ACC

WP Company had the following transactions during 2020: Sales of $15,000 on account Collected $5,000 for services to be performed in 2021 Paid $2,500 cash in salaries for 2020 Purchased airline tickets for $1,000 in December for a trip to take place in 2021 What is WP's 2020 net income using accrual accounting? a.$12,500 b.$6,500 c.$7,500 d.$11,500

a.$12,500

If total liabilities decreased by $4,000, then a.Assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. b.Assets must have increased by $4,000. c.Assets and stockholders' equity each increased by $2,000. d.Stockholders' equity must have decreased by $4,000.

a.Assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000.

Closing entries: a.Cause the revenue and expense accounts to have zero balances. b.Are prepared before the financial statements. c.Summarize the activity in every account. d.Reduce the number of permanent accounts.

a.Cause the revenue and expense accounts to have zero balances.

The Harris Company purchased equipment for $15,000 on December 1. It is estimated that the equipment will last five years and have a salvage value of $-0- at the end of the five years. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: a.Debit Depreciation Expense, $250; credit Accumulated Depreciation, $250. b.Debit Depreciation Expense, $3,000; credit Accumulated Depreciation, $3,000 c.Debit Depreciation Expense, $12,000; credit Accumulated Depreciation, $12,000 d.Debit Equipment, $15,000; credit Accumulated Depreciation, $15,000

a.Debit Depreciation Expense, $250; credit Accumulated Depreciation, $250.

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: Select one: a.Debit Rent Expense, $4,000; credit Prepaid Rent, $4,000 b.Debit Rent Expense, $20,000; credit Prepaid Rent, $20,000 c.Debit Rent Expense, $24,000; credit Prepaid Rent, $24,000 d.Debit Prepaid Rent, $4,000; credit Rent Expense, $4,000

a.Debit Rent Expense, $4,000; credit Prepaid Rent, $4,000

Breeze Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a.Debit Supplies Expense, $4,500; credit Supplies, $4,500. b.Debit Supplies, $4,500; credit Supplies Expense, $4,500 c.Debit Supplies Expense, $2,500; credit Supplies, $2,500 d.Debit Supplies, $2,500; credit Supplies Expense, $2,500.

a.Debit Supplies Expense, $4,500; credit Supplies, $4,500.

The double-entry system requires that each transaction must be recorded a.In at least two different accounts. b.In two financial statements. c.First as an asset and then as a revenue. d.In both the General Journal and the General Ledger.

a.In at least two different accounts.

Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Paid rent for the current month. Collected cash from customers on account. Paid the balance due on an accounts payable. How many of these five transactions increased the given company's total assets? a.Two b.Three c.Five d.One e.Four

a.Two

Using accrual accounting, expenses are recorded and reported only: a.When they are incurred whether or not cash is paid b.When they are incurred and paid at the same time. c.If they are paid before they are incurred. d.If they are paid after they are incurred

a.When they are incurred whether or not cash is paid

Howard Company had a transaction that caused a $5,000 increase in both total assets and total liabilities. This transaction could have been a(n) a. Investment of $5,000 cash in the business by the stockholders. b. Purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance. c. Repayment of a $5,000 bank loan. d. Purchase of office equipment for $5,000 cash.

b. Purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance.

JayHawk Company began the year with $126,000 in its Common Stock account and a debit balance in Retained Earnings of $54,000. During the year, the company earned net income of $69,000 and declared and paid $9,000 of dividends. In addition, the company sold additional common stock amounting to $33,000. Based on this information, what should be the ending total of all stockholders' equity accounts? a.$123,000 b.$165,000 c.$249,000 d.$231,000

b.$165,000

Equipment costing $20,000 is purchased by paying $5,000 cash and signing a note for the balance owed. The journal entry should include a a.Debit to Cash for $5,000 b.Credit to Notes Payable for $15,000 c.Credit to Equipment for $20,000 d.Credit to Notes Receivable for $15,000

b.Credit to Notes Payable for $15,000

Issuing shares of stock in exchange for cash is an example of a(n) a.Operating activity b.Financing activity c.Inactivity d.Investing activity

