practice exam 1

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,250; Prepaid Insurance, $550; Equipment, $36,700 and Cash, $40,900. On the same date, SloMo owed the following creditors: Simpson Supply Company, $12,500; Allen Office Equipment, $9,750.

22250 Liabilities = Simpson Supply Company, $12,500 + Allen Office Equipment, $9,750 = $22,250.

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,250; Prepaid Insurance, $550; Equipment, $36,700 and Cash, $40,900. On the same date, SloMo owed the following creditors: Simpson Supply Company, $12,500; Allen Office Equipment, $9,750.

79400 Assets = Accounts Receivable, $1,250 + Prepaid Insurance, $550 + Equipment $36,700 + Cash, $40,900 = $79,400.

Identify the form of business that is considered a separate legal entity.

A CORPORATION

Just before Johnson Laboratories opened for business, Howard Johnson, the owner, had the following assets and liabilities. Cash $ 41,400 Laboratory Equipment 76,500 Laboratory Supplies 7,700 Loan Payable 16,000 Accounts Payable 10,100 Determine the totals that would appear in the firm's fundamental accounting equation.

Assets $125,600 Liabilities $26,100 Owner's Equity $99,500

The fundamental accounting equations for several businesses follow. Supply the missing amounts.

Assets = Liabilities + Owner's Equity 1. $27,100 = $5,210 + $21,890 2. $23,500 = $4,830 + $18,670 3. $48,375 = $38,150 + $10,225 4. $36,200 = $4,050 + $32,150 5. $54,300 = $29,350 + $24,950

The Copy Center had the transactions listed below during the month of June. TRANSACTIONS John Amos started the business with a cash investment of $59,000. Purchased equipment for $21,500 on credit. Performed services for $3,000 in cash. Purchased additional equipment for $4,500 in cash. Performed services for $5,000 on credit. Paid salaries of $4,400 to employees. Received $3,100 cash from charge account customers. Paid $12,600 to a creditor on account. Show how each transaction would be recorded in the accounting equation. (Enter decreases to account balances with a minus sign.)

Assets = Liabilities + Owner's Equity Cash + Accounts Receivable + Equipment = Accounts Payable + John Amos, Capital + Revenue - Expenses 1. $59,000 + + = + $59,000 + - 2. + + 21,500 = 21,500 + + - 3. 3,000 + + = + + 3,000 - 4. (4,500) + + 4,500 = + + - 5. + 5,000 + = + + 5,000 - 6. (4,400) + + = + + - 4,400 7. 3,100 + (3,100) + = + + - 8. (12,600) + + = (12,600) + + - Totals $43,600 + $1,900 + $26,000 = $8,900 + $59,000 + $8,000 - $4,400

At the beginning of September, Selena Cantu started Cantu Wealth Management Consulting, a firm that offers financial planning and advice about investing and managing money. On September 30, the accounting records of the business showed the following information. Cash $ 67,200 Accounts Receivable 9,000 Office Supplies 7,800 Office Equipment 76,000 Accounts Payable 12,400 Selena Cantu, Capital, September 1, 2019 54,400 Fees Income 156,800 Advertising Expense 14,000 Salaries Expense 33,000 Telephone Expense 2,600 Withdrawals 19,000

CANTU WEALTH MANAGEMENT CONSULTING Income Statement Month Ended September 30, 2019 Revenue Fees income $156,800 Expenses Advertising expense $14,000 Salaries expense 33,000 Telephone expense 2,600 Total expenses 49,600 Net income $107,200

An independent accountant who is licensed by the state and provides accounting services to the public for a fee is a

CPA

The following T accounts show transactions that were recorded by Residential Relocators, a firm that specializes in local housing rentals. The entries for the first transaction are labeled with the letter (a), the entries for the second transaction with the letter (b), and so on. Cash (a) 178,000 (b) 34,000 (d) 18,000 (e) 580 (g) 1,800 (h) 9,800 (i) 3,800 Equipment (c) 68,000 Accounts Receivable (f) 10,400 (g) 1,800 Accounts Payable (c) 68,000 Supplies (b) 34,000 Wade Wilson, Capital (a) 178,000 Fees Income (d) 18,000 (f) 10,400 Telephone Expense (e) 580 Wade Wilson, Drawing (i) 3,800 Salaries Expense (h) 9,800

Cash $149,620 Accounts Receivable $8,600 Supplies $34,000 Equipment $68,000 Accounts Payable $68,000 Wade Wilson, Capital $178,000 Wade Wilson, Drawing $3,800 Fees Income $28,400 Telephone Expense $580 Salaries Expense $9,800

Which of the following decreases owner's equity?

Expenses

Which of the following types of accounts normally have debit balances?

Expenses and assets

A company issues periodic reports called

FINANCIAL STATMENTS

Which of the following groups contain only accounts that normally have credit balances?

Fees Income and John Smith, Capital

Which statement below represents what GAAP stands for?

General Accepted Accounting Principles.

Derrick Wells decided to start a dental practice. The first five transactions for the business follow. Derrick invested $81,000 cash in the business. Paid $21,000 in cash for equipment. Performed services for cash amounting to $8,100. Paid $2,900 in cash for advertising expense. Paid $2,100 in cash for supplies. (1) Select which two accounts are affected in each of the above transactions. (2&3) Post the above transactions into the appropriate T accounts.

PART ONE ransaction 1 Cash Derrick Wells, Capital Transaction 2 Equipment Cash Transaction 3 Cash Fees income Transaction 4 Advertising expense Cash Transaction 5 Supplies Cash PART 2 Cash Equipment (1) 81,000 21,000 (2) (2) 21,000 (3) 8,100 2,900 (4) 2,100 (5) Bal. 21,000 Bal. 63,100 Fees Income Advertising Expense 8,100 (3) (4) 2,900 Bal. 8,100 Bal. 2,900 Supplies Derrick Wells, Capital (5) 2,100 81,000 (1) Bal. 2,100 Bal. 81,000

Which of the following accounts is not a permanent account?

Salaries Expense

An act passed in response to the wave of corporate accounting scandals is the

Sarbanes-Oxley Act.

All financial statements submitted to the SEC by publicly owned corporations must include an auditor's report prepared by

an independent certified public accountant.

The form of a business organization that is not affected by the withdrawal or death of an owner and can continue indefinitely is the

corporation

Modern products paid cash to a creditor. To record this transaction, the accountant would:

debit Accounts Payable and credit Cash.

The Financial Accounting Standards Board is responsible for

developing generally accepted accounting principles.

The normal balance of an account is the:

increase side of the account.

The financial activities of a business and the financial activities of the owners should be

kept totally and completely separate.

When J. Simmons, the owner, invests in her business, the transaction would be entered on the:

right side of the J. Simmons, Capital T account.

The government agency that has final authority over the financial reporting of publicly owned corporations is the

securities and exchange commission