ACC-101-EP Practice Exam B
Which of the following transactions records the collection of accounts receivable?
A credit to Cash and a credit to Accounts Receivable
What is indicated by a debit balance in the Income Summary account?
A net profit
When are adjusting entries prepared?
After a trial balance financial statements have been prepared
Which of the following is NOT a purpose of adjusting entries?
To apportion the proper amounts of revenue and expense to the current accounting period
What is true about the concept of materiality?
It involves only tangible assets.
Which of the following is NOT true about the information used in financial statements?
It is confidential and intended for use only by company management.
At the end of October, Flagship Marina receives a bill for fuel used in October. Payment is not due until November 30. What is true about this transaction?
It is recorded as a liability in October but not considered an expense until November.
What is true about collection of an accounts receivable?
It reduces total liabilities.
What is true about an adjusted trial balance?
It should show accumulated depreciation equal to depreciation expense.
What does a strong statement of financial position show?
Large amounts of liquid assets relative to the liabilities due in the near future
In which of the following accounting records is a transaction first recorded?
Ledger
Which principle states that revenue should be recognized at the time goods are sold or services rendered?
Matching
What effect will declaring a dividend have?
Net income will remain the same.
Which of the following is true about a balance sheet?
Owners' equity is always the first section listed because it is the most important to external users.
What is the fundamental purpose of a strong internal control structure?
To prevent fraud, theft, and embezzlement
What is the basic purpose of generally accepted accounting principles?
To provide a framework for financial reporting understood by the preparers and users of financial statements
What is the basic purpose of bookkeeping?
To record the financial transactions of an economic entity
Which of the following will occur if $9,600 cash and a $31,000 note payable are given in exchange for some office machines to be used in a business?
Total assets will increase
The collection of an account receivable is erroneously recorded by a debit to Cash and a credit to Accounts Payable. What will occur if this is not corrected?
Total liabilities will be overstated.
NO adjusting entry should consist of a debit to _______ and a credit to _______.
an expense; revenue
Retained earnings appears on
the income statement
Dolphin Company received $4,350 in fees during Year 1, 1/3 of which will be earned in Year 2. The rest was earned when the amount was received. How much should the company report as income in Year 1?
$1,450.00
Before any month-end adjustments are made, the net income of Bennett Company is $75,300. The following adjustments are necessary:Office supplies used = $3,090Services performed for clients but not yet recorded or collected = $3,570Interest accrued on note payable to bank = $2,970. After adjusting entries are made for these items, what will Bennett Company's net income be?
$72,810
Wilson Trucking, Incorporated reports the following account balances at January 1, Year 2 (shown in alphabetical order): Accounts Payable $ 210,000 Accounts Receivable 190,000 Buildings 470,000 Capital Stock 670,000 Cash 150,000 Equipment 310,000 Land 390,000 Notes Payable 510,000 Retained Earnings 120,000 On January 5, Year 2, Wilson Trucking collected $165,000 of its accounts receivable, paid $140,000 on its accounts payable, and paid $31,000 on its note payable. In a trial balance prepared on January 6, Year 2, what will the total of the CREDIT column be?
1,510,000= Accounts payable + Capital Stock + Notes payable + Retained earnings
Which of the following must be included in a journal entry that recognizes an expense?
A credit to Cash
How should a worksheet be viewed?
As a financial statement to assist managers in making decisions
In what order are financial statements typically prepared?
Balance sheet, income statement, statement of retained earnings
Which of the following will cause a decrease in owners' equity?
Distributions of assets to the owners and unprofitable operations
Which of the following is considered a return on investment?
Dividends
What is the main difference between financial accounting information and management accounting information?
Financial accounting information measures solvency rather than profitability.
In which of the following situations would a company record unearned revenue in May?
In May, it receives payment for work to be performed in June and July.
What is unearned revenue?
Income
Before it was closed, the Income Summary account had debits of $85,000 and credits of $75,000. What does the Income Summary reflect?
Income summary Account has a credit balance of $10,000 ($85000-$75000), Hence Option D is correct, Net Loss of $ 10,000.
Who performs audits of financial statements?
Independent certified public accountants
Which of the following best describes investors?
Individuals and enterprises that have ownership interest in a reporting entity
Which of the following would NOT appear on an income statement?
Insurance expense
Which of the following will NOT cause a change in the owners' equity of a business?
Purchase of land with cash
Which of the following relationships is the statement of retained earnings based on?
Retained Earnings + Net Income − Dividend
What does the NYSE require all listed companies to do?
Send financial statements directly to all users of financial information
What does return on equity measure?
Solvency and leverage
Which one of the following is NOT one of the three primary financial statements?
Statement of budgeting activities
Which of the following is NOT a general-purpose financial statements issued by a corporation?
Statement of financial position
Eton Corporation purchased a parcel of land in Year 1 for $190,000. In Year 10, it purchased a nearly identical parcel for $430,000. Eton valued these two parcels of land at a combined value of $860,000 in the balance sheet prepared at the end of Year 10. Which accounting principle was violated by reporting the land in this manner?
The cost principle
Which of the following is considered an adjusting entry?
The entry to pay outstanding bills
What is indicated by a trial balance that is out of balance?
There is not an equality of debit and credit amounts in the ledger.
What is true about the financial statements of a business entity?
They are considered the first step in the accounting process.
Which of the following best demonstrates the matching principle?
Using the equation: Assets = Liabilities + Owners' Equity
Closing entries would be prepared before
the opening balance sheet