acc hell midterm

Which of the following is an example of a clearing account?

Income Summary.

Sandy Soong opened a small café, which she called the Song Bistro. During the first week, she purchased food for $2,500 on account from The Wholesale Food Co. How would this transaction be reflected in the accounting equation?

Increase Food Inventory and Increase Accounts Payable

Which of the following statements best describes the accounting principle of objective evidence?

It requires supporting documents for accounting transactions whenever possible.

The Wages Payable account is classified as which one of the following?

Liability

You total the credits and debits for a certain account and find that the account carries a debit balance. All of the following types of accounts typically carry a debit balance except:

Liability accounts

Liabilities that present obligations expected to be paid beyond the next twelve months from the date of the balance sheet are called:

Long-Term Liabilities

Your assistant has just paid the property insurance bill premium of $60,000 that covers a three-year period. The $60,000 cash disbursement is recorded as insurance expense. This violates the _____ principle.

Matching

Which of the following groups would be considered internal users of a company's income statement?

Operation managers

The Expenses section of an income statement includes which of the following?

Outflows related to the accounting period and expenses that were incurred in the process of producing revenue

The owner's investments in the owner's company are classified as which one of the following?

Owner's Equity

Which of the following procedures involves transferring amounts recorded in the general journal to ledger accounts?

Posting

Which of the following in an example of an accounting adjustment in which previously recorded assets become expenses?

Prepaid Rent decreases and Rent Expense increases

Which of the following steps in the accounting cycle is performed immediately before preparing adjusting entries?

Preparing a trial balance.

The class of assets on the balance sheet that includes land, buildings, and furnishings that are in use is:

Property and Equipment.

Which of the following would be included in the Investments category on the balance sheet?

Property not currently used in operations.

The Interest Income account is classified as what type of an account ______ and the normal balance for this account is __________.

Revenue account and the normal balance is a credit

All of the following are balance sheet accounts except:

Revenue accounts

Regardless of the size of an operation's accounting department, the diversity of its responsibilities, or the number and types of reports produce, the accounting staff is responsible for providing:

Service

Hospitality accounting staff members prepare a trial balance in order to:

Test the equality of debits and credits

To operate your business, you have taken out a load from Big Bank Inc. The loan was for $10,000 at 10% annual interest. Although you will make loan payments every six months, you need to estimate the monthly interest payment and record it. For the purposes of this example, assume that each month has 30 days and there are 360 days in a year. What will be the monthly interest payment and how will it be recorded?

The monthly interest of $83.33 will be recorded as a debit to the Interest Expense account and a credit to the Interest Payable account.

Hospitality managers are held responsible primarily for:

The profitability of the operation they manage.

Which of the following serves as a link between the income statement and the balance sheet?

The statement of owners' equity.

On which of the following financial statements would you expect to find a line item for correcting errors that were made in a previous financial statement?

The statement of retained earnings

Which of the following best describes the limitations of the balance sheet?

They reflect an operation's financial position only at a particular moment. They fail to reflect many elements of value to hospitality operations, such as people. They do not reflect current values for some assets. Several Balance Sheet items are estimates based on judgement.

The branch of accounting that involves reviewing and evaluating documents, records, and control systems is called:

Auditing

Which of the following financial statements would show how quickly a hospitality operation could convert assets into cash?

Balance Sheet

Accounts that record accumulated depreciation are shown on the:

Balance sheet as deductions from assets

Statement 1: Earnings per share is calculated only for corporations. Statement 2: If the Restaurant company achieved earnings per share of $5 last accounting period and it has 5,000 shares outstanding, Net Income for the Restaurant was $25,000 for the last accounting period.

Both statements are true

The Accounts Receivable account is classified as which one of the following?

Asset

Which of the following kinds of accounts would appear in a general ledger?

Asset accounts. Drawing accounts. Owners' accounts.

Revenue from cash sales ultimately affects which two balance sheet accounts?

Assets and Owner's Equity.

What happens to the fundamental accounting equation when the sole proprietor of a business invests more cash in it?

Assets increase, liabilities remain the same, and owner's equity increases

If an accountant fails to make adjusting entries for utility service payments that have not yet been made:

Assets will be understated.

The Event Company has just purchased new equipment for $60,000. The new equipment has an estimated useful life of five years with estimated value of $10,000 at the end of its useful life. Using the straight-line depreciation method, estimate the annual depreciation.

$10,000

To open your business, you will need to purchase equipment costing $200,000. This life of this piece of equipment is estimated at 10 years and you expect to use straight line depreciation. At this time, it is estimated that the equipment will have no value at the end of the 10 years. Calculate the depreciation expense for the first year.

