in the statement of stockholders' equity?

Net Income & Retained Earnings

Which of the following statements is true?

Tangible assets have physical substance.

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as repairs and maintenance expense, which of the following statements is true?

The current year's net income will be higher and future depreciation expense will be higher.

Tomlin Manufacturing, which has a 12/31 fiscal year-end, purchased a manufacturing machine for $105,000 on July 1, 2017. Tomlin estimates a salvage value = $5,000 and a 10 year useful life to the machine at the time of purchase. Tomlin continued to own (and use) the machine through 12/31/18. The 12/31/18 carrying (book) value of the machine is

The yearly depreciation is: ($105,000-$5,000)/10 years = $10,000 per year With only 1.5 years having passed, the carrying value is: $90,000 ($105,000 - ($10,000*1.5)).

Which of the following accounting records is the main source of information used to prepare the financial statements?

Trial Balance

During 2015, Rand issued $16 million of stock, earned revenues of $64 million, and declared and paid dividends of $4 million. What was the amount of total expenses that Rand recorded during fiscal year 2015? $54 million

We know that Equity (E) = Contributed Capital + Retained Earnings (RE) Equity in 2014 = 180 -50 = 130 Equity in 2015= 220 - 8- = 140 Change in Equity = + 10 The change in Contributed Capital was + 16. Hence, the change in Retained Earnings must have been - 6 We know that RE at the beginning + Net Income (NI) - Dividends = RE at the end. Here, the change in Retained Earnings was -6 and the dividend - 4. Hence, the Net Income was -2. We know that NI = Revenues - Expenses (ignoring the gains and losses). Hence, Expenses = Revenues + NI. Here, Expenses = 64 +2 = 66.

Josh Bell Company, which has a 12/31 fiscal year end, both declared and paid dividends on 12/30/19. The declaration and payment was not recorded before the books closed on 12/31/19. The consequence of these circumstances is that

Working capital and owner's equity are overstated.

What adjusting journal entry is needed to record depreciation expense for the period?

a debit to Depreciation Expense; a credit to Accumulated Depreciation

The step-by-step process to record business activities and events to keep financial records up to date is ________.

accounting cycle

If an adjustment includes an entry to a payable or receivable account, which type of adjustment is it?

accrual

Revenue earned but not yet collected is an example of which of the following?

accrued revenue

All of the following increase owner's equity except for which one?

acquisitions of assets by incurring liabilities

If a journal entry includes a debit or credit to the Cash account, it is most likely which of the following?

an ordinary transaction entry

What is the impact on the accounting equation when a sale occurs?

both sides increase

Unearned service revenue occurs when which of the following occurs?

company receives cash from a customer before performing the service

The three heading lines of financial statements typically include which of the following?

company, statement title, time period of report

Which of the following accounts' balance would be a different number on the Balance Sheet than it is on the adjusted trial balance?

retained earnings

Which of the following pairs increase with credit entries?

unearned service revenue and accounts payable