b.Financing activity

James & Younger Corporation purchased a one-year insurance policy on March 1, 2020 for $42,000 and recorded it as a Prepaid Insurance. The insurance policy is in effect from March 2020 through February 2021. If the company neglects to make the proper year-end adjusting entry on December 31, 2020: a.Net income and assets will be overstated by $7,000 b.Net income and assets will be overstated by $35,000 c.Net income and assets will be understated by $35,000 d.Net income and assets will be understated by $7,000

b.Net income and assets will be overstated by $35,000

If a company pays dividends of $10,000, a. Net income will be reduced by $10,000. b. Retained earnings will be reduced by $10,000. c. Both retained earnings and stockholders' equity will be reduced by $10,000. d. Stockholders' equity will be reduced by $10,000.

c. Both retained earnings and stockholders' equity will be reduced by $10,000.

Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? a.Utilities Expense and Notes Payable b.Service Revenue and Equipment c.Dividends and Rent Expense d.Prepaid Insurance and Interest Payable

c.Dividends and Rent Expense

A corporation has which of the following set of characteristics? a.Simple to set up and maintains control with founder b.Shared control, tax advantages, increased skills and resources c.Easier to transfer ownership and raise funds, no personal liability d.Harder to raise funds and gives owner control

c.Easier to transfer ownership and raise funds, no personal liability

Consider the following eight accounts: Accounts Payable, Insurance Expense Prepaid Rent, Common Stock Salaries, Payable Dividends Supplies, Deferred Revenue How many of these accounts have a normal credit balance? a.Five b.Two c.Four d.Six e.Three

c.Four

A chart of accounts for a business firm a.Shows the balance of each account in the general ledger b.Is a graph c.Lists the accounts in the general ledger d.Indicates the amount of profit or loss for the period.

c.Lists the accounts in the general ledger

Which of the following accounts will reflect the account's beginning balance on the adjusted trial balance? a.Cash b.Unearned Revenue c.Retained Earnings d.Prepaid rent

c.Retained Earnings

Adjusting entries are: a.Made to balance sheet accounts only. b.Made whenever management desires to change an account balance. c.Typically required before financial statements are prepared. d.Not necessary if the accounting system is operating properly.

c.Typically required before financial statements are prepared.

Which of the following is not an advantage of the corporate form of business organization? a. Easy to raise funds b. No personal liability c. Easy to transfer ownership d. Favorable tax treatment

d. Favorable tax treatment

Brokaw Industries borrows $40,000 and signs a 6%, 6-month note payable on September 1, 2021. How much interest expense will Brokaw report in its 2022 financial statements? a.$2,400 b.$800 c.$1,600 d.$400 e.$-0-

d.$400

On March 1, 2022, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 1? Why or why not? a.No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known b.Yes, the company is now obligated to pay the employee, thus that event must be recorded. c.Yes, failure to record the event would cause the financial statements to be misleading d.No, hiring an employee is an important event; however it is not an economic event that should be recorded.

d.No, hiring an employee is an important event; however it is not an economic event that should be recorded.

Under accrual accounting, the revenue recognition principle dictates that revenue should be recognized in the accounting records: a.At the end of the month. b.When cash is received. c.In the period that income taxes are paid. d.When the performance obligation is satisfied.

d.When the performance obligation is satisfied.

Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,160,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year? a.$120,000 b.$200,000 c.$140,000 d.$260,000

b.$200,000

Clemson Company purchased equipment for $2,400 cash. As a result of this event, a.Stockholders' equity decreased by $2,400. b.Total assets remained unchanged. c.Both assets and stockholders' equity decreased by $2,400. d.Total assets increased by $2,400.

b.Total assets remained unchanged.

The normal balance of any account is the a.Left side b.Right side c.The side which increases the account balance d.The side which decreases the account balance

c.The side which increases the account balance

An architecture firm earned $2,000 for architecture services provided with the fee to be paid in the future. No entry was made at the time the service was provided. If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause: a.Net income to be overstated. b.Revenues to be overstated. c.Liabilities to be understated. d.Assets to be understated.

d.Assets to be understated.