$20,000.

You are asked to prepare the 2018 Statement of Owner's Equity for Hotels Incorporated. The Net Income for 2016 was $30,000. The Dividends Paid during 2018 were $10,000 and the Dividends Declared were $15,000. The balance in Retained Earnings as of January 1, 2018 was $25,000. What is the December 31, 2018 Balance shown on the Statement of Retained Earnings?

$40,000 ($25,000 + $30,000 - $15,000)

The Wages Payable account is classified as what type of an account ______ and the normal balance for this account is __________.

A Liability account and the normal balance is a credit.

You are preparing a financial statement and you need the balances of the owners' capital and drawing accounts. Which statement are you most likely preparing?

A Statement of Owners' Equity

Which of the following events would be recorded as an accounting event?

A guest purchases a meal in a food outlet

Which of the following adjustments is an example of an accrual adjustment?

A liability/expense adjustment involving utility expenses

Telephone services costs your hotel $1,000 per week. The business pays its phone service bill on the fifteenth day of each month, but it prepares its financial statements at the end of each month. Which of the following types of adjustments is required to ensure the accuracy of the hotel's financial statements?

A liability/expense adjustment.

The Uniform System of Accounts for the Lodging Industry, could be described as any of the following except:

A set of tables that indicate how much net income a property can expect to earn each year

Statement 1: Management is held accountable primarily for operations (revenues and expenses) and only secondarily (if at all) for gains and losses. Statement 2: The Rooms Department and Food Department are commonly called profit centers whereas the departments which provide services to profit centers, such as accounting, human resources are called service centers.

Both statements are true

Statement 1: The Allowance for Doubtful Accounts amount is shown on the balance sheet in the Current Assets section. Statement 2: The Allowance for Doubtful Account is an example of a Contra-Asset account.

Both statements are true

Statement 1: The income statement, complete with all departmental statements, is considered the most useful financial statement for management. Statement 2: The income statement shows four major elements: revenues, expenses, gains, and losses.

Both statements are true.

The food inventory is generally valued at its cost at the end of each year. However, this year it is written down at its market value because the market value is less than cost. The valuing of food inventory at the lower of cost or market is according to the________principle.

Conservatism

The members of The Restaurant team are paid every two weeks and the last pay period included up through September 28th. When the financial statements were prepared on October 1st, the accounting team realized that it was necessary to record accrued wages for two days (September 29 and September 30). Daily wages are estimated at $500. Determine the amount of wages payable and record the adjusting entry for that month. Which of the following best describes the correct entries?

Debit Wages Expense for $1,000 and Credit Accrued Wages Payable for $1,000

All of the following are considered current liabilities except:

Deferred Income Taxes.

Which of the following is an example of a temporary account?

Depreciation Expense. Rooms Revenue. Advertising.

All of the following items are shown on the balance sheet of a hospitality company except:

Employee Training Expenses

You are making several entries into the general journal where you serve as an accountant. The main difference between entries for routine business transactions and adjusting entries is that:

Entries for business transactions are made more often than adjusting entries

The generally accepted accounting principle of matching requires that:

Expenses be matched with the revenues they generate

You have just purchased a new oven with a bank note. Which accounts are affected, what is the normal balance for each account, and indicate whether the transaction is a debit or credit to that account?

First account: Equipment, the normal balance is a debit, and the transaction requires a debit. Second account: Notes Payable, the normal balance is a credit, and the transaction requires a credit.

Rent, property taxes, and insurance are all independent of hotel occupancy rates; they vary only with the passage of time. For this reason, these expenses are called:

Fixed charges

Which of the following statements best summarizes the role of footnotes on a balance sheet?

Footnotes should explain balance sheet figures and help users interpret the balance sheet.

The Haunted Hotel, in addition to including its depreciation expense on the income statement, mentions its method of depreciation and the estimated lives of its property and equipment in a footnote. This is based on the ________ principle.

Full Disclosure

The Club sold a van for $15,000 to raise cash. The van was originally purchased for $40,000 and the accumulated depreciation was $30,000. You will have to record a _______ of _______ on the sale of this van.

Gain; $5,000

Which of the following statements about consolidated financial statements is true?

Generally, most of the voting stock of a subsidiary should be owned by the holding company or by the same interests if the associated companies' financial statements are to be combined.

T-accounts are so named because of:

their appearance

Why do accountants close accounts?

to consolidate revenues and expenses into one net figure